[Flight] Chapter three: Cruise

Link to foreword

Link to chapter 1

Link to chapter 2 (coming soon)

NB: This chapter appeared as a guest post for How I Got A Job In The US.

I entered my fourth year in France, the first year of Master’s studies under the European LMD curriculum.

Right at the beginning I decided to focus most of my energy into finding a good internship to the expense, if necessary, of classwork. Around this time, I also got distracted by a host of personal issues and as a result, my academic performance suffered tremendously. By the end of the academic year, I was still not able to remedy this downward trajectory. Academically speaking, that year was my worst ever and would always remain so.

This did not mean, however, that there was no silver lining. And what a big silver lining it was too, because during this year I had the best class that I ever had. Everything about “Structured Finance”, I still recall today, was a break from my other classes. First, the class was taught by a seasoned professional with two dozen years of experience working in structured & project finance at the leaders of the sector (which, by the way, are often French banks). Second, the entire course was based on real-world case studies of projects and deals around the world. We learnt (by doing!) that diligent risk analysis was absolutely critical in a transaction that involved a multiplicity of countries and legislations (talk about broaden your horizon and see the world!). We also learnt how good structuring could mitigate these risks and understood what was the role of the myriad of parties to a given transaction. And to top it all off, the entire course was done in English, which the instructor spoke perfectly, over one week of morning-evening intensive sessions. I had the distinct impression of not just learning about structured finance but more generally about how and why finance mattered in today’s world. The course really struck a chord with me and later, it would influence greatly on my “re-orientation” decision.

Why “re-orientation” you asked? Well, because as things stood then when I took the “Structured Finance” course, my eyes had long been set on asset management. So this brings another question: how had my eyes set upon asset management in the first place? There were a few reasons for that, some of which only became clear much later after a lot of introspection.

First, why not applying for the other usual suspects: investment banking, corporates and Big 4 firms? Easy answer first: no investment banking because I decided I could not stand the crazy hours (yes, even in 35-hour-workweek France the IB hours are the same). Next, I decided not to apply to companies’ finance departments because I wanted to do something that were exclusively finance first. And why not the Big 4 firms? Well, because my deeply rooted insecurities at the time did not want myself to be associated with an “accounting” brand name. Yes, I was that silly. Never had I realized accounting/audit was hard, honest, good work and it had real meaning to the people who did it as well as to society at large. And never mind the myriad of other non-accounting work that the Big 4 firms were actually really good at.

Second, and more importantly, I thought I knew about the culture in asset management. Having read a book written by a hedge fund manager, I thought asset management was the most meritocratic environment in finance, where there was no bullshit, no schmoozing and no agonizing over font size in PowerPoint at 3AM. Well, it turned out that asset management was truly all of the above, but it was so much more. And it was the “so much more” part that ended up causing me difficulties.

Third, and most importantly, I chose asset management and hedge funds because my insecurities were (again!) trying to compare myself with my surroundings, only to make me even more insecure. My insecure self believed that I had something to prove and that breaking into asset management would prove it. Because the entry was supposed to be severely limited and the work difficult, where only the smartest could win and success or failure could be judged clearly on a few numbers. Oh, and the pay in asset management was supposed to be good, too.

So on a cloudless spring day that year, I proudly put on my suit to start the first day of my internship with a hedge fund. My année de césure (gap year) had begun, during which I would work for one full year before returning to school to finish my Master’s degree. A gap year was truly the first large window every student had to swim the sea on their own, and as a result everyone took the opportunity as seriously as they would their first full-time job.

As I crossed the Parc Monceau to get to the office, I could not help but being amazed at how much luck I had. My 12-month internship was one of the last of its kind before a reform capped internships at 6 months only. I had previously sent out some sixty résumés and carefully-written cover letters to asset management firms and big banks, but the number of interviews I got at the end was exactly one. That one invitation came from a boutique hedge fund in Paris, and the position had been advertised widely on eFinancialCareers and published on the job board of every grande école in the country. Fortunately, one of the founders of the firm was an alumnus of Dauphine, which ensured that at least my résumé did not go to a black box. After rounds of phone and in-person interviews, the last round consisted of a take-home case study and pitted me versus an American student from Tufts University who was pursuing her Master’s at HEC Paris. Fortunately (again), I had read a book about the firm’s merger arbitrage investment strategy written by the firm’s founders themselves that had been published just a few weeks prior. All that preparation turned out well-needed, and I ended up with the offer.

So as I sat down at my desk in front of my double monitor, I decided to learn everything I could about the merger arbitrage strategy. I thought I had learnt something by reading the book but in reality (as expected) all I had done was barely scratching the surface. Merger arbitrage consists in buying and selling shares to make money from price spreads that are created when a deal is announced on the market. Say company A announces it would acquire company B for $50 a share. In a “plain vanilla” situation, the shares of B should quote maybe around $49, or slightly lower than the price the acquirer says it is ready to pay. So a way to make money is to buy the shares on the market at $49 then resell it to the acquirer at $50. The $1 spread is supposed to reflect the possibility that the announced acquisition would not happen, a risk we as arbitrageurs voluntarily took. That risk is broken down to a myriad of components: for instance the buyer may not have enough money or the government may decide the combined company would be too big and not allow the companies to merge. Aside from anticipating the direction a known transaction would take, we also tried to anticipate transactions before they were announced. To do this, we looked at industries that were consolidating and companies that made good targets for acquisitions.

