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Would this be a good investment move?

Do management consultants ever move into hedge funds or investment banking?

  • From my naive perspective, it appears that those who've had experience in IB and/or hedge funds can easily move into a management consulting role with M/B/B and others such as AT Kearney. Is it common for management consultants to take on roles in IB or hedge funds as well? What is the typical career path in this case?

  • Answer:

    Yes, all the time. Generally, if you're good at what you do, there will be people who will want to hire you, regardless of what your background is.  Presumably, a consultant who is good at what he does has a great understanding of how businesses/industries work, how to interact with senior management, how to deal with different cultures, how to manage teams and work with others, etc. All of these things could potentially be a good fit at a bank or a hedge fund. (You'd be hard pressed to find a large hedge fund these days that has not hired a single former consultant.) I wouldn't say a move from consulting to hedge funds occurs with the same frequency as from investment banking or trading, but it does happen very frequently. Generally the most typical "path" is to get into a top MBA program and do on-campus recruiting out of business school to a bank or a hedge fund, but this is not required. There are many cases where consultants have directly lateraled into a finance role and there's not really a well-defined "path." Point is, if you're at a McBainCG, you have a lot of choice. By no means are you "locked out" of a career in finance.

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Anecdotally, it’s relatively commonplace to see management consultants (generally from MBB) transition into private equity, and much more rare to see them transition into investment banking or hedge funds, unless it is punctuated by 2 years at a business school.On a fundamental level I think this fact pattern makes a lot of sense, as experience in management consulting naturally lends itself to private equity, in which a lot of the work entails interacting directly with the portfolio company to improve operations / profitability / capital allocation. In this sense, a lot of what you do as a junior analyst or associate in private equity is probably similar to what you did in consulting, though I suppose the incentives are more directly aligned financially.On the other hand, the transition for an ex-consultant into a junior role in investment banking would be difficult, as the learning curve with regard to financial modeling and analysis would be quite steep. What reason would a bank have to hire an ex-consultant as an associate, and have to teach them the ins and outs of Finance 101, when they could just as easily promote a star analyst?Similarly, the skillset overlap between management consulting and hedge funds is relatively small, so it makes sense that this transition is least common. Many of the things that are valued in consulting (professional appearance, salesmanship, artful presentations, etc.) have no place at a hedge fund. On top of that, hedge funds often require even more proficiency in specialized financial analysis than do investment banks. Few consultants are likely to have extensive experience in this area.

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