Meet Your New Recruits: They Want to Eat Your Lunch
Thirteen young men and one woman meet in a drafty medieval-style room in a campus residence hall at Yale University. Thick exposed beams cross the ceiling above a large fireplace. A stained-glass panel in the heavy wooden door is decorated with a cobalt "Y." "Anyone interested in finance wants to join the Globalfund," says Philip Uhde, 22, the group's founder and president. "And the smartest of those people are here."
A cross between Yale's secretive Skull & Bones society and a young tycoons club, the Globalfund is one of a growing number of exclusive business groups cropping up at elite colleges across the country. The organizations, fueled by a mix of youthful ambition and careerist anxiety, have become an increasingly important part of the competition for the most lucrative jobs at investment banks, hedge funds, and consulting firms. For many students, it's a race for money and prestige that's starting earlier and earlier. The slumping economy and tens of thousands of layoffs on Wall Street have only aggravated the angst.
Launched in 2006, the invitation-only Globalfund calls its undergraduate members "partners" and evaluates candidates based on their investment ideas. Even among hand-picked aspirants, the partners reject three out of four. Partners pool earnings from summer internships at financial firms to make real, if modest, investments backed by research the students do themselves. One Monday evening in March, Harry Greene (video of Greene), another founding partner, rattles off statistics about China Natural Gas (CHNG), a small distribution company based in the city of Xi'an that trades over the counter. Glancing periodically at his BlackBerry, Greene, a 23-year-old senior majoring in economics and mathematics, describes to his colleagues how he called a company investor-relations representative from his dorm room and grilled her—in Mandarin, which he mastered after extensive classroom study and a year off from college spent in Beijing.
Most Globalfund partners speak a second language, Greene explains later. "We can often do more-thorough due diligence than Wall Street analysts because we can interview management in their native language." The fund's initial $800 stake in the gas company nearly tripled over four months last year, and the students sold their shares for a profit. A more recent $2,300 position in China Natural Gas has slipped slightly in value, but Greene assures the group it will bounce back soon. After graduation in May, he plans a short stint with a software company before heading to an investment banking job.
Once, merely graduating from an Ivy League college or similarly prestigious rival like Stanford or Swarthmore qualified students for a choice entry-level perch on Wall Street. No longer. "The whole idea of smart people just falling into banking is becoming rarer," says Lance LaVergne, a vice-president and global head of diversity recruiting at Goldman Sachs (GS). "Clubs are essential to preparation, especially for students who are not majoring in traditional disciplines like finance or accounting."
Blue-chip employers are looking for substantive experience and signs of early commitment. Wall Street internship programs that used to seek out students after their junior year now invite motivated freshmen and sophomores. Students feed the frenzy themselves, some showing up at college having already attended summer business-prep camps while still in high school.
DESPERATELY SEEKING DISTINCTION
Now the credit crunch is chewing up many of the jobs hyper-directed undergraduates yearn for. As the contest for junior analyst and novice trader slots intensifies, unlikely rumors keep some awake at night. "I have been hearing that a lot of these banks are only taking one student from Harvard," says Anthony Genello, a 21-year-old junior and president of operations of the Harvard Financial Analysts Club. "It definitely hit home and makes everyone more crazed." Desperate to distinguish themselves, students on at least two dozen top campuses have lately formed or expanded high-powered clubs, some of which offer eye-popping opportunities to invest and network. "As markets become more difficult and hiring needs are reduced, it will likely become more difficult for students to just wind up in our business," Goldman's LaVergne says.
Some veterans in business and finance worry that increasing student fascination with pre-professional clubs bespeaks a lack of appreciation for the perspective afforded by a liberal arts education. Etched high on the stone wall of the grand room where Yale's Globalfund holds its weekly meetings, a quote from poet Edgar A. Guest urges the precocious partners to value life's intangible joys:
The thing that we call living isn't gold or fame at all,It is laughter and contentment and the struggle for a goal,It is everything that's needful to the shaping of a soul.
But these words seem lost on the Yale students, most of whom look elsewhere for inspiration. "We are followers of Warren Buffett," explains Greene, who says he studies the famed Omaha investor's letters to shareholders as if they were sacred texts.
In dollar terms, the Globalfund is relatively small. At any given time, it has about $25,000 from students' pockets to deploy. The partners liquidate it at the end of the school year and distribute the proceeds on a pro-rata basis. Their counterparts at a cross-campus competitor, the Yale College Student Investment Group, manage no less than $280,000. That money remains within the university's endowment, having grown from seed funds donated by alumni such as investment guru James B. Rogers Jr., who earmarked cash years ago to improve undergraduate investment acumen at the New Haven campus.