I quickly found out I enjoyed working for the company. I certainly relished the intellectual challenge, and there was a lot of that. Since the fund may theoretically invest in every publicly traded company in both Europe and North America, the mass of information to take in was daunting. I had to dig through stacks of reports and documents and re-read the founders’ book to learn everything I could about the US market, about how M&A is done there and about its differences compared to Europe. My mind had to learn to dig both deep and wide about a given subject.

I also enjoyed doing financial analysis and valuation work. While not as in-depth as in other types of funds, the work demanded a clear understanding of valuation analysis done by other people. The most important thing I learnt during that process was critical thinking. Valuation was not an exact science, it was done by people who used the results to justify their actions or to convince other people to take a course of action. It was this connection between finance and the real–hence political–world that I found fascinating.

So I decided to continue down the finance path for the long term. But at the same time I also felt something else.

Have you noticed something in what I wrote about what I had enjoyed during my internship? At no point did I mention I found myself enjoying making a return and being smarter than the market. Yet these figured on my list of motivation as the reason to do asset management in the first place. Well, the truth is that I thought I knew myself, but the self itself was either changing or not the representation I had made in my mind at the beginning altogether. The me I had become struggled with answering the question “Why do I do what I do?” or, in other words, it didn’t find meaning in the work.

At the same time, my performance also had issues. I quickly discovered my soft skills to be quite limited compared to what was required of me. My teamwork skills left much to be desired in a real professional environment although I had had more group projects at school than I could count. Specifically, I encountered many difficulties in making myself understood and in convincing my colleagues of my ideas, all that despite the ease I had found in doing class presentation. My attention to details, too, needed to be improved dramatically. This is why I said above that asset management and hedge funds in particular were so much more than a meritocratic, no-bullshit environment where only performance counted. It turned out that a lot of the things I had taken for bullshit were actually vital soft skills that I had been unable to acquire so far, something which I had been severely blind to.

At the beginning, I was quite consumed by self-doubt. Was everything reflecting something that was fundamentally wrong with me? Was I not nearly as good as I would like to think of myself as? Had I made the correct career choice going into finance? What would I rather be doing? Was it too late to change? If you are thinking “boy, that escalated quickly” then you are right. Self-doubt, to a person still acquiring self-awareness, could be difficult to manage. One of the biggest problems was, for me, to separate the “soft-skill” issue from the “meaning” issue. The former could, and in fact must, be worked on, while the only solution to the latter was more soul-searching.

Days became a blur and nights became slo-mo replays of days. Reflection could only do so much and I had yet to find my answer(s). Then one day, I volunteered to create some VBA code to improve existing process despite not knowing anything about the language beforehand. I came up with something only by relying on the ever-helpful Professor Google. The final product lacked finesse but it did speed up things that took hours and hours of careful labor to mere seconds. More importantly, and perhaps surprisingly, my feelings were completely altered. For the first time, I felt like the work mattered so much to me personally and like I myself mattered. This is the kind of epiphany you only experience a few times in your life if you are lucky, the kind of food for thought that is a heavenly tartare de boeuf to my ravenous mind. You see, after some (more!) serious thinking, I realized I wanted to, in a broad sense, help real people and real businesses solve their problems. I realized that to me, being evaluated by a set of percentages was too concrete and too ambiguous at the same time. Does that make sense? It did to me. I had a hard time with the concreteness because the goal when I manage a fund was to get a higher return, e.g. 4.81% is higher than 4.76%.  The ambiguous side lies not in the outcome but in the process. For instance, more than once I found myself asking “does what I do matter in getting towards the results?” and not being able to answer that question. Finally, I admitted to myself I was not overly concerned with being smarter than other people. I had looked at this trait of mine as a weakness at the beginning and tried to suppress it, but what good could that do? By accepting that side of me and, by extension, that I had nothing to prove when I did not want to, I could find a measure of peace.

So the important question now became: what next steps did I need to take? It dawned on me that I needed to go somewhere else where everything was different to explore something new. My thoughts drifted naturally towards Southeast Asia, which I could consider to be my somewhat “home turf” even though I had not worked a single day there.

I began asking around people I knew for internship tips in Vietnam or Singapore. One of my professors, who taught at CFVG in Ho Chi Minh City, introduced me to one of his friends in Vietnam who ran a private equity firm. We did an interview at 4AM one morning by Skype. My own effort scouring online job postings in Vietnam amounted to another Skype interview with another firm, but they did not seem to like my university transcripts. Finally, a cousin of mine introduced me to a friend of a friend in Singapore who might be ready to take me in for 2 or 3 months over the summer. We did an in-person interview (whew!) in Paris when he came here for a trip.

I ended up choosing Singapore simply for the “X-Factor.” Who knew what might happen when I went to an unknown environment?

But, after all, this was how self-discovery was done…

…or was it?

And so twelve months into my gap year, I found myself on a journey again. This time, I boarded an airplane to Ho Chi Minh City, and another airplane the next day to Changi Airport.

Coming soon(ish): Chapter 4: Turbulence

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