Breaking into the Buy Side: Hedge Funds, Private Equity, and Venture Capital

Breaking into the finance buy side, focusing on hedge funds, private equity, and venture capital, is challenging but offers diverse opportunities and high rewards.

### A Comprehensive Guide to Buy Side Careers: Hedge Funds, Private Equity, and Venture Capital
* 💼 Hedge funds focus on public financial securities, with analysts researching and investing in companies based on **market views and financial models**.
* 💰 Private equity investors primarily focus on **leveraged buyouts**, **improving company operations**, and **exiting investments for returns**.
* 🚀 Venture capital investors provide funding, insight, and networks to early-stage startups, with **high-risk, high-reward potential**.
* ⏰ Hours and lifestyle vary, with private equity averaging **65 hours per week**, venture capital around **60 hours**, and hedge funds at **60-70 hours**.
* 💵 Compensation is highest in **hedge funds**, followed by **private equity** and then **venture capital**, with bonuses heavily tied to **fund performance**.
* 🔍 Breaking into these industries typically requires a background in **investment banking, consulting, or industry expertise**.
* 🎯 Pros and cons of each field include **hedge funds for market enthusiasts**, **private equity for deep company analysis**, and **venture capital for startup enthusiasts**.
* 🏆 "It's often said that it's best to make VC your **last job** rather than your **first**."

In the finance world, the hardest industries to break into are collectively known as the buy side, and these include hedge funds, private equity, and venture capital. These three industries are usually shrouded by mystery, but I'm going to try to shed light on the buy side. In case you're new to the channel, as a bit of background, my name is Ben, and I used to work at J.P. Morgan as an investment banker for a few years. So, I used to look into these faces a lot myself because I considered going into the buy side, and I also have a lot of friends in the buy side as well. So, I spoke with a bunch of them, and out of all my friends in banking, I'm the only weird guy who's just making YouTube videos. But anyway, I digress. In today's video, I'll first be going over what you do in each of these fields. I'll then go over the hours and lifestyle, next into compensation, and lastly how to break in and some tips.

on how to figure out which field is right for you. Two quick things before I get started. First, I want to let you know that today's video is a brief overview into each of these fields, and so I'm going to do deep dives into each of them later on. Let me know down in the comments which one you'd like me to do first. And second, shout out to the sponsor of today's video, Financial Edge, for helping make this video possible, and stay tuned for a giveaway announcement with Financial Edge. All right, so jumping straight into it, let's first talk about what you do in each of these fields. First, I do have to add the caveat though that depending on the funds that you join and what kind of strategy it has, your experience and what you do will be pretty different than what I explained today or can be. And so today I'm giving broad generalizations, and so just think that I'm giving you a big picture overview. With that said, starting in alphabetical order, hedge funds focus on investing in public financial securities.

like stocks, fixed income assets, options, commodities, futures, and more. Hedge funds also have a wide variety of strategies like you see here, but given that there are so many, I'm going to really just focus on long-short fundamental hedge funds since they're the easiest to understand. At a long-short hedge fund, you're looking deep into public companies by digging through financial statements, speaking with management teams, reading industry reports to establish a market view, keeping up to date with economic and market news to form a macro view, and building financial models usually on a quarter-to-quarter basis. As a more junior hedge fund analyst, you're typically given a small universe of companies to cover, let's say somewhere between 10 to 20 companies, and your job is to focus on doing research to suggest which companies to invest in and which ones to avoid. Depending on the firm, you might also have some free reign, or it may even be your job to think of new investment ideas that fit your fund's

strategy. Then as you grow more senior at a fund, you're given a portion of the fund's overall portfolio to manage, and so while you're still continuing to diligence companies, you won't be digging into the weeds as much, and you'll also be more and more in charge of relationships with investors and fundraising. Lastly, here is a snapshot of some of the top hedge funds in the world, which you can pause to take a look through. Next up is private equity and PE investors really focus on one type of transaction called the leveraged buyout or LBO. In simple terms, an LBO involves funding the acquisition of a company with debt, aka leverage, hence the term leveraged buyout, and then making operational improvements to the business, paying off as much debt as possible through the company's cash flows, and then exiting that business through an M&A sale or IPO, ideally at a higher valuation to ultimately earn a return on investments. There are a few important implications with the LBO. The first is that PE investors are

