Investment Banking Strategies

Let me give you an insider look into the hedge fund industry. (For wannabe analysts, allocators and managers). I have been working on the launch of my macro hedge fund Palinuro Capital for 11 months now. Here is what I learnt. 1️⃣ For wannabe analysts If you want to break into the hedge fund industry, your best odds aren't with online applications. Instead, it's about: - Content creation (visibility) - Proof of concept (concrete skills) - Communication (marketing yourself) Hedge fund managers or PMs are likely to hire someone that consistently produces great quality content, approaches them with concrete solutions to their problems, and does so in a concise and efficient way. If you are looking for a hedge fund job, show the manager why she needs you. And specifically you. 2️⃣ For allocators Research shows that managers' alpha tends to be concentrated in the first years of a fund: that's when managers are hungrier and most concentrated on risk-adjusted returns than AuM maximization. Yet there is an extremely limited amount of allocators out there that are willing to take the ''career risk'' of allocating to boutique managers. The assessment is mostly qualitative in the early stages, and I have observed the smartest day-1 allocators are after: - A repeatable investment process - Managers that understand the importance of operations and cash flows - Humility and long-term mindset 3️⃣ For managers Launching a hedge fund in 2024 is extremely hard. You have two main routes: - Get a deal from a seeder (sell equity or revenue share to get seed capital) - Go solo (bootstrapping) A seed deal generally comes in the 50-200M area (~100M median), and seeders require a substantial portion of your GP equity in exchange. Yet they give you a large amount of working capital to start, and peace of mind when it comes to operations. These deals are hard to get by, and they don't allow you to remain independent. Unless you are spinning off Millennium or Citadel, if you want ''your own baby'' then prepare to: - Front at least $250k in working capital - Work on the setup and asset raising for 12 months - Fight hard to get to breakeven AuM (~50M) At Palinuro Capital we have managed to raise some solid day-1 capital, and it's been mostly by NOT showing any rush to our investors. We are here for the long run, and allocators love a true long-term mindset. As a wannabe hedge fund analyst, allocator or manager: do you agree or disagree with this post?

🚀 Thrilled to share my latest piece with ImpactAlpha: “Innovative Finance Initiative’s fund designs for radical impact” — co-authored with the brilliant Erinch Sahan of the Doughnut Economics Action Lab (DEAL). Over the past decade, we’ve seen impact investing and sustainable finance gain serious momentum. But here’s the uncomfortable truth: despite this growth, our social and ecological crises have only deepened. Why? Because most financial tools have tried to fit into traditional systems, rather than transform them. It’s time to reimagine. We’re calling this next chapter Impact Investing 3.0—a refresh that moves us from tweaking systems to building new ones, rooted in accountability, inclusion, and regeneration. 🌱 A major piece of this shift? Fund design. Too often, we start with structure—10 year closed end fund, equity investments, etc. —and retrofit the mission. What if we flipped that? What if fund managers designed structures from the ground up, starting with purpose? We lay out a five-part framework for how fund managers can unlock deeper, more transformative impact: 🎯 Purpose – Anchor the fund in a regenerative investment thesis. Think long-term stewardship, not short-term shareholder value. 🧱 Structure – Embrace vehicles beyond the usual suspects. Open-ended funds, permanent capital, and blended finance can provide the flexibility impact needs. ⚖️ Incentives – Align manager comp and investee terms with real impact—not just IRR. 🗳️ Governance – Include the voices of those most affected by investment decisions. 🔁 Exit – Redesign exits to preserve impact: employee ownership, community buyouts, or even self-liquidating structures. This draws on the best of Adventure Finance, Doughnut Economics (Kate Raworth), and Marjorie Kelly’s vision for economic redesign. And it’s already happening: check out innovators like Purpose Economy, Fair Capital Partners, Prime Coalition, Citizenfund Brussels, and Apis & Heritage Capital Partners. 💡 If we’re serious about transformative change, our capital must reflect it—from structure to strategy. 📰 Read the full article on ImpactAlpha (link below) and join the conversation at the Innovative Finance Initiative (link also below). Let’s build the next generation of funds—designed for impact, not just returns. #ImpactInvesting #FundDesign #InnovativeFinance #ImpactAlpha #DoughnutEconomics #Investing3point0 #RegenerativeFinance #SystemsChange