As students sense tougher times setting in, many seek to "front-run the process," says Chris Borrero, president of the Yale College Student Investment Group. "People are taking a step back and trying to get a [Wall Street] internship earlier so they have a better résumé for the junior internship." Membership in a finance club is seen as a boost up the career ladder. Borrero, a 21-year-old junior from Westford, Mass., says he began reading The Wall Street Journal aloud to his father in the second grade. He notes that 40% of the investment group's 250 members are freshmen, far more than in the past.
High-revving students scoff at advice they sometimes hear about intellectually browsing before settling on a narrow employment path. "Many of my fellow classmates have been planning out their college choices since middle school, so to tell them not to plan for a future career during freshman year is illogical," says Janet Xu, 22, a senior at Yale and editor of the undergraduate magazine Yale Entrepreneur. She is heading off soon to be an analyst for Sears Holdings (SHLD) in Chicago.
Driving some of the credentials-mania is the impression that campus clubs open doors to summer internships many firms are relying on more heavily for full-time hiring. JPMorgan Chase (JPM), for example, says 90% of its entry-level hires last year were former interns, up from 60% five years ago. At the big consulting firm Accenture (ACN), "these clubs help us identify the best people for our internship program," says John Campagnino, global recruiting director.
Some of the organizations aim to broaden opportunities for women and minority students. At Columbia University, sophomore Anastasia Alt (video of Alt), 19, helped raise nearly $30,000 from Fidelity, Goldman,
Morgan Stanley (MS), and other financial titans for a recent career-networking conference of the 300-member Columbia Women's Business Society, a campus group. Firms use such events as an extra recruiting opportunity beyond visits regulated by career services offices. Alt's pitch to prospective sponsors: "Here are women who are both talented and interested in your company." Currently she's launching a Columbia chapter of Smart Woman Securities, a club started in 2005 at Harvard to give women a crash course in investing.
A trio of minority undergraduates at Harvard created a club last year called Veritas Financial Group as a way to learn the financial basics they couldn't find in the regular curriculum. JPMorgan, Goldman, and Credit Suisse Group (CS) have given Veritas a total of $15,000 in startup money. "I feel that I need to be doing everything I can to compete with students who are given the opportunity to have some pre-professional education," says co-founder Ryan Williams, a 20-year-old African American sophomore from Ossining, N.Y. His club already has 90 members, including some white students. It's the 13th undergraduate business organization available on the Cambridge campus alone.
TOO NARROW A FOCUS?
Some prospective employers welcome the abundance of undergrad societies devoted to pecuniary pursuits. "Supporting a club like Veritas is important, as it provides the kind of hands-on, practical experience that can only benefit students who are planning a career in finance," says Brian Marchiony, a JPMorgan spokesman.
But others express reservations. Michael J. Mauboussin, chief investment strategist for Legg Mason Capital Management, worries that a premature narrowing of focus could hurt future employees. "If you are specialized too early, there is a risk you will be less innovative because you have fewer building blocks to combine in new ways," says Mauboussin, 44, who majored in government at Georgetown.
Carly Fiorina, the former CEO of Hewlett-Packard (HPQ) and now an unpaid adviser to Republican Presidential candidate John McCain, agrees. She majored in medieval history and philosophy at Stanford. Such fields help hone judgment and perspective in a way that an investing club cannot, she says: "Judgment is knowing when to act and when to pause. Perspective is the ability to separate the merely interesting from the truly important." Companies can be impaired by too many people with similar backgrounds, she adds. "If everyone is the same, your decisions won't be as sound and you probably won't be as innovative a place."
More immediately, if everyone in the finance club is fixated on picking stocks, they may not pay very close attention to the lectures and lab sessions for which their parents are paying serious tuition. Students on the executive board of Tufts Financial Group, a newly minted club at Tufts University near Boston, confess that they habitually track their investments from a $30,000 fund created by an alumnus gift to the university's endowment. "I'll take care of e-mails and work on spreadsheets during class if I need to," says Chris Cerrone, 20, a sophomore juggling an internship at Century Capital Management in Boston along with his major in economics.
At Tufts, a school that ranks just below the Ivies, the formation of the finance club's investing arm last year has caused a stir. Membership has swelled to 200. Lindsey Tannenbaum, a 22-year-old senior and president of the group, says some students are listing the club on their résumés even though they barely participate. "It looks good if you're applying for a career in finance," she says. In response, she's now taking attendance at weekly meetings and restricting access to the group's online investment research. After interning for Lehman Brothers (LEH) last summer, Tannenbaum is returning full-time to the New York investment bank later this year. Meanwhile, at Lehman's request, she's vetting résumés of other students from her club.
