Why investment banks and hedge funds are still getting graduate recruitment wrong
Alexey Loganchuk glanced around the trading floor at JPMorgan after over five years at the bank and realised everyone was a little too similar. Investment banks’ ‘cookie cutter’ approach to recruiting graduates means that students with great academics from top schools, with internships and the ‘right’ kind of extra-curricular activities are the only ones that get hired.
Loganchuk hardly deviates from this mould – he has a degree in finance, statistics and international business from New York Stern – but the lack of diversity in the financial sector was an ongoing concern. “My frustration with the lack of meritocracy in financial services dates back to my time in college. As a student, I saw many of my most capable peers struggling to find opportunities at bulge-bracket banks,” he says. “That frustration only deepened over the course of my time with JPMorgan. I felt that the finance industry’s singular focus on resumes was something that needed to change.”
The problem is that the people who excel academically aren’t always the people who make the best traders, advisors or investors, he says. Banks, hedge funds and asset managers set the bar so high, but they have no way of assessing who can actually perform. Five years ago he quit banking to set up Upgrade Capital, a firm which arranges events pitting students from various universities against one another in trading and investment competitions, and then connecting the top performers with hedge funds and investment banks. The point, he says, is that it’s down to how you perform, not how high your GPA score is or who you know at, say, Goldman Sachs.
“Through the linear application of hard work, these people get into top universities and earn top grades – but they often end up lacking the business acumen and creativity necessary to add real value at banks and hedge funds,” says Loganchuk.
Upgrade Capital has partnered with Fortress Investment Group to provide its ‘Macro University Challenge’ and Loganchuk it also working with other hedge funds that he can’t name. Last year, around 1,400 people took part in its competitions across 27 universities and he expects a 50% uptick in 2014.
The list of ‘core universities’ on Upgrade’s books isn’t exactly targeting low-end students. Yale, Harvard, Brown, Princeton, Stanford, Columbia, Brown and most Ivy League colleges are all working with the group. But then so are the University of Missouri, Texas A&M and Georgia Tech, which don’t have investment banks swarming the campus.
“Right now, a lot of how banks and hedge funds recruit comes down to what college you went to and what your grades were. We are trying to make it so that young people are hired strictly based on their ability to add value,” says Loganchuk.
Doing well in one of these competitions won’t automatically mean a job in a hedge fund or an investment bank – Loganchuk is keen to point out that Upgrade is not a recruitment agency – but it will open doors to people and organisations which may have previously junked your resume without a second thought.
“We look at students on our platform who can generate alpha, and then engage them offline to examine the thought process underlying their investment decisions. These students ultimately interact directly with hedge fund analysts and portfolio managers. Not only is it a great learning opportunity for students – it is also a way for them to build invaluable connections in the industry,” he says.