Most finance students know DCF. Very few know LBOs. That’s the difference. If you want to break into: → Private Equity → M&A Advisory → Investment Banking You must understand LBO modeling. So what exactly is an LBO? A Leveraged Buyout (LBO) is when a company is acquired mainly using debt. The goal: Buy a business, improve it, repay debt & exit at a profit. Simple in theory. Complex in execution. Here’s what an LBO model actually tests: → Can the company generate enough cash flow? → How much debt can the business handle? → What returns will investors make? → What happens in downside scenarios? Core concepts you must learn: → MOIC (Multiple on Invested Capital) → IRR (Internal Rate of Return) → 3-statement modeling → Sensitivity analysis → Debt schedules → Exit multiples Who uses LBO models? → Corporate Finance teams → Private Equity firms → Financial Analysts → Investment Banks Big mistake students make: Trying to learn LBOs before mastering basics. First learn: 1. Financial modeling 2. DCF valuation 3. Accounting 4. Excel Then move into LBOs. Best way to learn? Don’t just watch tutorials. Pick a real company. Build assumptions. Model the acquisition. Test returns. That’s how actual analysts learn. LBO modeling is one of the hardest finance skills. But once you understand it, you start thinking like an investor, not just a student. ----- Jeetain Kumar, FMVA® Founder of FCP Consulting Helping students break into finance and consulting PS: If you want to start your career in finance & consulting, check the link in the comments to book a 1:1 session with me #finance #investment #strategy #consulting #impact

Your Model Is Balanced, But Are Your Ratios "Talking" To Each Other? Calculating ratios is easy. But cross-checking them against each other helps you catch silent modeling mistakes before a VP ever opens the file These ratio interlinkages help you spot internal red flags in your model: 1. EBITDA Margin ↑ but Interest Coverage ↓? → Potential Mistake. These should typically move together if margin improvement is real. What to check: – Did EBITDA rise due to a one-off gain? – Was interest expense inflated by a missed debt reduction? 2. ROCE ↑ but Asset Turnover ↓? → Doesn’t add up. If capital is getting more efficient, you would expect better asset utilization too. What to check: – Did you miscalculate average capital employed? – Is EBIT overstated? 3. Debt-to-Equity ↑ but Interest Coverage ↑? → Inconsistent. Rising leverage should typically reduce coverage, unless operating profit has jumped disproportionately. What to check: – Did you miss lease liabilities in debt? – Did you accidentally use EBIT after interest? 4. Current Ratio ↑ but Quick Ratio ↓? → Inventory spike. The quick ratio excludes inventory—if that’s the only driver, liquidity may not have improved. What to check: – Has obsolete inventory been factored in? – Are receivables reliable? 5. EPS Growth ↑ but ROE ↓? → Double-check the math. Higher EPS should generally improve ROE, unless equity base has grown significantly. What to check: – Did equity grow due to a large rights issue or revaluation reserve? – Did you forget dilution adjustments in EPS? Quick Trick: - Add a ‘Cross-Ratio Audit’ tab to your model: - List key ratios side by side across years - Highlight expected vs. unexpected moves - Use conditional formatting to flag anomalies When ratios don’t “talk to each other,” your model is probably hiding a silent mistake. Follow Pratik for investment banking careers and education

