How to get out of banking and into hedge funds, PE, or a long only fund

It's a known fact that many bankers would rather be something completely different. Those who don't want to be rock stars often want to move to the buy-side. Specifically, they'd like to work in hedge funds, private equity (PE), or maybe just the kind of boring long only fund manager that's actually doing some hiring. 

Moving to the buy-side isn't easy, however. Banks employ far more people than asset management firms, and only a fraction of the frustrated bankers can migrate across. The European Banking Authority's recent report on high earners in financial services suggested there are ten times more bankers earning €1m+ in the UK than there are asset managers. This is partly symptomatic of the high pay in banking, but it's also indicative of the diminutive asset management sector. Private equity funds, especially, often employ only tens of people to invest huge amounts.

So, how can you escape banking and get into the buy-side nowadays? Here are seven crucial pieces of advice.

1. Go at the start of your career

If you want to move into a hedge fund it will help if you do so with just two to four years' experience in an investment bank, says Barry Seath at hedge fund recruiter Mirage Recruitment. "It's much easier to place junior people who are prepared to go into an execution only trading role in a hedge fund," says Seath.

The 'go early rule' applies equally to jobs in long only asset management firms and private equity funds. "We generally find it quite difficult to move people from the sell-side [an investment bank] to the buy-side," says Rachel Hewson at recruitment firm Mason Blake. "However, it's much easier to make the move into a long only asset manager when you're junior - you're seen as more culturally adaptable," Hewson adds.

2. Move out of M&A 

Large private equity funds are well known for their preference for hiring top-ranked junior M&A bankers with two or three years' banking experience. More surprisingly, Seath says these are precisely the people hedge funds are after too. "Most hedge fund clients prefer to hire juniors from M&A teams than from equity research or trading desks. M&A analysts have excellent modelling skills which can be used for technical valuations," he adds.

3. Think like a strategy consultant (if you want to go into private equity)

Much as private equity funds like to hire top ranked M&A analysts, they're also increasingly keen on recruiting strategy consultants according to Rachel Morley of Private Equity Recruitment (PER).

Strategy consultants are seen as more commercial than junior M&A bankers, says Morley. They're better able to cope with private equity interviews which involve detailed investment case studies. "A private equity fund will ask, for example, whether it's wise to invest in the care home market in Germany," says Morley. "They'll want to see your thought processes when you're evaluating whether to invest - to see that you run through all the important factors like competition and factors that will influence the valuation. Strategy consultants are often much better at this side of things."

4. Use your network 

If you're a mid-ranking trader or researcher and you want to move into a hedge fund, you'll probably need to use your own network rather than to go through a recruiter, admits Seath. It can be very hard for recruitment firms to place mid-ranking banking professionals into hedge funds - traders coming from banks often lack an audited track record and hedge fund CIOs will hire people they're already familiar with.

5. Move internally 

If you want to move into a long only fund, it's easiest to get a job at a large bank with an asset management arm and to move that way, says Hewson. Many internal asset managers are transferring salespeople and researchers from their investment banks across, she claims.

6. Accept lower pay

Long only asset managers pay considerably lower base salaries than investment banks and aren't willing to match banks' base pay. If you want to move into one, you'll need to accept less upfront (and probably a lower bonus too), says Hewson. This is non-negotiable. If you try negotiating, you'll simply turn potential employers off.

7. Make it clear that you have no intention of going back to banking

Hewson says long only fund managers don't like hiring bankers because they think people from banking are only using them as a haven in the storm. At the slightest whiff that this is the case your application will be dismissed.