by Brian DeChesare

Sales & Trading Exit Opportunities: Got Global Macro Hedge Funds?

Sales Trading Exit OpportunitiesIf you do sales & trading, are you stuck in it forever?

That is the subject of our podcast today, which continues the tradition of… a new podcast here once every 5-6 months.

Just like with the equities vs. fixed income question, there’s a lot of misinformation about exit opportunities from sales & trading roles.

So our resident S&T expert joined me recently to discuss all aspects of the sell-side-to-buy-side transition, including:

  • How to think about the opportunities, and why you’re not just limited to hedge funds and asset management.
  • The process and timing – when it makes the most sense to move over.
  • The best and worst desks for exit opportunities, and what happens if you’re in sales rather than trading.
  • What to expect in interviews, and the most revealing question you’ll have to answer.

Get the full MP3 recording, the transcript, and the highlights after the jump:

Exit Opportunities from Sales & Trading

We have the same guest as in the previous S&T podcasts: he worked at a large bank for a few years, and then moved into a buy-side role at a hedge fund.

His role is a bit unusual in that it’s a hybrid of the traditional “investment analyst” and “execution trading” jobs at funds.

He has also authored several articles on M&I, including the one on a day in the life of an options trader, and an overview of the equities trading floor.

For this podcast specifically, his perspective was great because he has been through the entire process and now interviews traders for roles at his hedge fund.

Click here to download the MP3 of the M&I Podcast – Episode 004.

Click here to download the Transcript for the M&I Podcast – Episode 004.

I’m still at war with Apple / iTunes, so there’s no link to the feed there.

But I highly recommend SoundCloud if you want to subscribe and get future episodes as they’re released:

Key Points

We covered a lot of ground in this discussion, but some of my favorite points include:

Point #1: The Available Exit Opportunities from Sales & Trading

You see a lot of discussions where people claim that once you’re in trading, you’re in trading for life.

There is some truth to this because you do not develop as broad a skill set as you do in investment banking or private equity.

However, there is one commonly overlooked exit opportunity that many traders pursue: entrepreneurship.

He also weighs in on the three main types of hedge funds, and explains why PM-track roles are the easiest to win at global macro funds if you have an S&T background.

If you want to understand the different roles at hedge funds and how most firms are structured, check out this overview article.

Point #2: Moving into Non-Hedge Fund/Asset Management Areas from S&T… and from Sales

Technically, you could still get into areas like private equity and corporate development coming from sales & trading, but it is far more difficult.

To make the move, you’ll likely need:

  • Experience with the right product (e.g., a distressed credit trader moving to a distressed PE fund).
  • Evidence of the skill sets required in those roles, via outside training, classes, or other experience.
  • A willingness to come in at a lower-level position.

It is also possible to exit to buy-side roles if you’re in sales rather than trading, but it tends to be more difficult.

To make the move, you’ll need:

  • The CFA or something else that proves you understand fundamental analysis and that you have the “analyst mindset.”
  • Some evidence of risk management experience.

Point #3: The Best and Worst Desks for Exit Opportunities

You should avoid cash equities and also any specialized products that do not require fundamental analysis.

Derivatives desks are good, as are rates desks and anything that’s more macro-oriented.

We covered the macro vs. micro distinction in the previous podcast on equities vs. fixed income, but “macro” refers to analyzing factors like government policy, interest rates, and exchange rates, and “micro” refers to analyzing specific companies.

You could still work at a fundamentals-based fund if you’re coming from a “micro” desk, but you’d also be competing against many IB analysts.

Point #4: The Timing and Process

There is no structured process for joining the buy-side from sales & trading at a bank.

You’ll likely need around 2-3 years of experience and 6-12 months of managing your book, and you’ll have to try every networking avenue you can think of.

Our guest spent 7-8 months applying for and winning his role, during which time he went through 4 rounds of interviews (with 2-month gaps in between) and met with everyone at the firm.

That’s on the longer end of the expected time frame, but a typical process might last for 3-4 months.

The timing is also quite important because you want to move over as soon as you can (2-4 years), or when you’re much more senior (10+ years).

Point #5: The Ease or Difficulty of Moving into Other Areas on the Buy-Side

Just like people incorrectly believe that “there are no exit opportunities as an associate in IB,” some also believe that it’s impossible to move between different buy-side trading roles.

But it can be easier because you’ll have a wider network, you’ll know more headhunters, and you’ll have a vote of approval from at least one firm.

However, you don’t want to end up with lots of two-year and three-year stints over a 10-year period since that screams “job hopper” to many firms.

