Barden Financial Services Asset Management Series...Hedge Fund v Private Equity: The Nature of the Work
Welcome to the second edition of the newly launched Barden Financial Services Asset Management Blog Series. Each blog aims to deliver asset management focused content, to demystify and decode some of the tricky terminology out there, and to shine a light on asset management as a career.
As the experts in financial services recruitment we regularly field questions about asset management, and in particular hedge funds and private equity.
In this edition Fionnán O’Sullivan, Director, Barden Financial Services, zones in on what the nature of the work when it comes to hedge funds and private equity.
Nature of the Work…Private Equity
The day-to-day tasks as a junior-level person in private equity typically include:
- Deal sourcing.
- Reviewing potential investments.
- Valuation and financial modelling.
- Monitoring portfolio companies.
- Assisting with add-on acquisitions or preparing portfolio companies to sell.
- Coordinating due diligence on potential deals.
- Administrative work such as editing NDAs or other deal documents.
- Meeting with bankers, lawyers, lenders, and other industry contacts.
- Preparing marketing materials for the fundraising process.
Similar to other finance/banking/investing careers, you’ll spend a lot of time in Word, Excel, and PowerPoint, but you’ll take a critical eye to each company rather than selling your client.
That requires more brainpower, but it also means that you’ll spend a lot of time looking at marketing documents and finding reasons to say “no” to deals.
Nature of the Work…Hedge Funds
By contrast, the daily tasks at traditional hedge funds fall into just two categories: research and analysis.
Everything is shorter-term and higher-tempo, there are no deals, and portfolio companies don’t exist in the same way, so you spend the bulk of your time:
- Building models and doing research.
- Middle office investor services tasks
- Back office reporting: and
- Client management.
You still monitor your current positions, but many of the logistical and fund-wide issues are up to the Portfolio Manager, not the Analyst or Senior Analyst.
Both fields use valuation and financial modelling, but on average, financial models are more granular in private equity because of the longer holding periods.
You don’t need to create a 5,000-row Excel model to validate a quick decision at a hedge fund – you just need to verify that, very roughly, the stock’s current price is way off!
As you can see there are a number of differences when it comes to the nature of work with hedge funds and private equity.
Keep an eye out for our upcoming blog in the Barden Financial Services Asset Management Series which will take a closer look at “Skills and career requirements” for hedge funds and private equity.
To read the previous edition which focuses on “Hedge Fund v Private Equity: What do they actually do?” click here.
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