MBA Is Not a Magic Bullet to Research Jobs
Why MBA Won't Magically Fast-Track Your Investment Research Job Search
So your investment research job search is going horribly and you are wondering “Hmm, maybe I should do an MBA and that will solve all my problems?”
As an MBA graduate who went through investment research recruiting, sell-side or buy-side, let me give 5 reasons why MBA isn’t the magic bullet you think it is.
MBA is not a fair competition
For MBA candidates, you face extra layers of challenges versus non-MBAs:
Most funds can hire college grads who went through the IB analyst programs, private equity, and equity research, why would they pay more for an MBA graduate without relevant incremental experience?
Most banks don’t recruit MBAs for sell-side equity research, probably increasingly so because of cost reasons. And it also depends on whether the bank’s research leadership has an MBA, which signals whether they value candidates who hold the degree.
For banks and funds that do recruit from MBA: 1) They recruit from very few schools; 2) The hiring quota is incredibly small nationally. All the top mutual funds in the US hire, I don’t know, mid-single digits of MBA interns each year. And mega mutual funds are the only path for international students because of visa sponsorship.
I understand you just want to get a job, but understanding hiring firm motives helps you rationalize the high difficulty of getting into investment research.
Funds want to hire the best absolute talent. And many of you pursue MBA because you don’t have the technical skills. However, during MBA, you will be competing with peers who have pre-MBA IB, PE, or ER experiences. While you are taking courses on accounting and competitive strategy in the first semester, your classmates might have stock ideas good to go and are already interviewing with funds.
You have to ask yourself, how hard do you want it? Are you willing to put in the work to close the skill gap between you and the candidates whose day job was more transferable to investment research? MBA changes the market’s perception of you, but perception only gets you the interview. Skills get you jobs. I have argued a similar logic regarding the CFA program.
You will not undergo the transformation you need in 2 years if you just passively wait for knowledge to be spoon-fed to you.
My suggestion: If you are starting MBA soon, start self-teaching all the technical skills ASAP. Don’t wait until your first semester starts, because as of now you are already behind if you are not a traditional candidate with pre-MBA high finance work experience.
You will also compete with peers who have had a head start in cultivating their investment process and philosophy. I remember my classmate, George, who showed up late to my school’s internal stock pitch competition. He took home the first prize with a killer pitch. It turns out he has been a very passionate deep value investor for a long time before he even stepped foot on campus.
Meanwhile, I was scrambling together my first stock pitch while force-feeding myself knowledge on modeling, competitive analysis, and valuation, all within a single semester, which leads to my next point on classroom learnings.
Most programs don’t have dedicated teachings
A generic accounting class, a financial modeling course, and a competitive strategy course are not remotely adequate to prepare you for an investment research career. Sadly, that is what most business schools can offer in the classroom. Some schools do better than others because of adjunct professors who have real investing experience or bring a lot of great guest speakers to their courses, but most classes are still taught by professors who have never invested in a single stock.
So you are kind of on your own even after forgoing 2 years of salary and paying hundreds of thousands of dollars on tuition. You will get out what you put in, but you got to put in the work. It’s really that simple, but hard to execute.
Definitely hit up my book list ASAP because these books gave me most amount of eureka moments that formed my investment belief and more importantly established my investment process.
I thought of going to MBA as paying for 2 years of time where I don’t have the distraction of a day job, so I can dedicate myself to working on my craft as an investor. I was so intense about it that my classmates all know they can find me in the Bloomberg room.
Before I started MBA, I was already networking with current MBA students from different schools. I remember speaking with a UVA Darden second-year MBA student who told me his classmate read 200 books during MBA and landed at a top 20 hedge fund in the US.
I did use the “200 books” as my yardstick. I quit my job months before MBA began, went traveling for 2 weeks, and spent the rest of that time immersing myself in all the literature I can find. I finished MBA with about 80-90 books read, a lot of the books made onto my reading list.
I am not saying there is a certain number of books you need to run through, but just know someone else is willing to outwork you to better understand the world so that they can find money-making stock ideas. If you only want to do the bare minimum, it’s fine too as long as you are okay with the consequence of your decision. I just want you to be happy.
And you might wonder, don’t MBAs have investment clubs and student funds? Yes, and you should definitely participate, but the quality of the experience varies across schools. For example, CBS has monthly stock pitch meetings that are judged by real investors. At my school, we had an internal competition only once per year that are judged by a few alums. One alum judge worked in investment banking; I am not sure whether that person is qualified to judge anyone’s stock idea.
