I discuss why MBA is not a magic bullet to break into institutional public equity investing (at a mutual fund, hedge fund, family office, pension fund, etc.). Before you think, “Oh, maybe I should just get a CFA and a MBA, and getting an investment management job will be easy.” No, it will not. (Please also read my view on the CFA)
Based on my own experience, I strongly agree with many on online forums who highlight the following five MBA programs as the best destinations for investment management: Harvard, Stanford, Wharton, Columbia and Booth (I am making up this term “HSWCC”). For MBA students who went through investment management recruiting at schools other than these five, I believe their experience should resonate with mine to a high extent.
There are always exceptions. You are welcome to hold on your own belief if you strongly disagree with my views.
I studied math/statistics in undergraduate, did not know accounting, valuation, and never read a 10-K before MBA. I did my MBA at a top 15 US program where I was a leader of the investing club, portfolio manager of the student fund and made finalist at one of the major MBA stock pitch competitions and spent my second year interning at a sizeable hedge fund.
Despite checking all the boxes for required activities during MBA, I found all my internships and jobs through my own networking. So much for paying for an expensive networking opportunity.
I am not dissuading anyone from pursuing an MBA (though many should not pursue an MBA because of the wrong motives). My goals are: 1) painting you a realistic picture of what it is like to pursue investment management through MBA 2) how to take advantage of all the resources during MBA to achieve your goal (which I will cover in a separate article.)
MBA is not a memoryless program
Investment management firms like to hire from Investment Banking and Equity Research because the firms do not want to train juniors the foundational skills. In MBA, you will be competing with classmates who already have the prerequisite skills.
While you are learning competitive strategy and accounting in the first semester, your classmates with prerequisite skills are already working on compelling stock ideas and networking with funds. Meanwhile, you are scrambling to mash together your first stock pitch without having the frameworks to generate ideas and develop variant views. Even worse, some classmates have pre-MBA public equity investing experience: they are good to go from day 1.
Remember that life isn’t fair? Well, no one starts at the same starting line for MBA. MBA will provide you with a rebranding opportunity, but it is very competitive to get into investment management from MBA. Just be aware of that.
Most programs don’t have dedicated investment teachings
Investment management is a skill-based profession. A generic accounting class, a financial modeling course, and a competitive strategy course are not remotely adequate for basic competency to generate actionable stock ideas or even just analyze a business. Sadly, that is what most business schools can offer in the classroom.
Just be aware that you will be on your own to pick up all the frameworks to be comfortably identifying compelling investment opportunities and crafting convincing stock pitches for competitions, networking and interviews.
Yes, most schools have an investment club and some even have a student fund. You should definitely participate, but the quality of the students dedicates the quality of your experience in those activities. In a Wharton Investment Management Fund or a Cayuga Fund (Cornell Johnson) where the processes are robust and the students are engaged, you could get a valuable experience. Otherwise, there is always the risk of a “blind leading the blind” situation, rendering the learning experience low quality.
Speaking from experience, I was a portfolio manager for the student fund. Each student member is responsible for pitching one stock during the semester. Almost all of them prepared their stock pitch 20-30 minutes before their presenting session. You can imagine the quality of the discussion is very low.
Quality of classmates
Every MBA program has similar resources: an investment club, a student fund (if available) and access to external stock pitch competitions. Aside from these resources and classroom learnings from real investors who teach as adjunct professors, you have to count on learning from your peers.
High-pressure pre-MBA work experience such as investment banking and management consulting still ensure relatively higher probability of landing at a top MBA program. If you are a complete novice to finance, as I was pre-MBA, I believe it is immensely beneficial to learn from peers who already have a baseline understanding of accounting, business strategy and competitive analysis, and so on. This is not a variant view: try to get into the best program you can to rub shoulders with high-quality peers.
To give you an example, for my MBA class, ten people “considered” pursuing investment management (that really means three were laser-focused, the other seven people thought investment management is a “backup” to investment banking or consulting). I could not learn from peers who also lacked the skills that I needed to analyze companies. There was a lot of blind leading the blind and the risk of tunnel vision until you are put against peers from top business schools and realize how competitive investment management recruiting truly is.
That said, school quality is a double-edged sword. At the top investment management schools, you have to stand out within your school to be selected to attend an external stock pitch competition of your choice (at my school, I could have attended all the external competitions if I wanted to because no one wanted to do it)
Buy-side firms hire on-site at these external stock competitions, which is why competition is cutthroat. Tying back to my point of MBAs not being memoryless, I can imagine students with prior finance experience will band together to ensure they beat out internal competitors to gain the highest visibility in front of hiring firms. Meanwhile, someone without the relevant experience will feel like that kid with poor hand-eye coordination in PE class who is always picked last.
The search channel
Investment management is notorious for its unstructured recruiting process (funds just hire whenever they need.) One of the values of the MBA is the opportunity to market yourself on campus in front of hiring firms without needing to build your own relationships.
Both product and go-to-market are important for the job search. You are in control of the product – work hard to learn the skills, identify actionable ideas, form variant views and differentiate and concisely craft a stock pitch.
The go-to-market is why you are paying six figure tuition and forging two years of salary to gain access to, but sadly most schools cannot provide the following advantages that the top MBA programs for investment management can provide:
- Alum network: Say each year Columbia Business School (CBS) sends 50 people to the buy-side. That extrapolates to 500 CBS alums over the 10 years for you to network with. For my school, I know less than 30 people in total who made it to the investment management in the last 10 years. With investment management known for the lack of shots on goals, going to the right school is very crucial.
- Brand Perception: In a profession where most jobs are unpublicized and filled by referrals and recruiters, only the largest investment firms spend money to recruit on campus. Viking Global’s public investing team is almost entirely from Wharton. Fidelity and Wellington, the top mutual funds in the nation, have a heavy alum base from Harvard and Stanford MBA. Where will these firms spend their recruiting budget? It’s all about winning the perception race. Of course, I know that getting into the HSWCC (Harvard, Stanford, Wharton, Columbia, Chicago Booth) is very hard, but I believe you are not better off by attending a lesser MBA program like the one I attended than networking your way into the buy-side from where you are currently. You are paying similar tuition for any MBA program, but the value is vastly different for the specific purpose of buy-side recruiting.
In conclusion, I want to point out MBA is nowhere near a magic bullet to public equity investing. If you consider MBA for a shot to buy-side, try your very best to get into one of the HSWCCs to maximize your chance. Even then, the following is true in general about life but particularly relevant for a skill-based profession like public equity investing: You get out what you put in. I am a living proof that it’s doable from a lesser school without employer respect (frankly I would not recruit talent from my school if I were looking to hire research analysts.)
Disclaimer: This is not a sponsored post – I do not believe HSWCC needs any advertising for those aspiring to get an MBA.
If you are interested in learning more about professional equity investing (the "buy-side"), I have two other great articles for you:
- A Primer on Equity Investment Styles: LO vs. L/S, Value vs. Growth
- Generalist or Specialist, That is the Question
Don't know where to start to research and value a company? Have trouble generating stock ideas and differentiating on stock pitch? I can help you. Let's meet!