long-term investors because it takes a lot of time to really operate and improve a company. So, typically, each investment will be exited on average in about five years. The second is that PE investors are extremely deliberate and do very thorough diligence in a company because not only are they acquiring 100% of the equity, they're also funding the purchase with a bunch of debt. The third is that PE investors are always looking to buy more established companies that have stable cash flows rather than investing in hot tech startups, which are usually burning cash and are unprofitable. In terms of your day-to-day, PE investors primarily focus on building financial models, which are usually LBOs, writing investment memos that present the market view, potential returns, and risks, conducting due diligence on potential investments through lots of phone calls with management, customers, and industry experts, supporting portfolio companies, sourcing new companies to invest in, and fundraising. As a more junior PE investor, your time is focused on responsibilities one through four here, while as a more senior PE investor

you're focused more on three to six. Lastly, here is a snapshot of some of the  top private equity firms in the world, most of which you may not have heard of  before if you're new to finance. By the way, before we move on to venture  capital, you're going to notice the lighting is changing as I'm filming this  video because the sun is coming up, and I was working pretty hard on this  video, so I would really appreciate if you could smash that like button to help  support the channel. For venture capital, VC investors really  help entrepreneurs build their businesses from the ground up  in three primary ways. The first obvious way is through funding,  and VC investors provide huge injections of capital that help companies hire  talent and scale their operations. The second is by providing insight. The  best VC investors have been around for decades and have seen a lot of companies  come through the pipeline, and so VC investors can be great  sounding boards for entrepreneurs, especially during the toughest of times. Third is by providing a strong network. The best VC firms are extremely well

connected and can help entrepreneurs with things like recruiting top talent, or making introductions for key business relationships. Because venture capital involves investing in the super early stages of a company, the industry is a super high-risk, high-reward industry, and usually in VC, your top few investments will make up for tens to hundreds of poor investments, and this really is not an exaggeration. As for what you do, VC investors spend their time sourcing new companies to invest in, reviewing lots and lots of pitch decks from founding teams, conducting due diligence on potential investments, supporting portfolio companies, networking with entrepreneurs and other industry professionals, and fundraising. Junior VCs typically spend more time on numbers one through three here, while the more senior VCs really spend time doing all of these responsibilities but not as much of the grunt work with the diligence, and they're also having lots and lots of meetings with entrepreneurs. And lastly, here is a snapshot of some of the top venture capitals in the world for you to take a look at. By the way, if you're interested in trying to break into the buy side.

whether it's in the short term or long term, one resource I highly recommend are the courses on Financial Edge. The company's founder, Alistair, is literally the instructor who taught me and hundreds of other analysts during my summer training at J.P. Morgan. He's this British guy who has a really, really great good-natured personality and cares a lot about being a good teacher. Financial Edge's instructors train the analysts at the top four banks who paid tens of thousands of dollars, and you can get the same lessons for just a few hundred dollars, so I think it's really worth it. You can also learn about accounting, modeling, and a whole lot more to help you break into investment banking and or the buy side. And on that note, Financial Edge has courses like the investment banker and a private equity course that focuses on LBO modeling, and Financial Edge is giving away one of these two courses to three winners. All you have to do is follow Rare Liquid and Financial Edge on Instagram and leave a comment down below on why you'd like to win and Financial Edge.

will announce a winner one week later on January 19th. You can also use my code RARELIQUID25 to get 25% off. And so if you want to purchase from Financial Edge, you can find the link down in the description below. And if you buy and win the giveaway, then Financial Edge will just simply refund you. All right, now moving on, let's now go into the hours and lifestyle. Now, in terms of hours, it's really hard to give anything besides a rough estimate for the buy side because you're gonna have some chill weeks where things are pretty manageable, and then you're gonna have some really, really crazy weeks where work just consumes you. But with that said, roughly speaking, for private equity, you work around 65 hours a week on a normal week, and then you would work 80 to 90 hours a week when you're working on a live deal, and this could go on for many, many weeks. For venture capital, around 60 hours is more normal, while 70 to 90 hour weeks are also possible, particularly when you have

