Why L/S Shops Prefer IB Guys Over ER Guys?

Hey Everyone,

I've read on several occasions that IB analysts tend to have an edge in the recruiting process. I'm curious to understand the rationale behind this preference.

While both roles involve financial modeling and valuation, it seems that ER analysts might have a closer alignment with the fundamental analysis and research-driven approach of L/S shops.

There is not much skill difference other than the stress-handling capacity one gets to gain in IB. Then, why the preference is given to the IB guys?
Is there anyone in your pod from the ER background, whats the approximate ratio of ER vs IB?

 

ER guys come with their own investment/valuation practices picked up during their sellside ER stint, which some funds don't like. They want someone who knows how to model, etc but is still training them with their own investment philosophy. Another reason is for fund reputation like we have these former IB guys from X,Y,Z bank working at our fund. But if work under a decent ER analyst, you should get looks from good L/S shops.

 

Its more on the analyst you work for, although the brand name does help you, so being at JPM with a good analyst better than no-name. I don't work at BB ER so would be better if someone with some experience can shed some light here

 
Most Helpful

Your whole premise is off.

MMs take ER more frequently, as they bring sector expertise. A healthcare MMPM likes to hire from an ER healthcare team.

SMs probably more IB/PE as they are often more sector agnostic or want someone with no style biases that they can train almost from scratch. But they will also hire from ER.

Everyone needs to understand that HF recruiting is a lot more unstructured than PE, so there are no silly rules of thumb. Bill Ackman has hired guys he enjoyed playing tennis with. So if you are driven and smart, just chase what you're after and be persistent.

 

So, as you have mentioned, MMPMs want sector expertise from their analysts, so what are your thoughts on the number of years it usually takes an ER analyst to know at least enough about a sector in order to get an MMPMs attention?

 

As always, it depends. If you want someone to keep models and that brings only basic understanding of 15 companies, 2 years or less is enough.

If you want an idea generator that can stand on his own with little guidance, probably need 4-5 minimum?

 
MMPM

Your whole premise is off.

MMs take ER more frequently, as they bring sector expertise. A healthcare MMPM likes to hire from an ER healthcare team.

SMs probably more IB/PE as they are often more sector agnostic or want someone with no style biases that they can train almost from scratch. But they will also hire from ER.

Everyone needs to understand that HF recruiting is a lot more unstructured than PE, so there are no silly rules of thumb. Bill Ackman has hired guys he enjoyed playing tennis with. So if you are driven and smart, just chase what you're after and be persistent.

Just wanna say that this is an accurate and good post. People on this forum act as if careers trajectories are guided by certain immutable laws but in reality it's not that black and white.

 

Not in biotech. Don’t know a single MD/PharmD/PhD that tried IB recruiting, got rejected, then ended up in ER. They go right for ER given IB in biotech doesn’t require much on scientific expertise side. 
 

Also, ER has significantly less seats available vs IB so could argue ER tougher to land…. 
 

 

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