Numi Advisory is an expert in hedge fund and equity research recruiting, having advised over 600 clients by providing career coaching, mock interviews, and resume reviews for people seeking jobs in equity research, private equity, investment management, and hedge funds (full bio at the bottom of this article).

If you want to know how to pitch a stock, it would be great to have a full stock pitch guide in one article… right?

Well, you’re in luck: in this article, we give you real stock pitch examples and templates that you can use in hedge fund, asset management, and other buy-side interviews.

The stock pitch matters a lot in these types of interviews because it is literally what you do on the job, and it’s the best way to set yourself apart.

Also, interviewers will ask you to pitch a stock, often multiple times, if you want to get a job at a hedge fund.

Stock Pitch Templates & Examples

Let’s start with the most important part: stock pitch examples for real companies. I’ll share two below from our financial modeling courses:

• Jazz Pharmaceuticals [JAZZ] – [SHORT] – Word | PowerPoint
• AvalonBay [AVB] – [LONG] – Word | PowerPoint

The Jazz stock pitch turned out to be incorrect over a 12-month time frame, but it was correct over a ~6-month time frame when the stock price fell.

The AvalonBay stock pitch turned out to be correct, with the company returning over 25% (including dividends) compared with an overall S&P gain of ~10% in that time frame.

I’m not going to share the full financial models, but you can get a sense of the AVB valuation by looking at our tutorials on REIT NAV Models and REIT Valuation.

For the Jazz model, there’s a whole treasure trove of DCF modeling tutorials on our YouTube channel.

What is a Stock Pitch?

Definition: A stock pitch is a short write-up or presentation that argues for or against investing in a public company’s stock, and which is backed by a strong investment thesis, data, valuation metrics, catalysts, and an assessment of the risk factors.

You use a stock pitch in the following ways:

• Networking: For example, you could look up contact information for hedge fund professionals and include your pitch in your introductory email to them.
• Interviews: You’ll be asked to pitch a stock all the time in hedge fund and asset management interviews.
• Investment Clubs and Competitions: You’ll have to present your views, argue why a security is mis-priced, and then convince others that you’re right.
• Personal Investing: If you have a personal trading account and you invest in individual stocks, you can use stock pitches to hone your reasoning and make better picks.
• On the Job: Finally, if you’re working at a hedge fund or other investment firm, you’ll research and pitch stocks on the job regularly. That is the job!

The bottom line: if you want a hedge fund career, or a career in closely related fields, you’ll need some solid stock pitches to interview successfully for Hedge Fund Analyst roles.

And if you want to start a hedge fund, you’ll need to generate a steady stream of stock pitches.

Usually, interviewers, firms, and competition judges won’t give you a specific company to pitch; it’s up to you to do the research and find one.

If they do give you a specific company, then it’s probably a time-pressured case study where you have 2, 3, or 4 hours to skim the company’s filings, build a simple model, and make a quick pitch based on that.

This article is geared toward longer, “take-home” stock pitches where you have a few days up to a week to finish the pitch, but the basic structure applies to time-pressured pitches as well.

If the firm you’re interviewing with does not give you an explicit time limit, ask for it, along with the formatting requirements and anything else they want to see.

Finally, note that we are only covering stock pitches here – not credit pitches or distressed debt pitches or global macro pitches involving FX, commodities, or sovereign bonds.

You can use the same structure for those, but specific elements of the pitch, such as the valuation, catalysts, and risk factors, will differ.

The Ideal Stock Pitch Structure

We recommend the following structure for all stock pitches:

1. Recommendation – State whether it’s a Long or Short (i.e., whether you think its stock price will increase or decrease) and what the company should be worth. Do not give a “neutral” recommendation unless they assigned the company to you.
2. Company Background – What are the company’s products/services, how much revenue/EBITDA does it generate, what is its market cap, and what are its current valuation multiples? Bonus points for a price/volume graph.
3. Investment Thesis – The stock is priced imperfectly because of these 2-3 key factors. The market has not factored them in because of reasons X and Y. The market is wrong, and there’s a chance to gain significantly by longing/shorting this stock.
4. Catalysts – Certain key events in the next 6-12 months will cause the market to “realize” this pricing imperfection, resulting in a price correction and the potential to make money. Key events might include new product launches, acquisitions, earnings announcements, divestitures, clinical trial results, and financing activities.
5. Valuation – For a Long recommendation, you need to show that the stock is undervalued (e.g., right now it’s trading at $25, but there’s a reasonable chance it’s worth $35-$40); for a Short recommendation, you show why the stock is overvalued.
6. Risk Factors and How to Mitigate Them – You lay out the top 2-3 market and company-specific reasons why your investment thesis might be wrong, and then explain what you can do to mitigate these risks. Even if you’re wrong, could you limit your losses?

If this is an initial pitch for networking or interviews, keep it short.

“Short” means “2-3 pages at the most,” as in our examples above.

Make it longer only if you have a lot of time to present, you’ve been asked to create a slide presentation, or you’ve been asked for a certain number of pages.

Building an Investment Thesis: Stock Pitch Idea Generation

“OK,” you say, “that structure sounds nice. But where am I supposed to get ideas in the first place? And how do I complete the research process and build a valuation in only a few days?”

The blunt truth is that you need to be following industries or companies already to have a good shot of finishing a stock pitch, even a 2-3-page one, in only a few days.

If not, then you should reevaluate whether or not you want a career in investing or hedge funds.

The best investors do it because they’re passionate about the process itself; pitching stocks is their hobby.

So, ideally, you already have in mind companies that are undervalued or overvalued and whose stock prices could change significantly in the next 6-12 months.

How to Find a Company to Pitch, Step-By-Step

But let’s say you just found out about an interview in 4-5 days, you have nothing prepared, and you don’t follow specific companies.