multiple fundraising rounds going on. At hedge funds, 60-hour weeks are more normal, and these hours could extend to 70 to 80 hours during busy times like earnings season, which happens four times a year. Now a lot of people on the buy-side came from investment banking backgrounds, and a lot of them usually say that the buy-side is a lot more intense and stressful, and so even if you're working fewer hours than you would in banking, the hour-by-hour that you put in is a lot more intense because you're actually putting capital at risk. So for example, in investment banking, you might have a small error in the model or a typo in the client presentation, but most things can be forgiven, and as long as your bank earns fees, that's pretty much it, and that's all you really care about. On the other hand, on the buy-side at a hedge fund, you could lose a huge portion of your portfolio pretty much in a matter of minutes or hours. In a private equity firm, you're purchasing 100% of a company, and in venture capital, you're investing

in a highly, highly risky startup. And so, as you can imagine, being on the buy side is pretty intense, and you really have to know what you're doing, and that's why it's so hard to break into these industries because they really hire the best of the best. Because a lot of money is being put at risk, and so there's a ton of responsibility. The benefit to all this is that you have more interesting work. My friends who work in the buy side all previously have banking backgrounds, and they always say that banking involved a lot more transactions where you didn't really have to put a lot of thinking into everything that you did. While for private equity, hedge funds, and venture capital, you have to really focus and do some serious thinking. And so, with that more challenging work, you just grow and develop more as a professional. And so, the benefit of the buy side, like I said, is more interesting work. Next up, let's go into everyone's favorite part - compensation. Just like ours, compensation on the buy side varies a ton depending on the firm that you join and where you live.

so take all the numbers I'm about to show you with a grain of salt. With that said, in general, you make the most at a hedge fund, but your compensation will be dependent on how the fund performs each year, so it's also the riskiest. You make the second most in private equity, which is actually a job with a lot of job security, especially when you move up and have a solid reputation. Also, by the way, carry is short for carried interest, which in simple terms you can think of as a percentage of the fund's overall returns. In venture capital, you get paid the least, especially at the lower level positions, but if you're at a good firm, you'll earn a ton through carry if your firm is investing in the right startups. Honestly, in terms of compensation, if you join any of these industries for long enough, you're going to be making more than enough money, so I think what's really important is actually figuring out which industry is best suited for you. That's a good segue into the next part of the video, which is how to break in and how to choose.

Starting with hedge funds, the vast majority of hedge fund analysts break in from investment banking, equity research, or private equity, and that's pretty much it. For private equity, the most common way people break in is through investment banking, while a small number of spots are available to McKinsey, Bain, and BCG consultants. I've also seen some undergrads go straight from college as well. Lastly, for venture capital, there's a pretty broad range, but the absolute most surefire way is to be a founding member of a successful startup, which lets you skip a lot of the lower levels at most VC firms. Other common ways include investment banking, management consulting, and industry jobs that make you an expert in an industry, such as product management or engineering. Let's next talk about how you can choose which field is right for you by focusing on three pros and three cons for each field. Hedge funds are great for those who first and foremost love the public markets, which is a huge must. You also enjoy a more predictable work schedule since you don't work on transactions.

and if you're at the right firm, you'll have little, if any, weekend work. And lastly, if you want to make a lot of money as fast as you can, hedge funds are really the way to go. For the cons, you often get pigeonholed when working at a hedge fund because you become an expert at a specific strategy or industry, so exit ops are limited, especially since you're not building any operational experience. Second, the hours are predictable, but the stress level is extremely high because your investments could turn sour at any moment. And lastly, compensation is volatile and heavily linked to fund performance. Moving on, private equity is great for those who want to dive super deep into the weeds of a company as an investor because you're often buying 100% of a company. Second, there's a heavy emphasis on improving the operations of a business if that's what you're looking for. And lastly, you have the most flexible exit opportunities where you can go pretty much into anything after PE. For the cons, work-life balance is the

roughest, especially when live deals are going on. Second, you're typically looking at mature and relatively boring companies that, honestly, no one else really cares about. And I'm sorry, but it's usually true. And lastly, the PE world is getting increasingly competitive, and returns are shrinking, which is an overall headwind on the industry. Last but not least, for venture capital, this is the industry for you if you live and breathe startups, but you don't really want to start one yourself because you're typically going to be looking at the hottest, newest, exciting companies. VC is also great if you're a people person and enjoy forming relationships, and by the way, this doesn't mean you have to be an extrovert. Lastly, VC is great for those who want to look at a broad range of companies without the weight of fully being responsible for operations since you own a portion of a company. For the cons, the first is that you have to have a ton of patience, given that if you invest early enough, you may not see returns until seven to ten years later.