Investment clubs and student funds are really a hit or miss. You could get valuable experience, but you could end up in a situation where you are leading a bunch of clueless people. When I was Portfolio Manager for the student fund. Each fund member was responsible for pitching one stock per semester. Almost all of them prepared their stock pitch 20-30 minutes before their presentation session. You can imagine the quality of the discussion is very low. And that leads to my next point.
Quality of classmates
This is not a variant view: Try to get into the best program to rub shoulders with high-quality peers. They can influence you in a positive way: whether it’s instilling a good work ethic, sharing their technical and sector knowledge, or just general intellectual honesty. And HSWCCs (Harvard, Stanford, Wharton, Columbia, and Chicago Booth) have a critical mass of motivated peers who are laser-focused.
At my MBA program, ten people from my class “considered” pursuing investment research (that really means three were laser-focused, and other seven people thought investment management is a “backup” to investment banking or consulting because they are clueless about what it takes)
My school sent out teams to most MBA stock pitch competitions and my classmates report back that it’s always Columbia, Wharton, or Booth that wins first places. That by itself is a wake-up call. And two major factors: 1) More people from those schools have pre-MBA finance background which helps; 2) They know how hard to get into the buy-side so they work harder, partly thanks to their pre-MBA high-intensity work experience. The result is their work product is so good. In investment research, nothing beats letting the product do the talking for you.
I remember at least five of my classmates went with the exact same stock idea for all of their research interviews because apparently, they think stock ideas are one size fits all. Well, a lot of them ended up working at KPMG so they got what they deserved.
With a good supply of talents, the alums are more engaged and want to give back to their alma mater, creating a virtuous cycle of alums wanting to meet the next generation of talents and the talents get mentored by industry professionals so everyone benefits. If I were to look for talents to hire for my fund, I would not even hire from my own alma mater.
That said, school quality is a double-edged sword.
At HSWCC, it’s more competitive to stand out. You have to place well in the internal competition to earn the right to go to an external competition of your choice. A lot of good funds host first-round interviews at those competitions. I can imagine students with prior finance experience will form teams to ensure they gain the highest visibility in front of hiring firms.
If you go there as a complete career changer, you could feel like that kid with poor hand-eye coordination in physical education class who is always picked last. But I still think that’s a better problem to deal with than going to a lesser school, which leads to my next point.
The search channel
One of the biggest values of the MBA is the school should create a platform for you to market yourself in front of hiring firms without the need to build your own relationships. Investment research is notorious for its unstructured recruiting process: Funds just hire whenever they need and hire through word-of-mouth. Getting that access to the alum base and earning respect from firms can save a lot of time and effort if you are at the right school.
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, know what you are talking about and pitch actionable stock ideas concisely. The go-to-market is why you are paying six-figure tuition and forging two years of salary to gain access, but most business schools cannot provide the buy-side ecosystem that only HSWCC has.
Alum network: Say each year Columbia Business School (CBS) sends 50 people to the buy-side. Don’t quote me on this because I might be low. Assuming only the alums from the past 10 years will respond to your networking 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 investment management in the last 10 years. I just have so much fewer shots on goal that I started reaching out to alums from the other schools I discussed.
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. Capital Group and Wellington, the top mutual funds in the nation, are heavily HSWCC MBA. Where will these firms spend their recruiting budget? It’s all about winning the perception race.
Conclusion
I know that getting into the HSWCC is very hard, but I strongly believe you should only go for those 5 schools if your only goal is investment research. Otherwise, you are better off networking on your own. You will pay similar tuition for any MBA program, but the ROI is vastly different for your specific goal.
With all that said. Investing as a skill profession is really about you. If you are hungry enough to acquire the right knowledge and skills, you don’t need an MBA. If you aren’t willing to put in the work, even HSWCC won’t help you. Either way, it’s incredibly hard to get into public equity investing. So you have work cut out for you.
I hope this is helpful.
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Great read. Have my work cut out for me. Think PE fits my personality better though over public markets investing. Have recently seen people from T25 MBAs somehow get into LMM PE (whether doing 2 years of IB prior or not) and have seen LMM PE shops in my prior industry. Not thinking about a top name like KKR etc as realistic. Just lower mid market. Willing to do banking prior to trying to shoot a shot at any PE. Am I thinking about this the right way? Targeting T15 MBA ideally.