Private equity funds

Career Equation: CPA + MBA/CFA = Hooray?

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Hi Caleb,

I am a CPA with 5 years experience in a 2nd tier firm (i.e. BDO, Grant Thornton), with the first two years in the Financial Services audit group, and have spent the last three years in Financial Services tax group. All five years, I have pretty much been working on Hedge Funds, ��������������������, etc. Recently, I have come to the realization that I’m getting a little bored of accounting. I still have an interest in the financial markets, and would like to explore opportunities on the investment side, possibly as an analyst at either a fund or investment bank. I spoke to a buddy at one of the major investment banks who gave me some advice. He mentioned that my skills serving Financial Services clients as well as having an understanding of financial statements should translate well to an analyst type of role at a fund or investment bank. He also mentioned that to get my foot in the door, my choices are either to get an Ivy League MBA or take the CFA exam. With that said, I have the following questions: 1) Is it correct that a fund or investment bank would value my skills in terms of placing me in an analyst type of role? 2) What would be the better option, going for the MBA or studying for the CFA (keep in mind that I’d prefer studying for the CFA given the fact that tax season makes it difficult to attend class)? 3) Would I have to wait till I finish an MBA program or pass all 3 parts of the CFA exam or would I be able to make the change after say a couple of semesters into an MBA program or having passed one part of the CFA exam? I would appreciate your insight.

Bored of Accounting

Dear BoA (no, not the flailing AIG target),

Before I take my red pen to your hopeful ambitions of being an analyst, let’s take a few minutes to quickly set two things straight:

#1 – You should not be going to work at a bankUBS. Credit Suisse. RBS. Goldman. Barclays. Morgan Stanley. No, not a list of places you’re qualified to work because you know how to read a cash flow and prep a K-1. Cuts. Firings. Shit bonuses (relative). SEC in your face. Why the hell would you want to work for a bank, regardless of your level of qualification? You haven’t been auditing banks. You’ve been working in asset management.

#2 I’m going to assume you’re referring to a real analyst position – Not a management company accountant job that the HR guru at RBS slapped a “financial analyst” title on to make the recruiting process easier (“oh, but you’ll have the chance to MOVE AROUND IN THE GROUP YAYYYY.”) That shit doesn’t happen. So, judging by your CFA and MBA speak, you’re referring to a real analyst position, right? Right. Good, now on to your questions.

Q: Is it correct that a fund or investment bank would value my skills in terms of placing me in an analyst type of role?

DWB: You can answer this yourself. Analyze your own experiences – what makes you qualified for such a position? With a little digging on LinkedIn and a basic understanding of your firm’s asset management clients, I can assume that most of your clients fall into the long/short strategy (maybe some bank debt, probably no high yield or event driven exposure). What are your “skills”? K-1 preparation? Washes? Auditing control testwork? Reviewing a waterfall calc? Accounting, accounting, accounting. “But I read the Journal every day.” – So do I, and I’m in HUMAN RESOURCES. I also read Bloomberg and comment regularly on ZeroHedge, but that doesn’t mean I should be calling the shots on a desk.

Q: What would be the better option, going for the MBA or studying for the CFA (keep in mind that I’d prefer studying for the CFA given the fact that tax season makes it difficult to attend class)?

DWB: If you’re going the MBA – and based on your current experience – you need a top 10 MBA program. Attending night school at CUNY Baruch for an MBA will not do the trick. With regards to the CFA – you need to get to level 2 at a minimum. Level 1 is pie.

Q: Would I have to wait till I finish an MBA program or pass all 3 parts of the CFA exam or would I be able to make the change after say a couple of semesters into an MBA program or having passed one part of the CFA exam?

DWB: You really want to make the move? Forget the CFA for now, get into a top 10 MBA program, drop out of work, and go fulltime. Seriously. This will give you the opportunity to network with your classmates, pursue summer internships and rotational programs, and get things done (meaning – move on from accounting) in an efficient manner.

Listen, I’m just trying to be honest. None of this is meant to pee in your Cheerios or diminish what you’ve done so far in your career (by all accounts, you’ve been very successful). But think about the greater picture – the banks are in the shitter, the economy is sloppy mess, and the market is flooded with Ivy grads coming off of fresh experience from the banks’ two year programs. Simply put – you’re not on the same playing level. If you know how to maximize the profitability in the futures market on tankers trekking through hurricane season while carrying retail goods from China to US ports, then maybe we should talk but until then…it will be easier to stick with what you’re good at. Try getting into a middle office role at a fund, or even a role working as the #2 to the CFO of a small fund. Sure, you’ll have to close the books at the end of the month, but you’ll also have exposure to investment meetings, investor relations duties, etc. over time.

First World Problem: When Does a Big 4 Tax Accountant Jump Ship for a Job at a Hedge Fund?