Second, exit opportunities are pretty much limited to other VC or operational roles in specific industries. And lastly, your compensation is on the lower side out of these three by side fields, and it's also really difficult to make partner. So it's often said that it's best to make VC your last job rather than your first. Alright, so that concludes the video. Let me know what you guys thought down in the comments below. And by the way, if you're interested in breaking into banking or finance, I am selling my resume and cover letter bank which got me into JP Morgan. And I'm also selling a resume and cover letter guide which compiles all of the tips I've gained from being the UC Berkeley JP Morgan recruiting captain for a few years. And lastly, if you are interested in the financial courses at Financial Edge, I highly encourage you to check them out. And with that said, thank you so much as always for watching. Hope to catch you in the next video. Thanks and peace out.

The BEST Beginner's Guide to Hedge Funds, Private Equity, and Venture Capital!

Welcome! My name is Ben, and my goal is to help you build your ideal career.

A bit about me - after graduating from U.C. Berkeley, I worked as an investment banking analyst at J.P. Morgan, where I closed 15 transactions valued at over $14 billion. I'm currently pursuing an MBA degree at Wharton (Class of 2024), and previously, I worked on consulting projects for Deloitte, Cisco, and Andreessen Horowitz.

Videos are published around 10AM EST (New York time).


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The buy side includes hedge funds, private equity, and venture capital, which are often mysterious to break into.

Hedge funds focus on investing in public financial securities using a variety of strategies.

Private equity involves investing in private companies, often with the goal of making operational improvements, while venture capital focuses on investing in early-stage companies with high growth potential.

Each field has its own unique work, lifestyle, compensation, and breaking-in process, making it important to carefully consider which one is the right fit.

The Role of Hedge Funds, Private Equity, and Venture Capital in Investing

Hedge fund managers start by analyzing companies in detail and managing relationships, while senior managers take on more responsibility for the fund's portfolio.

In contrast, private equity investors focus on leveraged buyouts of established companies, conducting thorough due diligence, and long-term operational improvements, with junior investors focusing on financial models and senior investors on fundraising and portfolio support.

Venture capital investors support businesses through funding, providing insights based on their experience, and offering a strong network for the entrepreneurs they invest in.

The Role of Venture Capitalists and Opportunities in the Buy Side

Venture capitalists support early-stage companies and take on high-risk, high-reward investments.

They are involved in sourcing, reviewing, and investing in new companies, as well as supporting and networking with portfolio companies.

Financial Edge offers courses for those interested in the buy side, taught by a well-regarded former J.

Morgan instructor, with a chance to win a course through a giveaway.

The buy side, including private equity and venture capital, typically involves long hours, with private equity workers averaging 65 hours a week and venture capitalists averaging around 60 hours.

Working on the Buy Side: Intensity, Responsibility, and Compensation

Working on the buy side, whether in hedge funds, private equity, or venture capital, involves intense hours and high levels of responsibility due to the risk involved in managing capital.

The buy side offers more challenging and interesting work compared to traditional investment banking, allowing for professional growth and development.

In terms of compensation, hedge funds generally offer the highest pay, but it is dependent on the fund's performance, while private equity provides job security and the potential for high earnings through carry.

Venture capital typically offers the lowest pay but can be lucrative with the right firm and investments, making it important to choose the industry that best suits individual preferences and skills.

Breaking into Finance: Hedge Funds, Private Equity, and Venture Capital

The most common paths to break into hedge funds are from investment banking, equity research, or private equity, with some undergrads going straight from college.

For private equity, the common routes are through investment banking or consulting, with a few spots for consultants from McKinsey, Bain, and BCG.

In venture capital, being a founding member of a successful startup is the most reliable way in, along with backgrounds in investment banking, consulting, or industry expertise.

Hedge funds are great for those who love the public markets, offering a more predictable work schedule and the potential to make a lot of money quickly.

However, working at a hedge fund can lead to being pigeonholed, high stress levels, and volatile compensation.

Private equity is ideal for those who want to deeply analyze companies, improve business operations, and have flexible exit opportunities, but it often comes with challenging work-life balance.

Pros and Cons of Private Equity and Venture Capital

Private Equity (PE) involves dealing with mature companies during live deals and is facing increasing competition, while Venture Capital (VC) focuses on exciting startups and allows for a broad range of company exploration.

PE requires patience for returns and has limited exit opportunities, while VC offers lower compensation and difficulty in making partner.

VC is recommended as a last job rather than a first in the industry.