Valuation is more important in these open-ended case studies because you can pick pretty much any company its not like a leveraged buyout case study where theyll give you a company or deal and youre constrained by that. But the main difference is that hf case studies and public markets investing in general are all about asymmetric risk profiles: cases where the upside potential is significantly greater than the downside potential. So youre not necessarily targeting a certain irr instead, youre thinking: This stock is currently.00 per share. I think theres a 75 chance it could increase.00, and only a 25 chance that it will fall.00, so i recommend investing because The other big difference is that catalysts are much more important in these case studies its not enough. You need to say, i think it will change because of event x, where event x is something like a new customer, a new product, regulatory changes, a competitors strategy, a refinancing or change in capital structure, or anything else you could think. Finally, risk factors and mitigating risk are essential for hedge fund case studies: you still consider them in pe case studies, but often you cant make extremely specific recommendations to mitigate the risk when youre acquiring an entire company. Were going to delve into the structure of these stock pitches and case studies in Part. But just to get everyone thinking about it, can you explain how youd usually structure your world recommendations? A: Sure well go into this in more detail in the next part of the series, but heres what i usually use: 1) Recommendation: neutral recommendations are not ideal, so are you long or short this stock?
Q: yeah, that matches what ive seen from clients going through the hf recruiting process. Before we move on, can you tell us what exactly a case study is? A: Sure, i should probably define that one at some point In hedge fund interviews, case studies are very informal. 90 of the time they will tell you: Come up with an investment idea you think is interesting, present it to us, and back it up with quantitative and qualitative support. Its up to you to come up with the structure, pick the industry and find the company, and anticipate their key questions in advance. Unlike private equity case studies, these case studies are far less structured and they want to see how well you can function without much direction. Occasionally, you will get case studies where they give you a specific company and then give you a few hours to look at its financial statements, filings, and industry research and form your own opinion but open-ended case studies tend to dominate. Q: so unlike pe case studies, where youre focused on irr and determining whether or not buying out a company could generate your targeted return, with hf case studies it sounds like its more about valuation.
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A: Here are the top 3 reasons: Case studies are what you really do on the job you generate investment ideas, present them to the pm, and aim to profit from your ideas while mitigating risk. Often, youre tasked with analyzing an investment opportunity with minimal guidance and hand-holding; therefore, its up to you to use your intellectual horsepower and investment acumen to figure out whether a particular asset is a good investment. Theyre a way to level the playing field and stand out against everyone else with high grades from Harvard/Wharton/Stanford. Lots of people have great pedigrees, but few can invest successfully. You will get them as part of the recruiting process at every single hedge fund, guaranteed.
Also, very, very few candidates actually customize their stock pitch and/or case study to the specific strategy that hypothesis a fund uses so even by using relatively simple strategies, you can stand out. As you always say, dont overestimate the competition. Q: so it seems like these case studies could also be a way to break in if youre coming from a very different or unconventional background? Unlike large banks that run very standardized recruiting processes and look for very standard types of candidates, many hedge funds are more open about who theyll speak to if you can prove that you have solid investment ideas and that youre passionate about investing. The industry has gotten super-competitive over the past 10-15 years, and it is generally getting smaller but if you can make a lot of money for a potential employer, there will always be room for you. In practice, of course, most people at hedge funds still come from investment banking, equity research, or trading backgrounds but especially at smaller funds, they care more about your p l than your pedigree. What Are hedge fund Case Studies?
But thats why you read this site: to learn how to swat away your competition like flies, overcome the biggest challenges, and win offers (youll have to look elsewhere for help with Peter Jackson). Today were starting a multi-part series on hedge fund case studies, and Im going to give away for free more actionable information, tips, and real examples than what other training providers would charge you 10,000 for. As The joker might say, its not about money its about sending a message. Well leave out the second part of that" about everything burning, at least until we reach the end of this series. Our interviewee has had a ton of experience in the finance industry, ranging from equity research to private equity to hedge funds and I convinced him to share all his best tips with you. He contributed the interviews on equity research over a year ago, and this series will be even better.
Lets jump right into it: Assumptions background Information, q: so we havent sat down for an interview since that series on equity research. A: Sure since the last time we chatted, ive graduated from business school and have been through the recruiting process at hedge funds. I am currently an analyst at a long/short equity fund. Im still helping clients break into equity research, private equity, and hedge funds as well. In the past, ive worked in private equity, equity research, and hedge funds (both internships and full-time and ive completed case studies at every step along the way so i wanted to sit down with you and explain the process, why its so important for. Why do case Studies Matter so much in Hedge. Q: Well, sounds like youve been quite busy (to say the least). Lets start from the beginning: why do case studies matter so much in hedge fund interviews?
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Chart indicates a counter trend rally is underway. It also indicates that the current down trend could be changing and moving into a trading range sidelines Mode. View more Trade Triangles ». Numi Advisory has advised over 400 clients by providing career coaching, essay mock interviews, and resume reviews for people seeking jobs in equity research and investment management (full bio at the bottom of this article). Few things in this world strike as much terror into the hearts of eager bankers looking to move to the buy-side as the infamous hedge fund case study. Protesters from the Occupy movement failing to shower for months at a time, or Peter Jackson deciding to split the remaining two. Hobbit movies into 19 movies might also be scary but even they pale in comparison.
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