Here’s the process I’d recommend in that case:

Step 1: Research the Fund’s Strategy

Before you even open Excel or Word, you need to make sure you’re searching for a company that is a relative match for the fund’s strategy. For example:

• Hedge Fund Strategy: Long/short equity with a growth bias and tech/biotech focus.
  • Good Idea: Short for a recently public tech startup.
  • OK-But-Not-As-Good Idea: Long for an undervalued, mature tech company.
  • Bad Idea: Merger arbitrage pitch for a life insurance company spin-off.
• Hedge Fund Strategy: Value-oriented long-only fund with an industrial/manufacturing focus.
  • Good Idea: Long for an undervalued industrial tools manufacturer.
  • OK-But-Not-As-Good Idea: Long for a misunderstood consumer/retail company amid a turnaround.
  • Bad Idea: Short for an overpriced biotech startup.

It’s more important to match the strategy than it is to match the industry.

That’s why the “bad ideas” above are strategy mismatches.

Step 2: Start with an Industry You Know Something About, or That Lends Itself to the Fund’s Strategy

For example, if you’re an engineer, pick the technology, telecom, or media industries.

If you’ve done internships at retail companies, pick consumer/retail.

If you like whiskey even more than I do, pick the food & beverage industry.

Avoid industries that are highly technical or that have specific accounting/valuation methodologies (e.g., oil & gas or commercial banks) – unless the fund specializes in them.

Also, keep in mind that certain industries will match the fund’s strategy more easily than others.

You can easily find over-priced and over-hyped tech and biotech startups that are ideal “Short” candidates, but in an industry like chemicals or industrials, it’s easier to find mature, undervalued companies that might be long-term investments.

Step 3: Screen for Mid-Sized Companies in the Industry

If you don’t have Capital IQ access, the best screening tool is https://finviz.com/.

Here’s an example healthcare screen, which you can sort by sector, industry, country, market cap, and other criteria.

If the biggest companies in your industry have market caps of $100 billion and the smallest have market caps of $50 million, you should pick something in the middle: maybe the $1 – $10 billion range.

If you can screen by revenue, aim for companies with revenue in the hundreds of millions to low billions USD.

Step 4: Find Companies with 3-4 Key Drivers, At Most, and Relatively Pure-Play Businesses

Do not pick a company with 20 different business lines where each segment depends on different assumptions.

Consumer/retail companies are great because revenue depends on the number of stores and the average sales per store, and the projections are straightforward.

On the other hand, the maritime/shipping industry is not ideal because you need to make granular assumptions for different types of ships in the fleet.

In our example stock pitches here, I picked Jazz Pharmaceuticals partially because it had a manageable number of products – the main one, two smaller ones, and several even smaller ones that we consolidated:

Step 5: Eliminate Companies with Messy Financial Statements

If the company’s Cash Flow Statement is four pages long, or its Income Statement has 13 non-recurring charges, or its Balance Sheet has 30+ items on each side, drop it.

Yes, you can simplify and consolidate the statements, but that takes up precious time that you don’t have.

Step 6: Favor Companies with Clear Catalysts

If you’re down to 2-3 companies by this point and you can’t decide, pick the one with the most concrete, impactful catalysts.

A company that just announced an acquisition or divestiture, a major product or clinical trial results, or a major strategic pivot is a good bet.

Product launches and expansion strategies are good catalysts because it’s easy to argue that future growth will be higher or lower than expected.

If you’ve done everything above but still can’t decide, pick a company randomly and move on.

One final note: do not rely on equity research reports to find companies or investment theses.

Equity research is useful for gaining background knowledge and finding market data, but you should not use it for building your investment thesis.

Stock Pitch Research and Valuation Process

You will not be able to read thousands of pages if you have only a few days or a week, so we recommend the following steps:

1. Research the Company and Industry – Get the company’s latest annual and interim reports and its most recent investor presentation. You can also search for press releases about the company’s products/services.
2. Build a Simple DCF-Based Valuation – You should go beyond percentage growth rate assumptions for revenue and expenses, but you don’t need a 5,000-row spreadsheet, either. Aim to project revenue with Units Sold * Average Selling Price in the main segments, and link the key expenses to Units Sold or the Employee Count. That might result in a DCF model that’s around 100-300 rows; a 3-statement model is unnecessary.You’ll need a sense of the Public Comps as well, but you should not spend time scrubbing the data. Use Capital IQ or FactSet if you have them, or Finviz and Google Finance if not. See our tutorial on comparable company analysis for examples.
3. Time Permitting, Do Real-Life Research – If you have the time to do so, spend a few hours speaking with people in real life to find out more about the overall prospects of the company and industry. For example, you could use LinkedIn to look up suppliers, partners, and employees, contact them via email, and ask if they’re willing to speak with you for a few minutes. In exchange, you can explain how investors view their industry.

This process is known as a “channel check,” and it’s a great way to set yourself apart with modest effort. A direct quote from a manager at the company’s key supplier is far better than a more complex financial model.

Focus on the following key points

• Your Angle: How do you see this company differently from the rest of the market? Will it grow more quickly/slowly than expected? Will it be more/less profitable than expected? Will its new products and services perform better/worse than expected?
• Valuation Inputs: How do these points translate into model assumptions in Excel? Research means nothing unless you can reflect it in your revenue, expense, and cash flow assumptions.
• Implied Value: What does the output of your valuation look like? Is the company overvalued, undervalued, or valued appropriately right now? How does that change in different cases, such as Base, Upside, and Downside?
• Catalysts: Which 2-3 events or potential events over the next 6-12 months could cause this company’s stock price to change in the direction you predict? Companies can stay mispriced forever if the market doesn’t realize it. Catalysts are particularly important for “Short” recommendations because they are so dependent on timing.
• Risk Factors: Why might your recommendation be wrong? What are the top 2-3 factors that could result in the company’s stock price moving in the other direction? And how could you mitigate these risks?