Manager Selection: The Hidden Alpha Engine “It’s not just the strategy. It’s who’s driving the car.” We obsess over strategies: macro vs long/short, private equity vs credit. But in alternatives, it’s often not what you buy—it’s who you back. Top-quartile managers can outperform by thousands of basis points. And yet, due diligence often gets treated like a checkbox. I’ve seen funds with dazzling decks and nothing under the hood. And I’ve seen quieter managers with airtight process, discipline, and skin in the game deliver decade-long outperformance. Manager selection isn’t always glamorous. But it’s your real edge. Don’t chase alpha. Allocate to it. #bealternative So how do you identify the right managers—and avoid the wrong ones? Here are five actionable principles backed by Hedge Fund Due Diligence, Due Diligence and Risk Assessment of an Alternative Investment Fund, and Private Equity Compliance: 1. Prioritize Behavioral Red Flags Over Marketing Shine Most blowups stem from behavioral warning signs—not poor returns. – Be alert to evasive answers, overpromising, and CV inconsistencies. – If the manager can’t clearly explain their worst drawdown, walk away. Operational risk often wears a smile. 2. Use a Layered Due Diligence Framework – Investment: strategy clarity, mandate discipline, leverage use. – Operational: NAV policies, service providers, valuation controls. – Manager: track record, co-investment, legal history. A strong fund passes all three layers—not just the first. 3. Move Beyond the Checklist Mentality – Ask how—not just what. – Request audit letters, compliance manuals, fund org charts. – Evaluate how quickly and how clearly information is shared. It’s not what’s disclosed. It’s how it’s delivered. 4. Re-underwrite Annually—Not Just at Allocation Diligence doesn’t stop once the subscription agreement is signed. – Monitor for style drift, team turnover, and audit delays. – Build an annual risk scorecard: manager alignment, NAV consistency, valuation transparency. Great managers stay great when they’re held accountable. 5. Investigate the “Why” Behind the Performance Outperformance isn’t always repeatable—but process is. – Ask: “What edge do you believe is durable?” – Review decision-making consistency, not just returns. – Confirm fee alignment, risk-adjusted mindset, and long-term incentive structure. Strong governance and repeatable process beat personality and narrative—every time. Alpha doesn’t live in the deck. It lives in the decisions behind it. What’s your non-negotiable when assessing a manager beyond performance? #bealternative

“Put all your eggs in one basket – and watch that basket.” 👀 🥚 This is what Stanley Druckenmiller, billionaire hedge fund manager and erstwhile protégé of George Soros, famously told investors. 🤷♂️ Of course, staking the family farm on one position, no matter how convinced you are of the logic, is not for everyone – nor would I recommend it. Druckenmiller’s example is an extreme one, but it does serve to illustrate the upside potential from following your convictions and running a concentrated portfolio. The problem is that most so-called 'active' managers are way over diversified. 🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚🥚 Data from Value Research Online shows that large-cap US mutual funds, on average, hold around 38 shares, mid-cap funds around 50 and balanced funds (65-70% of their assets in equity) around 52. Note that they are all way beyond the range established by widely accepted academic research. This sets these funds up for a mediocre performance at best – and that’s even before fees are taken into account! Why do most fund managers overdiversify? Career risk: As John Maynard Keynes observed, "It is always more comfortable to fail conventionally than to succeed unconventionally". Managers that go against the herd risk exposing themselves to significant career risk if they move away from a benchmark. Asset-gatherer mentality: Most large asset managers prioritise maximising the amount of assets under management (AUM) rather than performance. This is because fee structures are generally structured around a percentage of AUM. Investors hate performance fees! Regulation: There is significant regulatory pressure on asset managers in Europe and the US to diversify to reduce risk. Examples include the Prudent Person rule in the US and the 50/10/40 rule for European UCITS funds. This is unfortunate, as managers with a high active share (and, as a result, a concentrated stock portfolio) tend to outperform their benchmarks when this is combined with a low portfolio turnover (holding period of around two years or more). Why concentrated portfolios can outperform: High conviction: Concentrated portfolios are the result of high conviction on the part of the fund manager. High conviction is achieved through knowing enough about a particular investment to feel comfortable about the idiosyncratic risks involved and how the position relates to the rest of the portfolio. Informational edge: Concentrating on a smaller number of positions enables a fund manager to allocate more resources to researching and understanding those investments. Long-term focus: Active managers by definition believe that the market is inefficient and therefore they must be able to stomach periods where their strategy underperforms. Real long-term outperformance requires real conviction, which in turn leads to a concentrated portfolio strategy. This runs against the grain when it comes to the prevailing culture within most asset management firms.

