How to move out of investment banking into a stable, high-paid career
While investment banks have been cutting back headcount, hedge funds, private equity firms and asset managers have taken the opportunity to hire. In fact, employee numbers in fund management are now 13.2% higher than before the crisis, while front office banking jobs have shrunk by over nearly 9,000 since 2010.
While fund management roles have always been more stable than those on the sell-side, they typically paid a lot less. This is now changing – fund managers have avoided the EU bonus cap, and are increasing compensation while the investment banks get more prudent over pay.
However, if you want to make the move to a buy-side role, don’t expect an easy ride – it’s still very difficult to make the switch if you don’t have relevant experience, and most firms are spoilt for choice. Here’s how to make it, according to recruiters.
1. Cosy up to your prime brokerage division
Much to the chagrin of recruiters, hedge funds are all about word of mouth when it comes to hiring and often take on people who have been referred on to them. Prime brokers, in a bid to build and maintain business with hedge funds, are more than happy to make recommendations.
“They’re talking to 50 clients a day, and recruitment needs often come up in conversations. Prime brokers are willing to help because it solidifies the relationship, and hedge funds like this route because there are no fees,” said one hedge fund headhunter who declined to be named.
2. Excel, and get out early
The gravitation of analyst and associate level investment bankers out of the industry and into private equity has accelerated in the past two years – more people have become disillusioned with banking, and private equity firms are keener than ever to bring in new blood. This is an oft-tread route on to the buy-side and still the only viable way to make the switch, said Charlie Hunt, senior consultant at Private Equity Recruitment.
“There’s a very small window of opportunity – from second-year analyst to first-year associate – and private equity firms will only hire the very best from the banks,” he said.
3. Transfer internally
Your current employer should be willing to listen if you want to transfer into a bank-owned asset manager. J.P. Morgan, for instance, has been building its asset management headcount even while reducing investment banking staff and, while Goldman Sachs is a much-vaunted place to work, it’s fund management arm has struggled to hold on to people and has been hiring. The key, suggest asset management headhunters, is to get relevant work experience under your belt, and then look to move on.
4. Work in research
Equity research in investment banks may be taking a hammering currently, but fund managers remain open to hiring analysts and will consider sell-side experience, according to one asset management headhunter, who declined to be named because of company policy.
“If you’re a bright analyst, with a CFA under your belt, and an ability to develop relationships, fund managers will want to hear from you,” he said. You will, however, have to take a pay cut initially – an analyst on the sell-side can make £150k after three to four years, said the headhunter – on the buy-side it’s more like £75-85k.
5. Stay focused on the institutions
Unless you’re starting your own hedge fund – something that hasn’t worked out for a lot of investment banking traders – you’re more likely to find success working for a larger hedge fund with an institutional feel. The most active recruiters of investment bankers in recent months have been Bluecrest Capital Management, which has poached from both Nomura and Credit Suisse, Millennium Capital, which has been aggressively bolstering headcount, and Brevan Howard (although many traders have exited after poor performance in recent months). This week, CQS also brought in Greg Sadler, a credit trader at Barclays, as a portfolio manager, according to the FSA register.
“Traders with a good track record will find the transition to a hedge fund easier than anyone,” said Peter Elliott, managing director of hedge fund headhunters Elliott James.
6. Focus your expertise
If you want to move into a hedge fund trading role, “global macro and credit” strategies are more likely to take on people with sell-side experience, said Elliott. Meanwhile, hedge funds are also keen to hire subject matter experts for idea-generation roles, said Michael Martinolich, a hedge fund-focused partner at headhunters Caldwell Partners.
“Healthcare and tech analysts who are well-regarded in their sector will be targets for hedge funds,” he said.
7. Bring something new to the table
“Private equity firms really only hire from the sell-side if they want to mix up the gene pool,” said Hunt. “This means have specific industry expertise or relationships that can’t easily be found among the private equity community.”
8. Leverage your relationship with institutional investors
This is primarily for those working in the financial institutions groups, or indeed private bankers with links to high-net-worth individuals, but switching into the alternatives space into one of the many ‘hedge fund lite’ products is an indirect route on to the buy-side. Firms want sales staff who can bring in assets from both retail and institutional investors.
Morgan Stanley’s Alternative Investment Partners team is made up of people with both sell-side and buy-side experience, while earlier this year Anthony Maniscalco joined Blackstone’s Alternative Asset Management division from the FIG team at Barclays investment bank.