Once you’ve done this, you should be able to create a short, 2-page outline based on your findings.

Here are the outlines we created for AvalonBay and Jazz Pharmaceuticals:

• Jazz Pharmaceuticals [JAZZ] – SHORT – Stock Pitch Outline
• AvalonBay [AVB] – LONG – Stock Pitch Outline

After you have this outline, you’ll expand it to create the full stock pitch.

You can understand the research and valuation process in-depth and financial modeling in Excel by completing our courses.

The “Core” course linked to above has a simple example of a valuation, DCF, and stock pitch, while the Advanced Financial Modeling course has a detailed example backed by outside research and industry data:

Stock Pitch Section 1: Recommendation

In this section, you present the most convincing arguments for your pick. We recommend the following structure:

1. Long or short, current share price, the percentage by which it’s mispriced, and the top 2-3 reasons why the stock price will change in the next 6-12 months.
2. Two or three potential catalysts that will cause the stock price to change in the next 6-12 months.
3. Two or three investment risks (company-specific or market-specific) and how you might mitigate those risks through other investments, call or put options, etc.

Here’s our Recommendation slide for Jazz Pharmaceuticals:

If you want a better visual style for this one, see the summary slide at the end instead:

It is not a great idea to give specific probabilities here (e.g., “75% chance of gaining 30% and a 25% chance of losing 15%”) because the first question in any interview will be, “So, how did you come up with those probabilities?”

Instead of giving probabilities, focus on best-case and worst-case outcomes:

• Longs: Aim to show that the company is modestly undervalued in the Base Case (e.g., 20-30%), dramatically undervalued in the Upside Case (50%+), and only slightly overvalued in the Downside Case (5-10%).
• Shorts: Show the company is modestly overvalued in the Base Case, only slightly undervalued in the Upside Case, and dramatically overvalued in the Downside Case.

You are demonstrating that there’s an asymmetric risk profile, i.e., higher potential gains than potential losses.

Stock Pitch Section 2: Company Background

Here, you list the company’s key financial stats (revenue, EBITDA, market cap, and current multiples) and a quick overview of its business segments and products/services.

Don’t just copy in the descriptions from the filings or annual reports – summarize the most important points and leave out the corporate speak.

In the PowerPoint version of the Jazz stock pitch, we added a price-volume chart because of the extra space available:

In the Word version, we left out the chart and wrote the bullets in sentences instead.

Stock Pitch Section 3: Investment Thesis

In the investment thesis section, you must point out something that everyone else is missing or misunderstanding about the company.

In the Jazz stock pitch, we make very simple arguments: generics that threaten the company’s key product are likely to arrive sooner than expected, the company’s pricing power is lower than expected, and its new drugs have lower-than-expected market sizes:

We link each factor to a specific per-share impact on the company’s stock price to show how the misplaced mainstream view is more than theoretical.

Investment Thesis Examples

Besides arguments about pricing and market size, there are many other ways to build an investment thesis.

For example, here’s what we use for AvalonBay in the apartment REIT sector:

This is a Long recommendation, and the company is in a sector that’s highly sensitive to macroeconomic conditions, so the main idea is:

“Even if economic conditions worsen, the company won’t be affected too badly, and it might even benefit in some ways; also, the company’s development pipeline is stronger than expected and will deliver higher growth when the first deliveries arrive.”

Other investment thesis examples include:

• Misunderstood Acquisition or Divestiture: The company’s true upside from a deal will be far higher or lower than expected, and the rest of the market hasn’t yet factored it in because they don’t understand the cost synergies or integration plan.
• Lipstick-on-a-Pig Company: The company presents itself as a “SaaS” or “AI” play, but in reality, it’s an overhyped services business that should trade at far lower multiples.
• Misunderstood Threats: The market expects the competition to beat the company in Areas X and Y, or it expects the company to fail to execute Initiative Z, but it’s wrong for the following reasons.
• Financial Statement Shenanigans: The company is recognizing revenue too aggressively, exaggerating its reserves, or playing games with capitalized vs. expensed costs, all of which affect its cash flows and, therefore, its valuation.

Stock Pitch Section 4: Catalysts

Catalysts should be events or potential events that might occur within the next 6-12 months.

Most hedge funds operate on relatively short time frames, so if specific events will not change the company’s stock price for another 3-5 years, the company is a bad pick (for more on this, see our hedge fund overview article).

Also, it’s much more difficult to predict the impact of events that far into the future.

“Hard Catalysts” are events that are definitely going to happen and will produce a specific result: earnings reports, the announced outcome of clinical trials, or the announced acquisition of a smaller company.

“Soft Catalysts” are potential events that may or may not happen and where the time frame is less certain, such as a planned international expansion, a change in market share, or the launch of a future competitive product with an unknown release date.

You should prioritize “Hard Catalysts,” but it’s OK to use a mix of both – as we do for Jazz and AvalonBay:

Catalysts are most important for Short recommendations because overvalued companies tend to stay overvalued until a specific event, such as an earnings report far below expectations, suddenly makes everyone come to their senses.

If a company is high-quality, appropriately valued or undervalued, and has solid growth potential, its share price might increase gradually over time, and specific events are not as essential to your investment thesis.

Stock Pitch Section 5: Valuation

In this section, you must resist the urge to paste in 538 sensitivity tables and instead summarize the output, with a focus on the implied share price in different cases.

For Jazz Pharmaceuticals, we used the traditional “football field” graph, but we summarized the long-term projections on the next slide and showed sensitivities after that:

Focus on the DCF (or DDM, or NAV Model depending on the industry) because it demonstrates your differentiated, long-term views of the company more effectively than the other methodologies.