Navigating Acquisitions: Key Considerations for Software #Startups 🚀💼 Thinking about selling your software #startup? The decision to pursue a merger or acquisition (M&A) is a pivotal moment that requires careful planning and strategic alignment. Based on insights from Volaris Group's The Ultimate Guide to Selling Your Software Company (2025), here are key factors startups should consider when approaching an acquisition: (1) Merger vs. Acquisition: Decide whether a merger (integrating with a complementary business) or an acquisition (operating standalone or absorbed) aligns with your goals. For instance, mergers suit smaller startups seeking access to larger customer bases, while acquisitions are ideal for market leaders with strong brand recognition. (2) Customer Impact: Choose an acquirer committed to maintaining your product and service quality. Ask: Will they invest in your software, or force customers to migrate? Will support remain consistent? Prioritizing customer trust ensures your legacy endures. (3) Employee Development: A great acquirer invests in your team’s growth. Look for buyers with a culture of collaboration, clear talent management strategies, and opportunities for professional development to secure your employees’ future. (4) Strategic Fit and Values: Align with an acquirer whose values and growth strategies match yours. Investigate their track record—do they foster long-term growth through R&D investment, or focus on short-term gains? A shared vision is critical for success. (5) Avoid Common Pitfalls: Don’t wait too long to sell, as market conditions can shift. Ensure transparency during due diligence and prioritize deal structure over price alone—earnouts and contingencies can impact your outcome. (6) Prepare Thoroughly: Build a strong M&A team (CEO, CFO, CTO, legal counsel) and create a comprehensive Information Memorandum to showcase your company’s value. Address technical debt and refine your growth story to boost valuation.

# Demystifying Leveraged Buyouts (LBOs) ## Learn the ins and outs of LBOs 🤝 Leveraged buyouts (LBOs) have long been popular in private equity deals and corporate restructurings. But even seasoned finance pros can find the mechanics of LBOs somewhat complex. This comprehensive guide aims to demystify leveraged buyouts. 🚀 ### What is an LBO? A leveraged buyout occurs when a target company is acquired using a significant amount of borrowed funds to finance the purchase price. Often, a private equity firm serves as the acquirer in an LBO. ### Key Objectives of an LBO Typical LBO goals include gaining control of a target firm to: - Improve financial performance - Restructure operations - Integrate strategic assets  - Prepare the company for an eventual sale or IPO ### Sources of Funding LBO deals are financed through a mix of: - Debt - Includes bank loans and high-yield bonds - Equity - Cash from the acquiring private equity firm & partners - Seller rollover equity Debt is the majority, typically 60–90% of the total funds. ### Post-LBO Company Changes After an LBO, companies often undergo major changes, like: - Cost-cutting - Lower operating expenses to service the high debt load - Cash flow improvement - Boost cash generation to repay debts - Divestments - Sell off non-core assets - Management changes - Improve oversight and execution ### Exit Strategies After improving the business, common LBO exit strategies include: - Sale to a strategic acquirer - IPO - Recapitalization - Sale to another private equity firm The high leverage amplifies returns when the equity is ultimately sold. Want to learn even more? Be sure to subscribe to my newsletter!