Table of Contents, the Transcript, and More

  • 2:08: Overview of the Interviewee’s Background and Buy-Side Transition
  • 5:00: The Three Main Exit Opportunities from Sales & Trading Roles
  • 14:05: What About Exit Opportunities from Sales? And What About Other Areas Like Private Equity?
  • 20:38: The Best Desks and the Worst Desks for Exit Opportunities
  • 25:06: The Timing and Process for Moving to the Buy Side
  • 34:07: What to Expect in Interviews, and the Most Common Interview Question
  • 38:49: Can You Move to Other Areas on the Buy Side?
  • 43:59: Natural Transition Points for Moving to the Buy Side
  • 46:39: Conclusion

Click here to download the MP3 of the M&I Podcast – Episode 004.

Click here to download the Transcript for the M&I Podcast – Episode 004.

 

Up Next Time

We still have a lot of sales & trading-related topics to cover, and next time we’ll probably shift back to the job itself, different desks, and how to advance up the ladder.

I also hope to cover more on tech/other non-finance roles (similar to the Google Financial Analyst podcast), if we can find the right guests.

Stay tuned.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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by Brian DeChesare Comments (5)

Do You Want to Be a Financial Analyst at Google?

Google Financial AnalystDo you believe everything you read?

Probably not.

But what if it’s from an authoritative source – one you’ve trusted because the information is reliable?

Then you might believe a higher percentage of information from this source.

That’s the approach we try to take on this site: rather than letting everyone from high school students to gold farmers in World of Warcraft to imprisoned ex-financiers write articles, I am quite strict about what gets published.

But there’s a problem with this approach: broad topics like “corporate finance jobs” or “private equity interviews” or “hedge fund stock pitches” are tough to generalize, and there are always variations.

One place where you see a lot of variations is with “financial analyst” roles at normal companies – especially at a company like Google.

In this interview, a long-time contributor to the site joins me once again to discuss:

  • What you might expect in a Financial Analyst role at Google
  • Recruiting, what the team is looking for, and how to get in
  • What an average day is like, from meetings to VBA
  • How to tell if it’s right for you

Get the full MP3 recording, the transcript, and the summary of key points after the jump:

Meet Jerry: Google Financial Analyst Extraordinaire

If you’ve read the sales & trading articles on the site, you probably know Jerry Chi, who wrote several of them and who also recorded the sales & trading podcasts with me a long time ago.

Since that last round of podcasts, he graduated from Wharton, completed several internships, moved back to Tokyo, and worked as a financial analyst at Google for a few years.

Meanwhile, I’m doing exactly the same thing I was back then.

(Not that I’m feeling inferior or anything, really…)

Since so many bankers and financiers want to move into technology these days, finance roles at Google seemed like the perfect discussion topic.

Disclaimer: The views expressed here are solely Jerry’s personal views and do not reflect the official views of Google, nor do they reflect official information from Google.

Click here to download the MP3 of the M&I Podcast – Episode 003.

Click here to download the Transcript for the M&I Podcast – Episode 003.

iTunes / Apple has been annoying lately, so our feed is currently broken there and their support team is unresponsive.

Luckily, SoundCloud still works and is also 100x easier to set up and use than iTunes, so if you want to subscribe you can do so there:

Key Points

We covered quite a few topics in this discussion, but some of my favorite points were as follows:

Point #1: Want More Programming or VBA? Apply to Google

I’ve gotten a ton of questions over the years on whether or not you “need” VBA and more advanced Excel skills for investment banking and private equity roles.

The answer is “No, not really,” although they can come in handy sometimes (which is why there are a few VBA lessons in our Excel course).

But if you do like digging into data at a deeper level and doing some amount of programming, a financial analyst role at Google might be right up your alley.

Point #2: Banker or Consultant? Sorry, You’re Not Guaranteed a Financial Analyst Job at Google… or Any Other Company

While banks and finance firms look for fairly generic qualities in entry-level candidates, “normal companies” often look for very specific qualities.

A lot of former bankers or consultants mistakenly think, “Aha! I worked at a top-tier bank, I can now go to any company in the world.”

And that’s just not true.

You need the Excel / analytical skills, yes, but you also need great communication skills and polish, as well as the ability to “intuit” a lot more about your environment.

Working with a senior executive is a lot different than working with a senior banker, even if both titles read “VP.”

Point #3: Financial Analyst != Corporate Development != Business Development

Don’t judge a role by its title – even if two roles have similar titles, they might still be different depending on the companies.

