MBA: Not a Magic Bullet to Public Equity - Part II

MBA: Not a Magic Bullet to Public Equity - Part II

Last week, I discussed how no one is at the same starting line in MBA and how most classroom education is inadequate for training public equity investors. This week, I discuss the importance of quality classmates and search channel and why I argue the importance of attending the programs best for investment management to maximize your job prospect.

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.

Conclusion

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.)

I would love to hear your feedback!

If you are interested in learning more about professional equity investing (the "buy-side"), I have two other great articles for you:

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