𝐒𝐞𝐚𝐬𝐨𝐧 𝟑: 𝐋𝐞𝐚𝐝𝐞𝐫𝐋𝐞𝐧𝐬 訾源 𝐙𝐢 𝐘𝐮𝐚𝐧: 𝐑𝐞𝐬𝐢𝐥𝐢𝐞𝐧𝐜𝐞, 𝐑𝐢𝐬𝐤, 𝐚𝐧𝐝 𝐑𝐚𝐢𝐬𝐢𝐧𝐠 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐢𝐧 𝐂𝐡𝐢𝐧𝐚’𝐬 𝐇𝐞𝐝𝐠𝐞 𝐅𝐮𝐧𝐝 𝐌𝐚𝐫𝐤𝐞𝐭 🔥 Partner & Chief Operating Officer, Golden Nest Capital Management 🔥 Former Local Product Head, UBS Wealth Management China 🔥 Ex-GLG Partners London | Analyst, Multi-Manager Investments 🔥 Secretary General, CHINESE OVERSEAS PRIVATE FUNDS ASSOCIATION 中资海外私募基金协会 (COPFA) From London’s hedge fund streets to navigating the depths of China’s capital markets, Yuan ZI’s career bridges global experience with local execution. As COO of Golden Nest Capital, a Shanghai-Hong Kong based hedge fund focused on Greater China equity long/short, he leads operations, risk, and fundraising in one of the world’s most complex investment environments. I had the privilege to speak with Zi Yuan — and what a conversation! We spoke about: ➡️ Early inspiration at LSE — Founding the LSE Hedge Fund Society and being mentored by leaders at GLG, Blackstone, and Brevan Howard. ➡️ Transition from UBS to Golden Nest — Why he moved from private banking back into hedge funds at the market peak in 2021—and what makes Golden Nest different. ➡️ True hedge fund DNA — How the firm embeds risk management at its core, targeting low volatility and drawdown with real downside capture discipline. ➡️ Investor trust and transparency — Why consistency, clear communication, and local insight matter more than performance alone. ➡️ Fundraising in a post-COVID China — Building relationships with allocators in Europe, the Middle East, and Asia during geopolitical uncertainty. ➡️ Navigating policy risk — Turning China’s evolving regulatory landscape into a source of edge, not fear. ➡️ Advice to fund managers today — Know your edge, align with LPs, and remember: trust is built over years, not quarters. 🎯 “We're not selling products. We’re building partnerships.” 🎯 “In hedge funds, risk is not a report—it’s a culture.” 🎯 “慎终如始，则无败绩 — Be as cautious at the end as at the beginning, and you will avoid defeat.” Mike Sim Follow me for more conversations with the people shaping alternative investments across Asia. #whatinspireme #fundmanagement #hedgefunds #chinainvesting #leaderlens

𝐀𝐫𝐞 𝐂𝐨𝐦𝐩𝐥𝐞𝐱 𝐁𝐨𝐧𝐝𝐬 𝐭𝐡𝐞 𝐍𝐞𝐰 𝐒𝐮𝐛𝐩𝐫𝐢𝐦𝐞 𝐌𝐨𝐫𝐭𝐠𝐚𝐠𝐞𝐬? The global structured finance market has grown to $380 billion in 2024, driven by investor demand for high-yield products. From chicken wing royalties to music catalog revenues, Wall Street is packaging unconventional income streams into complex bonds. While these products promise lucrative returns, they carry significant risks—ones that mirror the mistakes of the 2007 financial crisis. This article dives deep into: [1] 𝐇𝐨𝐰 𝐒𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐞𝐝 𝐁𝐨𝐧𝐝𝐬 𝐖𝐨𝐫𝐤: Using real-world examples like Wingstop Restaurants Inc., I explain how franchise fees and other predictable revenues are transformed into investable products. [2] 𝐓𝐡𝐞 𝐑𝐢𝐬𝐤𝐬 𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫𝐬 𝐎𝐯𝐞𝐫𝐥𝐨𝐨𝐤: A 10% drop in consumer spending could increase bond defaults by 15%, creating ripple effects across the financial system. [3] 𝐓𝐡𝐞 𝐂𝐨𝐦𝐩𝐥𝐞𝐱𝐢𝐭𝐲 𝐓𝐫𝐚𝐩: Many investors underestimate the risks buried within layered tranches, exposing themselves to losses they didn’t anticipate. [4] 𝐓𝐡𝐞 𝐍𝐞𝐱𝐭 𝐂𝐫𝐢𝐬𝐢𝐬?: Overconfidence in perpetual economic growth could make today’s boom the next bust. This is not just another financial story. It’s a detailed analysis supported by historical comparisons, data-backed insights, and predictive models to show how small cracks in consumer spending could cascade into market-wide disruptions. Read the full article to understand how the hidden fragility of these products could reshape financial markets—and your investments. Don’t let the next crisis catch you by surprise. #structuredfinance #bonds