In the case of Google, you’ll get a lot of interaction with other teams at the firm as a financial analyst, but less interaction with clients and external 3rd parties.

That’s almost the opposite of corporate development and business development roles, even though they have some superficial similarities (Excel!).

The purpose of the role is also quite different: as a financial analyst, you’re there to determine which initiatives make financial sense.

There is some element of that in the other roles, but there is more focus on getting a deal done in the first place.

Point #4: Applying Online… May Not Be Such a Bad Thing, After All

While I’ve previously used terms like “black hole” and “bottomless pit inside a large dragon” to describe where your resume goes after you submit it online, it’s not quite so hopeless at non-finance firms.

It always helps to have internal referrals, but you may not need to be quite so aggressive with networking outside the finance industry.

Point #5: Meetings + Interaction with Other Teams + Chaos Management + Excel / Analysis = Financial Analyst at Google

Some buy-side roles can be very isolating – you, as the analyst or associate, have to go out there and find interesting ideas and companies.

The independence is great, but the reduced teamwork and the lack of socializing with your new team are not so great.

A financial analyst role at Google provides an interesting compromise.

You’re still doing some analytical heavy-lifting, but you also get a lot more interaction with other teammates and it’s less of a “lone wolf” gig.

And if, like Littlefinger, you view Chaos as a Ladder rather than a Pit, you’re even better-suited for it.

Table of Contents, the Transcript, and More

  • 4:06: Overview of Jerry’s Background and What He Does at Google
  • 9:08: Do Other Companies Have This Role?
  • 10:22: How This Group Fits Into Google as a Whole
  • 11:33: Technical / Coding Requirements
  • 13:21: Why Work at Google / in Technology?
  • 16:21: The Recruiting Process for Financial Analyst Roles at Google
  • 23:46: A Day in the Life of a Google Financial Analyst
  • 27:17: How “Japanese” is the Google Tokyo Office?
  • 29:44: Who Would Fit in Well / Not Fit in Well at Google?
  • 33:42: Conclusion

Click here to download the MP3 of the M&I Podcast – Episode 003.

Click here to download the Transcript for the M&I Podcast – Episode 003.

Disclaimer: The views expressed here are solely Jerry’s personal views and do not reflect the official views of Google, nor do they reflect official information from Google.

Links, Articles, and Show Notes

This podcast had some “tech talk” around various programming languages and a few other IT-related points.

In case you’re not familiar with them:

Software is Eating the World – A great article by Marc Andreessen that you should immediately read if you want to understand the world at large.

RThis is a programming language commonly used for statistics and data mining. It’s an “open source” project, meaning that the source code is freely available and anyone can contribute and use/modify the software in any way, free of charge.

(If you’re wondering how “open source” software companies like Red Hat make money, it’s from selling support services to large enterprises using these products).

SPSS – This is another software product used for statistical analysis, but it’s commercialized and not open source. IBM acquired SPSS, the company, for $1.2 billion in 2009.

SQL – This is the language you use to communicate with “real” databases such as the ones used on web servers. Without getting too technical, a true relational database stores data more efficiently than Excel, and makes it easier to update, manipulate, recover, and retrieve data.

VBA – OK, I really hope you know what VBA is. But if not: it’s a programming language you can use within Excel and other Office programs to automate tasks like formatting data or models up through much more complex operations.

Up Next Time

I don’t have anything in particular in mind, but we will try to up the frequency so these podcasts happen more than once every 5-6 months (I know, I know).

If you’ve quit the finance industry, you’re launching a new venture, or you have anything else interesting going on, we would love to hear from you.

Bonus Points: It’s also much faster for you to record a quick podcast than to email written responses to interview questions.

Plus, I’ll even link to your new product, service, or other venture if it’s relevant.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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by Brian DeChesare Comments (13)

Equities vs. Fixed Income in Sales & Trading: The Top 5 Myths You Should Stop Believing

equities-vs-fixed-income-sales-tradingYou can choose your friends, but you can’t choose your family.

What about your desk when you start working in sales & trading, though?

That one is somewhere in between friends and family on the “choosability” scale.

One small problem, though: if you look at most online discussions of this topic, you’ll get a very misleading view of what different groups and desks are like.

So our usual guest-for-all-things-S&T-related and I sat down to clear up the confusion.

Among other topics, we talk about how to decide between groups, how much math is required, how recruiting is different, and how the workplace environment is different… beyond just the type of trading you’re doing.