In some campus groups, it's a miracle members have time to sleep or eat, let alone study or write papers. Shortly after arriving at Stanford from her home in Houston, Connie Yu (video of Yu) applied for admission to Stanford Finance, which helps undergrads find corporate and consulting firm internships. One of the most selective of the 25 undergrad business groups on the sunny Palo Alto (Calif.) campus, Stanford Finance gets about 200 applicants a year for only two dozen spots. Yu, now a 20-year-old junior, was admitted but didn't stop there. She then joined the Blyth Fund, through which 25 undergrads manage a $180,000 stock portfolio begun with a gift from investor Charles R. Blyth, who made similar donations to several California universities in the late 1970s. The Stanford students trade through an account at E*Trade Financial (ETFC), where the money is registered to the university's endowment-management company but otherwise is controlled by the undergrads.
Completing what Stanford students call a rare "triple crown," Yu also gained admission to Stanford Consulting. That group rejects four out of five applicants with a notorious entrance interview. Yu's included a business-school-style question about how a deodorant company ought to reverse its declining market share. "It's so competitive to get into Stanford, and then it's kind of a shock you still have to apply for the student groups," says Yu, clutching her personalized Stanford Consulting tote bag to her chest.
The reward for getting into 20-member Stanford Consulting is the chance to do volunteer work 15 hours a week for a real consumer-products company, which Yu declines to name because she signed a nondisclosure agreement. She says she's helping management figure out how to gain attention with ads on YouTube (GOOG). Red-eyed and, by her own admission, sleep-deprived, Yu says she has had to sacrifice her hobbies of playing keyboards and ultimate Frisbee to complete her club obligations, along with classes in international trade and game theory. But she says it's worth it. She worked as an intern at Lehman last summer and is returning to the bank for another stint this year.
Meanwhile, she'll be paid up to $50 an hour to advise other undergraduates on navigating the choppy recruiting waters. She works with a company called Higher Recruiting started last year by students who met at the New York private high school Horace Mann and since have worked at various Wall Street banks. With 32 student consultants serving undergrads on more than 20 campuses, Higher Recruiting pitches itself to those who fear that their career services departments may not be savvy or aggressive enough.
Some career offices seem wary of the profusion of finance clubs, though most hesitate to criticize them explicitly. The Columbia Women's Business Society had planned to give recruiters at their upcoming conference a book of student résumés, but refrained when it learned that the university's career office discourages such contacts out of concern that all students should have equal access to potential employers, regardless of club membership, according to the women's society. Columbia's career staff declined to comment.
Stanford's career center says it established a more formal relationship with student business groups this academic year so it can keep closer tabs on their dealings with recruiters. Beverley Principal, assistant director of employment services at Stanford, frets that some employers might take advantage of applicants they meet outside of the regimented career-office environment: "If a student comes in crying because a potential employer has asked, 'What will you do if you have this job and get pregnant,' we have less of a leg to stand on when we try to help them." A counterpart at Harvard, Bill Wright-Swadel, has similar concerns. "The [career] conversation now begins virtually at Day One" of freshman year, before most students have any clear sense where their skills and proclivities will take them professionally, he says. For the moment, Harvard's career office monitors clubs only informally.
A new addition to Harvard's roster of undergrad business organizations is Williams' Veritas Financial Group. Williams brought some entrepreneurial experience with him to Cambridge in the fall of 2006. As a 13-year-old, he started a personalized sweatband business called Rapappay Active Wear. After classes at his public junior high school, he trekked down to Manhattan's garment district to find inexpensive supplies. "A lot of my Friday and Saturday nights, I spent catching up on sleep or working on my company operations," he recalls. Last year he says he had earnings of $3,500 but has put the operation on hold to focus on his studies.
Williams was alarmed to learn that Harvard doesn't offer any undergraduate classes on accounting. He and classmates Charles Cole and Derrick Barker (video of Barker) started Veritas to help undergrads, especially minority students, who might lack personal contacts with the business world, to learn basic skills. Sitting on beanbag chairs, surrounded by half-eaten granola bars, rifled cereal boxes, and other dorm room detritus, the three friends cobbled together their own curriculum from financial texts they lugged from the Harvard Business School's Baker Library, across the Charles River from the college. They blasted Harvard's entire B-school faculty with e-mails explaining their mission and asking for help.
The business school doesn't permit undergrads to cross-register for classes; those who sneak in anyway are known as "sharks." But Veritas' call for assistance was heard. Professor Arthur Segal, an expert on real estate, met with Williams to provide counsel. Craig Canton, a 29-year-old second-year student at the B-school on his way to a Wall Street sales job, leads a seminar on finance for Veritas once a week. At one session, 14 undergrads from a wide variety of ethnic backgrounds listened as Canton dissected the subprime mortgage mess and explained exotic financial instruments known as collateralized debt obligations.
While he's eager to help, Canton observes that some Veritas members seem overwrought. "These students are a lot more focused and seem to be having a lot less fun," he says. "I was scooping ice cream as a sophomore. There is a lot more worry than I felt."
Williams says a ruthless business world demands focus: "It's extremely competitive and cutthroat out there, so you have to take initiative." Last summer he worked for JPMorgan's private equity arm; this summer he heads to Merrill Lynch (MER).
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