You can support the intrinsic analyses with valuation multiples, but you can’t base your entire argument on them.

Valuation multiples fluctuate for so many different reasons that you can’t just say, “Aha! Company X trades at multiples that are 20% lower than Company Y, despite similar growth rates and margins – therefore, it’s undervalued by 20%!”

It’s quite important to include different scenarios, such as Base, Upside, and Downside cases linked to the company’s revenue and expense drivers.

If you’ve only looked at a single case in which the company grows by 10% per year, it will be very difficult to answer questions about the risk factors, the worst-case scenario, or the potential losses if your thesis is wrong.

The valuation must tie in directly to the asymmetric risk profile, and your audience must read it and think, “OK, it seems like there’s more to gain than to lose here.”

Stock Pitch Section 6: Risk Factors and Mitigating Factors

In this section, you cross-examine your investment thesis and point out all the flaws and reasons why it might be wrong.

The easiest method is to reverse the catalysts: for example, what if the company can raise prices by more/less than expected? Or, what if its new drugs turn into a giant success/failure? What if its clinical trial results are unexpectedly positive/negative?

Risk factors must be specific to the company to be effective.

So, don’t list “There could be a global recession!” or “Oil prices might plummet!” or “The company might get displaced by robots and AI!” as risk factors.

Yes, those are all risks, but they’re general risks that will impact a wide range of companies – not yours alone.

We followed the “reverse the catalysts” approach in the Jazz stock pitch, but one of the risk factors relates to early-stage drugs not mentioned in the catalysts section:

You should also write something about how to mitigate these risks.

The obvious approach for a Long/Short Equity pitch is to use call or put options, or stop-loss or stop-limit orders to cap your losses at a certain percentage.

But you could also recommend longing or shorting other companies’ stocks that might move in the opposite direction, or using other investments to reduce the risk in some way.

The worst-case scenario is worth mentioning as well, especially in Long pitches: if the company completely crashes, what might its Balance Sheet be worth in a liquidation scenario?

Could it sell non-core assets or other divisions if something catastrophic happens?

For Short pitches, what happens if the company’s stock price jumps 200%? How high could it realistically go, based on your valuation, and where would you cap your losses?

Presenting the Stock Pitch

The presentation of your pitch varies, but if you’re doing it live, expect an extended Q&A session or “healthy debate” after you finish.

The investment professionals will dig into your assumptions, question specific numbers, ask about your primary research, and assess how much conviction you have.

I wouldn’t recommend taking public speaking classes or joining Toastmasters or anything like that because your pitch is more of a conversation than a “speech.”

However, you should make notes about the key numbers, what your different sources said, and the industry stats.

And if you don’t know something, you should admit it upfront.

Then, offer to look it up and follow up with them after the interview… and make sure you follow through and do that.

Even simple valuations have a lot of numbers and assumptions, so there’s a decent chance you won’t be able to remember the source for one specific number.

Stock Pitches: Anything Else?

Some books, guides, and articles about stock pitches recommend that you include other factors in your pitch as well:

• The existing shareholders and how they’ve changed over time.
• How “crowded” the trade is, i.e., whether or not many other funds have also invested, and the short interest.
• The stock’s performance over the past few years.
• The liquidity and average daily trading volume of the stock.
• How you’ll enter and exit the position without affecting the stock price.

If you have the time and resources, and you’re allowed to make a longer pitch, sure, you can include these points.

But one problem is that you’ll need Bloomberg access to research these points in-depth, which may not be realistic if you’re a student or not yet in the finance industry.

Also, some of these issues are on-the-job considerations – critical when you’re making the trade in real life, but not as essential if you’re presenting the initial idea to generate interest.

The Top Stock Pitch Mistakes To Avoid

I’ve reviewed hundreds of case studies, models, stock pitches, and investment recommendations over the years.

Here are the top mistakes I’ve seen:

1. Unnecessarily Detailed Model – Some candidates spend all their time worrying about minutiae on the financial statements rather than the key drivers. You should create a moderately detailed model (100-300 rows for the DCF) and spend the bulk of your time researching the company, speaking with real people, and honing your investment thesis.
2. Inability to Support the Main Assumptions – Why are you assuming higher revenue growth or margins in a certain year? What historical performance, research, or channel checks support that assumption?
3. Poor or Non-Existent Catalysts – Your catalysts should be short-term (6-12 months), they should represent specific per-share impacts, and 1-2 of them should be “hard” rather than “soft.” Macro catalysts can work, but only if you explain how they will affect your company specifically.
4. Poor or Non-Existent Risk Factors and Mitigants – The most common mistake is to leave out the risk factors altogether, or to give risk factors that are too vague. Many candidates also fail to explain how to mitigate the risks.
5. Lack of Conviction – Many candidates walk in expecting to take the SAT or GMAT and coast through the process, but stock pitches are very, very different. If you are not passionately convinced that your idea is great, it will be very obvious to everyone, and you won’t win the offer.

Stock Pitches: What Next?

“Practice makes perfect” is a cliché, but it’s also 100% true with stock pitches.

To create high-quality stock pitches, you’ll need to practice with at least 2-3 companies before you get a feel for it.

And if you don’t yet have a good understanding of accounting and valuation, add on several months to learn those.

For interview purposes, you should prepare 2-3 ideas – at least 1 Long and 1 Short – and you can adapt them to different funds as necessary (e.g., you could recommend underweighting your Short pick if you interview at a long-only fund).

If you follow this guide, you should have a good start on those first 2-3 pitches.

And if you want personalized assistance with your stock pitches, I highly recommend the services of Numi:

Numi Advisory has provided career coaching, mock interviews, and resume reviews to over 600 clients seeking careers in equity research, private equity, investment management, and hedge funds. With extensive firsthand experience in these fields, Numi offers unparalleled insights on how to ace your interviews, excel on the job, and create and present great stock pitches.