Get the full MP3 recording, the transcript, and a summary of the key points after the jump:

Equities vs. Fixed Income: Myth vs. Reality

Based on feedback from the last podcast, we focused on a much narrower topic this time around, and one that’s useful even without specific numbers.

If you’re reading this via RSS, click here to download the MP3 directly.

Click here to download the Transcript for the M&I Podcast – Episode 002.

And yes, you can also now subscribe to the podcast on iTunes, Stitcher, and SoundCloud:

The main theme this time around was myth vs. reality with different groups in S&T.

Jerry did a great job covering fixed income trading and equity trading in previous articles, but this time we focused on how to decide which group is for you.

Myth #1: There is a Big Math Requirement for Fixed Income

If you look at forums, comments, and other online commentary, you might get the impression that you sit around solving partial differential equations all day when you work in Fixed Income.

That is not true at all.

While some products do require more math than others, the right way to view it is “simple product vs. complex product” – not Equities vs. Fixed Income.

For example, within Equities if you’re just trading blue-chip stocks the math is fairly simple… but it gets more involved with equity derivatives, and even more involved with “custom products” created for specific clients’ needs.

It’s more important to be able to make back-of-the-envelope approximations quickly and intuitively.

Myth #2: You Should Think About Equities vs. Fixed Income When Giving Your Group Preferences

While this is how all banks classify their sales & trading divisions, it’s not the best way to think about your personal preferences.

It’s more useful to think about whether you prefer micro or macro analysis – in other words, individual companies or government policies / interest rates / exchange rates?

Much of the “micro” analysis is geared toward Equities, but some of it falls within Fixed Income as well (e.g., if you’re trading corporate bonds and therefore need to understand individual companies’ credit profiles).

Myth #3: You Can Actually Pick Your Desk or Group

This one, unfortunately, is not necessarily true and your fate is mostly in the hands of HR (with a few exceptions, such as JP Morgan, where you can indicate more specific preferences).

And they often decide your fate based on factors such as your numerical test scores rather than your actual preferences.

You might be able to get around this if you’ve done enough networking and/or you know a specific product very well (see the last point below).

Bottom-line: keep in mind preferences about the type of analysis you want to do, along with knowledge of a specific product, but also realize that you’re unlikely to end up exactly where you want.

Myth #4: Trading is More of a “Sprint” Than Banking

Yes, I even mentioned this on the sales & trading vs. investment banking podcast a long time ago…

…but it’s not quite true.

It really depends on the product you’re trading: with the most complex products, typically “structured solutions” (e.g., the client wants a volatility of 15% and then 10 other criteria they can trade derivatives on), you work on long-term projects that might take months to complete.

This is also another way to pick the best type of group: do you want to finish your work for the day and be done with it, or do you prefer longer-term projects?

Myth #5: A Top School and High Grades Give You a Good Chance of Winning S&T Roles

This one isn’t quite a “myth,” but it is an exaggeration because many candidates with this profile make rudimentary mistakes repeatedly in interviews.

The most common one, as my guest points out, is to walk in with an attitude of “I am from LSE / Oxbridge / Harvard / Yale, therefore I can win this internship or job without actually knowing anything about the products you trade.”

While your pedigree may get you interviews, you seal the deal with product-specific knowledge.

Having an intelligent conversation about a specific product you’re interested in, like convertible bonds, is the best way to set yourself apart and the most frequently overlooked part of interview prep.

Table of Contents, the Transcript, and More

If you’re reading this via RSS, click here to download the MP3 directly.

Click here to download the Transcript for the M&I Podcast – Episode 002.

  • 2:41: Overview of Different Groups Within S&T
  • 5:27: How Much Math is Required in Each Group?
  • 9:39: How You Apply and Get Assigned to a Group
  • 11:31: How to Decide Which Group/Desk Suits You Best and Sales vs. Trading
  • 16:00: Complex Trading Products
  • 18:44: How to Decide Between Equities and Fixed Income
  • 21:30: On-the-Job Differences Between Equities and Fixed Income
  • 24:29: Recruiting Differences
  • 29:01: The #1 Mistake Students Make in S&T Interviews
  • 31:55: Conclusion

 

Up Next Time

The S&T podcasts will continue, but we’re also going to address other topics and industries – including a very different type of corporate finance role offered by big technology companies, and how that could be an interesting option if you want to combine engineering and business.

If you have suggestions for future guests, or you want to be on the podcast yourself (anonymity is OK, but obviously your voice will make you recognizable to anyone who listens), leave a comment below or reply to one of my emails.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

Break Into Investment Banking

Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews

We respect your privacy. Please refer to our full privacy policy.