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Dear Going Concern,

I have been in Big 4 FS Tax for the past two years and recently was promoted to Senior. Headhunters have been calling me with great opportunities in the tax departments of Hedge Fund/PE firms. The pay increase is significant and the hours will undoubtedly be better. However, I’m worried about leaving Public Accounting too early in my career. My eventual career goal is to become a Controller or CFO at a Hedge Fund. The headhunters I’ve spoken with insist that HF/PE firms prefer candidates with a mix of Public and Private experience for those positions. I’m wondering if I should stick around until making manager at Big 4 or if, as the headhunters recommend, leaving now as a Senior is the right move for me.

First world problem

Dear First World Problem,

Alright, listen up. The most important thing to do when you want to start looking for a role is to find a headhunter or two that you trust (and hopefully can trust you to not tattle on them for $5 worth of Starbucks). Yes, we all loathe headhunters. They call, they email; some pester more than others. Sure, most are in the same pool with real estate brokers (an evil means to an end), but there are some that see you as more than a pay-day and will serve as excellent resources throughout your career. A good recruiter will send you a select handful of opportunities that fit exactly what you’re looking for, not a blast email with 17 write-ups all containing the same five bullet points.

That said, with two years into your career you’re just starting to see the wave of job opportunities. Two to four years is the window that many most staff roles fall into at hedge/PE firms, both on the fund accounting and tax side. This is because most asset management firms consider the Big 4 (and regional firms that have an alternatives focus) to be training grounds for their back office hires. Why hire an accountant off of a college campus to do fund accounting work when you can have the Big 4 train ‘em up and toughen ‘em, up for you?

However, the difference is that the number of tax staff positions in-house at a hedge/PE firm are limited. Example: a hedge fund running $5bil in assets under management through six separate funds needs a tax director (typically 7+ years of public/private) and a staff member to assist with work. The same firm would have Sr. Controller/CFO, 1-3 fund controllers and a small staff of accountants running the day-to-day. Because of this prime example in supply and demand, I’d encourage you to interview for any and all roles that interest you, but more important than when you leave is what you leave for. In your case, being a CFO is your ultimate goal – you should be looking at opportunities that are a blend of tax and fund accounting. These roles typically exist at less institutionalized funds, so do your due diligence on opportunities at the likes of Och-Ziff, Blackstone, Fortress, etc. Talk to your recruiter about your long term goals and the need to better position yourself by diversifying your professional experiences. Right now you know K1’s, wash sales and partner allocations; a good recruiter knows what it takes to get you on the Controller/CFO track. It might be the first firm you interview with, or the tenth. When you find it, you’ll know.

Accounting News Roundup:’s Financial Reporting Could Have Some Issues; Tax Planning Stays One Step Ahead Financial Reform; Accountant Denied Bail in Terror Case | 05.18.10

Can We Trust’s Financial Reporting? [White Collar Fraud]
We won’t tell you what to think but you should know that Bidz reported “material weaknesses in internal control over financial reporting” specifically those controls over “management oversight and anti-fraud controls specifically in processing of financial transactions, vendor review and payment processing,” in its most recent 10-K and 10-Q As an investor in Bidz, this should make you queasy. Unless, of course, you’re not concerned with such matters.

Sam Antar probably doesn’t care either way but he does put something out there, “ cannot effectively prevent anyone from robbing the company blind and cannot prevent material errors in paying its vendors. Yet, the company wants you to believe that its financial reports contain no material errors and comply with GAAP.” But if you’re not sketched out by such things, then by all means, invest away.

But wait, in case that doesn’t earn your skepticism, the SEC began its investigation last year after Sam pointed out inventory irregularities at the company. Shortly thereafter, the Commission expanded its investigation into “the Company’s co-op marketing contributions and minimum gross profit guarantees.” If that wasn’t enough, the company’s auditors, Stonefield Josephson, were cited by the PCAOB for “significant deficiencies in a smaller sample of one of four audits reviewed.” So, again, if you can get over all that, this is probably a fine company to have your money invested in.

Bobbing as the Taxman Weaves [DealBook]
As Congress continues to dispel its wisdom on financial reform, it’s has become the natural order of things for any regulation to be circumvented prior to the passage of any bill.

In the case of carried interest, an incentive paid to hedge and private equity fund managers out of gains on the funds’ investments, Congress would like to tax these incentives at the ordinary rate (soon to be 39.6%). Currently, carried interest is taxed at the capital gains rate of 15%. DealBook reports that, despite threats by House to penalize those who use creative tax strategies that later fail, the maneuvering has not slowed:

The House of Representatives, aware that some titans of finance were already charting a course around any proposed change to their tax status, included a special provision in its version of the new legislation levying a 40 percent penalty for executives who invoked a loophole to cut their tax bill but were later ruled to have been wrong in doing so.

Still, that hasn’t stopped them from trying.

One of the latest machinations being whispered about in the industry goes like this: Private equity executives would sell their “carried interest” to a third party and then use the cash they received to invest directly in the deal so that any increase in value would be a capital gain.

It’s not clear whether this will work or not but it sure seems like fun.

Accountant held without bail in NYC in terror case [AP]
Sabirhan Hasanoff, a former PwC Senior Manager, was denied bail yesterday for his role in an alleged conspiracy that supported al-Qaida. He pleaded not guilty to the charges against him.