Numi customizes solutions to each client’s unique background and career aspirations and helps them find the path of least resistance toward securing their dream careers. He has helped place over 150 candidates in leading buy-side and sell-side jobs. For more information on career services and client testimonials, please contact numi.advisory@gmail.com, or visit Numi’s LinkedIn page.

The post Stock Pitch Guide: How to Pitch a Stock in Interviews and Win Offers appeared first on Mergers & Inquisitions.

1. Make a lot of money or gain power/prestige.
2. Take little-to-no risk.
3. And work normal, stable hours.

If you’ve read this site before, you know this set of goals is impossible for most finance careers: you take a lot of risk, work long/stressful hours, or both.

But one possible exception lies in sovereign wealth funds (SWFs), which are similar to funds of funds in some ways.

The pitch is that you do a mix of high-level “macro” work and occasional “micro” work, such as direct investments, you may get to live in exotic locations and pay less in taxes, and you work much more normal hours than in other finance jobs.

And while the pay ceiling is lower, it’s not that big a difference until you reach the top levels – especially after factoring in the lower taxes.

I’ll address all these points here and cover the advantages and disadvantages of SWFs, but let’s start with the definitions and overview:

What Are Sovereign Wealth Funds?

Sovereign Wealth Funds Definition: Sovereign wealth funds (SWFs) are state-owned vehicles that invest significant reserves from commodities or foreign exchange assets in various sectors to build up savings, stabilize the government’s revenue during downturns, and diversify wealth and income.

Sovereign wealth funds are the most common in countries with one or more of the following:

1. Commodity Wealth – Oil-producing countries tend to have cash surpluses, especially when oil and gas prices are high.
2. Trade Surpluses – Some countries, like Singapore, are not rich in commodities but serve as trade hubs and generate significant revenue from these activities.
3. Tax Revenues and Pension Contributions – In places like Canada and Australia, the pension or “superannuation” system generates significant funds to invest (but some would call the investment firms there “pension funds” or “superannuation funds” rather than SWFs).

SWFs in places like the Middle East, Norway, and Russia are heavily linked to commodities, while the ones in places like China, Hong Kong, and Singapore have more diversified reserves.

Commodity-linked funds want to diversify and avoid complete dependency on oil, gas, or lithium prices, while other funds are motivated by some combination of diversification and “saving for future generations.”

Sovereign Wealth Fund Strategies

Sovereign wealth funds can invest in almost anything, from equities to fixed income to real estate, infrastructure, private equity, hedge funds, and more.

Some SWFs operate like long-only asset managers (i.e., mutual funds) that allocate their assets top-down and then pick specific indices, companies, and securities that meet their criteria.

Others operate more like funds of funds and delegate much of the investing process to private equity firms, hedge funds, and other asset managers.

More recently, many SWFs have built direct investing teams to pursue minority-stake deals, credit deals, and even control deals for > 50% stakes in companies.

Examples in this last category include GIC and Temasek in Singapore and Mubadala in Abu Dhabi.

Also, many SWFs without official direct investment teams still co-invest with PE firms they’ve invested in, like the private equity fund of funds model.

Some sovereign wealth funds also pursue unconventional strategies.

One good example is the NZ Super Fund in New Zealand, which invests based on “diversifying risk” rather than a traditional asset allocation.

The firm uses passive and active strategies, often deviating from its reference portfolio based on the macro environment.

Sovereign wealth funds have much longer time horizons and more “permanent capital” than traditional PE firms, hedge funds, and funds of funds, and these points create differences in timing, strategy, and willingness to pay.

For example, many SWFs take their time making decisions and are sometimes willing to outbid traditional investment firms in areas like infrastructure assets.

They do not “need” to exit their investments within a specific time frame because they have no Limited Partners, so they can do things that traditional firms cannot.

The Top Sovereign Wealth Funds

You can easily find a list of the “biggest” sovereign wealth funds online: the Government Pension Fund (GPF) of Norway, the China Investment Corporation (CIC), the Abu Dhabi Investment Authority (ADIA), the Kuwait Investment Authority, GIC in Singapore, the Public Investment Fund (PIF) in Saudi Arabia, the Hong Kong Monetary Authority Investment Portfolio, Temasek, the Qatar Investment Authority (QIA), Mubadala, and so on.

Some people would also put CPPIB in Canada (and other Canadian funds) on this list, but these firms are usually classified as pension funds rather than sovereign wealth funds.

But the more relevant question is: “Which of these funds would you want to work at?”

And the short answer is: “Some of the Middle Eastern ones, plus GIC and Temasek.”

These tend to be the funds that pay better, actively recruit new entry-level hires, and do at least some direct investing.

Funds like Mubadala, GIC, and Temasek are good for direct investing work, and ones like ADAI, PIF, and QIA offer competitive pay, even if there’s less direct investing.

Some other large funds might also qualify; unfortunately, there’s little information available on most of them.

I assume you probably need to be a Chinese or Hong Kong national to have a good chance at anything based in China or HK, but I’m not 100% certain of that (feel free to clarify in the comments).

On the Job at a Sovereign Wealth Fund

To understand the nature of the job, you should know what PE Analysts, PE Associates, and HF Analysts do because much of it is similar.

If you compare a junior role at a sovereign wealth fund to these jobs, the work tends to be broader and shallower:

For example:

• Time – Traditional PE: You might dig into 2-3 potential deals each week, build models, and conduct market research. You’ll also spend time supporting existing portfolio companies and reviewing their results. Almost everything you do at the junior level is “micro” in nature.
• Time – SWF: You might spend 50% of your time looking at specific deals and the other 50% on higher-level asset allocation decisions (sectors, strategies, funds, etc.) and supporting your Portfolio Manager’s ideas and requests.
• Presentations – Traditional PE: The “deal review” pace above means that you could make several presentations to the investment committee or Board each month. And each one will take a fair amount of time and effort.
• Presentations – SWF: You will not make nearly as many presentations to the committee or Board; it might be closer to one per month, depending on the number of direct investments you work on.
• Deal Approval – Traditional PE/HF: To win approval for an investment, you don’t necessarily need to please “everyone” – just the key decision-makers. But they will dig into your work and ask detailed questions.
• Deal Approval – SWF: More people will review your process and recommendations, but they won’t go into as much detail as much as a traditional PE Partner. The approval process might take longer (say, 2-3 months rather than 1 month) because more people need to weigh in.
• Depth of Work – Traditional PE/HF: You’ll spend time doing market research, meeting management teams/customers/competitors, and building detailed financial models for any deal that moves past your quick screening.
• Depth of Work – SWF: You’ll still complete many of these tasks, but not to the depth that you would in most PE/HF roles. For example, you might focus on the model’s 2-3 key points that will drive returns rather than getting all 273 line items correct.
• Returns – Traditional PE: The targets vary by fund type and strategy, but traditional buyout funds usually achieve IRRs in the 15 – 20% range.
• Returns – SWF: Targets are often 3 – 5% lower, whether directly stated or implicitly acknowledged. This might not sound like much, but it could be the difference between a 2.0x and 1.6x multiple over 5 years (for example).

If you do direct investing, you’ll be closer to the “PE/HF” side of the spectrum, but there will still be some differences.

For example, minority-stake investments, credit deals, and co-investments in leveraged buyouts are all common.

But control transactions where your fund acquires over 50% of a company are less common, partly because of rules restricting foreign investment ownership in many countries.

Sovereign Wealth Funds: Salaries, Bonuses, and… Carried Interest (???)

You should expect pre-tax compensation that’s ~25% lower than pay at large PE firms at the junior levels.

So, expect something in-line with pay at middle-market firms, such as $200 – $250K rather than $300K+ total.

As you move up, the pay differential increases because base salaries and bonuses increase more slowly, and carried interest is much lower or non-existent; at the Director level, it might be more like a 40-50% difference.

At the senior levels (MD or Partner), earning $1 million or more is still possible, but it’s less common or “expected” than in traditional PE.

But the biggest difference relates to carried interest.

The “Limited Partner” of any sovereign wealth fund is the government, and the government does not like to pay high fees on its investments.

So, carried interest either does not exist or is greatly diminished at most of these funds, which means that the potential upside at the senior levels is much lower than in traditional PE.

Some places offer “shadow carry” or other vesting compensation that’s linked to performance, but the total amount is much lower than in direct investing roles.

That said, there is a tax advantage if you work in the main office of a sovereign wealth fund because the personal income tax rate is 0% in many Middle Eastern countries and only 22% in Singapore.

If you’re a non-U.S. citizen, these rates make a $200K total compensation package go much further than in other countries.

If you are a U.S. citizen, you still must pay U.S. taxes, but you’ll pay a significantly lower rate due to the foreign earned income exclusion.

So, you could easily earn more after taxes than in a traditional PE job in the U.S. or Europe – at least up to a certain level.

Lifestyle, Hours, and Promotions

The good news is that you also work much less in exchange for the reduced compensation.

At the junior level, you might work anywhere from 40 to 60 hours per week (the upper end of the range is more likely for direct teams), which is much less than most IB and PE groups.

Also, taking time off, planning vacations, and having a real life outside work are much easier.

The general attitude is that you’re in the office to work, but you’re not “on call” 24/7.

The bad news is that it can be quite difficult to get promoted, partially because working at a SWF is much more political than most PE firms and hedge funds.

Completely unqualified people sometimes get hired just because they’re connected to Powerful Politician X or Oil Baron Y, and hardly anyone at the top ever wants to leave.

Another issue is that many SWFs only hire local candidates, greatly prefer local candidates, or promote local candidates more quickly.

The classic example is Singapore, where you’ll get promoted more quickly as a Singaporean citizen at funds like GIC.

But it also happens at many Middle Eastern funds, so it’s not Singapore-specific.

If you’re in a SWF satellite office in the U.S. or Europe, this is less of an issue, but promotion there could also be tricky because these offices are smaller.

How to Recruit at Sovereign Wealth Funds and Win Offers

As mentioned above, in some cases, you need to be a citizen of the SWF’s country to have a good shot at winning a job in the fund’s main office.

This varies by fund and region and changes over time, but it is something to consider before you apply for these roles.

Most SWFs do not recruit undergraduates, with some exceptions, such as GIC and Temasek (if you fit their profile).

So, your best option in most cases is to gain traditional investment banking or private equity experience and use that to move in.

It is possible to move in from backgrounds like equity research, hedge funds, or asset management, but you should target groups that do asset allocation and public-market investments rather than deals.

Some larger funds use headhunters, but networking is essential to win these roles because the process is more like off-cycle private equity recruiting.

If you are a U.S. or European citizen with experience at a large bank, you probably have the best shot at Middle Eastern SWF roles at firms like ADIA, QIA, PIF, and Mubadala.

For more about this one, see our coverage of investment banking in Dubai.

Interviews and Case Studies

Just as the investment process is broader and shallower at SWFs, so is recruiting.

A typical process might look like this:

• Round 1: You might speak with HR or investment staff about very standard questions (“Why the buy-side?” “How would you invest in Industry X?” “Why this firm?” “Why this country?”). They might ask you to pitch a stock, but it will be less formal than in ER and HF interviews.
• Round 2: You answer other fit/behavioral questions about your leadership experience, strengths and weaknesses, and so on.
• Round 3: You might have to prepare and present a short case study or investment pitch in this round (~60 minutes). For example, they could give you information about two similar companies (Visa and Mastercard, Google and Facebook, etc.), ask you to recommend investing in one, and have you answer questions from the PMs about your decision.

You are unlikely to get a traditional LBO modeling test, a growth equity modeling test, or even a simple 3-statement modeling test – but there may be exceptions for teams that focus on direct investments.

Unlike the private equity funds of funds process, you are also unlikely to get a “fund evaluation” case study where you recommend investing in a specific PE fund.

Sovereign wealth funds do more than just PE fund investing, so this task might be too niche for many teams.

The technical questions are similar to the standard ones in any IB or PE interview, but you should also expect broader questions about markets and the economy, similar to an asset management interview.

The best way to prepare for the case study or stock pitch is to practice reading about different companies and making decisions quickly.

You won’t have time to build a simple DCF model or do more than look at multiples and qualitative descriptions, so you must think and act quickly based on limited information.

Sovereign Wealth Fund Exit Opportunities

The good news is that at the junior levels, plenty of people at sovereign wealth funds move around to other buy-side roles.

For example, it’s possible to win offers at middle-market private equity firms, funds of funds, family offices, and even venture capital and growth equity firms if you have tech investing experience.

You can also potentially join a portfolio company if you’ve worked in a group that does direct or co-investments.

On the other hand, it is extremely unlikely that you will go from a SWF to a PE mega-fund because they tend to “discount” SWF experience and prefer candidates from the top bulge-bracket banks.

You can get into good business schools in the U.S. and Europe from SWFs, but your chances at the top 2-3 schools are slightly lower because they also tend to discount SWF experience, especially in the Middle East.

That said, if you do IB/PE first and then work at a sovereign wealth fund for 2-3 years, your exit opportunities will be only marginally diminished.

Your chances at hedge funds depend heavily on what you did at your fund.

You can move to strategies like long/short equity if you have experience there, but if you’ve only done high-level asset allocation, you won’t be competitive.

The bad news is that the exit opportunities get much more limited as you move up the ladder to the VP/Principal/Director level.

Most traditional PE firms will not hire SWF professionals who lack normal PE experience at this level, so many people end up “stuck” at SWFs.

They don’t want to leave and take a big pay cut, but they also can’t easily move to other roles that offer similar pay.

Do Sovereign Wealth Funds Live Up to the Hype?

While sovereign wealth funds have their downsides, I would argue that they come close to offering the perfect mix of high compensation and relatively normal hours.

They are especially good in two specific situations:

1. IB/PE Burnout – Maybe you’ve worked in deal-based roles for a few years and enjoyed some of the work but want more of a life and a slower pace. In this case, joining a SWF for 2-3 years can be an interesting option that will set you apart from others without limiting your exit opportunities too much.
2. Long-Term “Buy and Chill” Career – If you do not care about advancing to the MD/Partner level in traditional PE or starting your own PE fund, and you’d be perfectly happy earning $500K – $1 million while working relatively normal hours, senior-level jobs at SWFs can be quite cushy.

The main problem with sovereign wealth funds is that everything between these two career positions is tricky.

Getting promoted can be very difficult and political, you’ll deal with a lot of bureaucracy, and if you stay too long, you’ll likely take a big pay cut if you decide to leave.

So, I’m not sure I would recommend SWFs over traditional PE/HF/VC/GE roles if your main goal is career advancement.

But if you’re willing to make a side trip to the desert for a few years, you might find a few diamonds in the rough right next to the oil wells.

The post Sovereign Wealth Funds: The Full Guide to the Industry, Recruiting, Careers, and Exits appeared first on Mergers & Inquisitions.

If you want an investment banking internship, you need a previous investment banking internship, usually at a smaller firm.

If you want a sales & trading internship, you need previous trading experience.

And as the recruiting process has moved up, this problem has gotten worse because you need these “pre-internships” even earlier to have a good shot at the large banks later.

You need to network to win these pre-internships, often using strategies like cold emails, and you also need a solid resume or CV.

But if you’re applying in your first or second year of university, you’re unlikely to have substantial work experience – probably just a mix of student activities, volunteer work, and side projects.

So, how do you write a resume or CV for a finance internship when you have no real work experience?

We’ll answer that question and go through a sample resume makeover in this article, but I want to add an important disclaimer first:

The “Finance Internship Resume No Work Experience” Strategy: Does It Work?

If you have no real work experience, you have to spin your activities, clubs, projects, volunteer work, and anything else into looking like “work.”

This strategy is useful if you’re:

1. An early university student who’s applying for finance internships at smaller/local firms to gain experience; or
2. A recent university graduate who did not complete internships and who now needs to find a job or off-cycle internship ASAP.

If you’re not in one of these categories, spinning non-work experience into looking like work experience will not work.

For example, with the 3^rd year summer internships that lead to full-time return offers at the large banks, all the serious candidates will have had 1-2+ other internships by the time they apply.

You can spin your student clubs and hobbies as much as you want, but you will not be able to compete with someone who has already had two internships at smaller firms.

Finance Internship Resume No Work Experience: The Makeover

Here’s the example we’ll start with:

• Finance Internship Resume No Work Experience – BEFORE (DOCX)
• Finance Internship Resume No Work Experience – BEFORE (PDF)

And here’s the “After” version that we’ve revised:

• Finance Internship Resume No Work Experience – AFTER (DOCX)
• Finance Internship Resume No Work Experience – AFTER (PDF)

I don’t want to spend time explaining the formatting and style guidelines here, so I’ll assume that you’re using one of our existing resume templates (or a variation).

Even with these templates, though, many students write their own resumes and end up with something like the “Before” version above.

There are many problems, which I’ve highlighted in the images below:

How NOT to Write a Resume When You Have No Work Experience

The main issues here are as follows:

1. Significant Blank Space At the Bottom of the Resume – You need to fill the entire page, even if this means changing the fonts and margins.
2. Space is Not Allocated to the Most Important Entries – If you completed a spring week or a 1-day competition that was highly relevant, you should go into significant detail on it and minimize the less-relevant experience.
3. Too Many Activities/Experiences Listed – Rather than listing 5-10 different activities and using one bullet for each one, pick the 2-3 that are the most relevant to finance and expand them by describing the specific projects/clients/deals you worked on.
4. No Evidence of the Student’s Accounting/Finance/Other Skills – These small firms that might hire you for an informal or off-cycle internship do not have time to train you. Therefore, your resume must show evidence of accounting, financial, or valuation-related skills (and the equivalent if you’re interested in S&T, quant roles, etc.).

We addressed these points in the “After” version by:

1. Deleting the Blank Space at the Bottom and Changing the Margins – We increased the top, bottom, left, and right margins and expanded a few of this person’s experiences while reducing or eliminating others.
2. Going “All-In” on the Most Relevant Experiences – The student investment fund and stock pitch competition matter more than anything else, so we expanded them by listing the details of the person’s analytical work. The real estate club is “fine” but not worth adding much detail to, and the volunteer experiences should go to the bottom section.
3. Providing Evidence of the Required Competencies – In addition to adding more detail for the stock pitch experience, we also linked to the person’s work on GitHub to add some credibility (NOTE: Before you do this, get some independent verification that your work is solid).

Some of the other changes are more subjective.

For example, we removed the high school math tutoring experience for space and relevancy, but we didn’t necessarily have to do this.

Especially if you did something impressive (e.g., won a national or international competition), you could keep high school experiences for your first year of university.

Another question is what to do with “menial jobs,” such as working in retail or at a gas station or a construction site or something similar.

This person does not appear to have any jobs like this, but if he did, we might leave in one of them.

Even if the job is not relevant to finance, it still helps because it shows that you can operate in a real work environment with other humans.

Enhancement Ideas for the “Finance Internship Resume No Work Experience” Strategy

You might look at this version and say, “But wait, you cheated! This person already had relevant experience; he just wasn’t presenting it well. What if I don’t have anything nearly as good?”

I would suggest the following ideas, in order of most to least viable:

1. Student Clubs and Activities – These are usually the best choice if you do not have paid work experience. Even if an activity is not related to finance or investing, you could still list it if it’s in “business” more broadly (e.g., consulting, tech, or entrepreneurship clubs).
2. Competitions and Events – In addition to stock pitches and bank-sponsored case competitions, you can also think about spring weeks in the U.K. or other “shadowing” opportunities you’ve had.
3. Sports and Other Hobbies – These can also be useful, especially if you’ve been in a leadership position (e.g., team captain or coach) or you’ve managed the logistics or budget for the team.
4. Volunteer Work – This one is lower on the list because most volunteer work is not that relevant to finance/investing careers. But if you did something related to the organization’s budget, fundraising, or member recruitment, by all means, list it.
5. Side Projects or Freelance Gigs – Especially for sales & trading and other public markets roles, listing software or tools you developed for market analysis and posting the GitHub links can be a useful strategy. Look at the article on quant research for more on that one.
6. Turn Class Projects Into Entries – For example, if you worked on a deal or investment recommendation in class or even something like an economic analysis of a public policy, you could potentially turn it into “work & leadership experience.” But this strategy is not ideal because everyone can take classes; it doesn’t show initiative in the same way.
7. Certifications or Online Courses/Training – Rather than just writing that you completed Course X, it’s better to explain how you used the training to build something of your own, such as a presentation/pitch, Excel-based model, statistical model, software tool/utility, etc.
8. Day Trading/Personal Account (“PA”) – This one can work, but it’s a little questionable even if you’re applying to sales & trading roles.

We probably get the most questions about this “personal account” idea.

If you’ve been day trading and have performed well over months or years, should you list your stats and explain your strategies?

It’s generally not a great idea for a few reasons:

1. Traders don’t take it seriously – It’s so different from institutional-level trading at a bank that there isn’t much skillset carryover.
2. If you haven’t had a real job, how did you get the money to trade? – The obvious answer is “from your parents.” While many people in finance come from wealthy families, you don’t want to draw attention to this point on your resume.

If you have nothing else, you can still list this type of experience, but don’t make it the focus of your resume.

We also get questions about “activities” like poker and other forms of gambling.

I would recommend against listing them as work/leadership experience; they can go in the bottom section of your resume if you are passionate about them.

Even if you’re applying to S&T roles, a trading algorithm, a new strategy you’ve developed, or simple code (Python, VBA, etc.) for market analysis would be more useful.

How to Apply These Strategies to Fix Your Resume When You Have No Real Work Experience

When you have to spin your experience heavily to write a decent resume, the most important points are:

1. Be careful about your “results” – For example, avoid claiming that you earned $X from your stock pitches or investment recommendations. Keep it more open-ended and write about the process you went through because firms will be skeptical of overly impressive accomplishments from a 19-year-old student.
2. Be able to back up everything you write – If you don’t know the details of one stock pitch (or any other project), don’t list it. It’s much better to explain one pitch, deal, or project very well than to list 2-3 extra items that you know little about.
3. Understand this strategy’s limits – Spinning non-work experience into “work & leadership experience” will not get you summer offers at the bulge bracket or elite boutique banks, nor will it make you competitive with students from top schools who have had multiple internships.

The point of this strategy is not to level the playing field.

The point is to create a resume you can use to win an initial internship, either during the school year or over the summer, which you can leverage into bigger, better ones.

If you understand that, the finance job search becomes less of a catch-22 and more of a progression up the ladder.

A very long ladder that you need to start climbing very early, anyway.

The post How to Write a Finance Internship Resume with No Work Experience appeared first on Mergers & Inquisitions.