The Wall Street hiring process, traditionally geared toward connections, elitism, and inherent biases, is far from perfect.
For Alexey Loganchuk, a former trader at J.P. Morgan, the biggest problem was the way the financial industry looked at merit. He felt it didn’t.
So after working at J.P. Morgan for five years, Loganchuk founded Upgrade Capital to provide opportunities to students who have no way of proving their financial capabilities when applying for jobs. Upgrade Capital finds talented young investors, and showcases their ideas and investing skills to financial firms, regardless of university, GPA, or resume.
The idea for Upgrade Capital started when Loganchuk realised that the financial industry was fundamentally flawed in the way they hired and promoted employees.
“The single best trader I met while I was at J.P. Morgan was fired with no severance … and one of the worst traders I met was kept around through the entire financial crisis, and was actually given a series of promotions and wound up joining a different bank with higher pay,” Loganchuk said. “That was one instance where I saw merit wasn’t really recognised on the sell side.”
He began to trace the lost value of meritocracy back to the nation’s top universities, where he found that students had very few methods of sharing their achievements in finance with employers.
“For these students, they have the brand that comes with going to these universities, so they are by no means lost, they are by no means doomed to obscurity,” Loganchuk said. “But outside of these core schools, if there’s somebody at University of Missouri who is as good as the best investor at Harvard, there’s no way in heck they would get quite the opportunities a Harvard student would get. And to me, this is a massive source of inefficiency.”
But these problems are too deeply entrenched to be changed from within, he said. So Loganchuk decided to build a brand new organisation to create change from outside, and to prove that this approach could work. In 2011, he left J.P. Morgan and founded Upgrade Capital.
Upgrade Capital started with six top universities, then expanded to incorporate more “non-target” schools. Since 2011, Upgrade Capital has grown to include 24 different schools, including Texas A&M, University of Missouri, Georgia Tech, and more.
Students from these schools participate in initiatives and competitions such as the Fortress Global Macro University Challenge, the Ben Graham Fellowship, and Quant Teams program. Upgrade Capital also helps connect students with valuable ideas to portfolio managers and partnered funds.
After being bootstrapped for two years, the organisation is now receiving funding from hedge funds who are interested in its mission, but declined to specify any names.
Most recently, Upgrade Capital held its annual student leaders conference in New York City. The summit gives students the opportunity to discuss best practices, strategies, diversity, and other issues facing young aspiring investors.
We talked to a couple students involved in Upgrade Capital, who all asked to remain anonymous to preserve careers or relationships.
One student at the conference said the organisation allowed her to practice trading and refine her investments. Having locked down an internship this summer, she said her outlook on the job market is fairly positive.
“I’m definitely not 100 per cent sure if there’s room or going to work out, but so far it’s been pretty comfortable,” she said. “I know it’s not great, but it’s definitely picking up. Our firm talks about hiring more interns and analysts than in previous years. And that’s kind of a trend I’ve seen across most of the companies I was speaking with.”
Another conference attendee said she’s seen discrepancies in hiring decisions and talent, mainly with applicants who aren’t in the top one per cent of performers.
“I think that there are levels to this. If you’re talented to a certain degree, I think that the barriers kind of all disappear,” she said. “But if you’re right below that, I think there’s definitely something to be said about someone that knew someone at a firm and was able to get a job … In those situations I think that favoritism does comes into play.”
She said the way financial firms weigh resumes and personality can also be detrimental to qualified applicants.
“Sometimes I feel like half of these firms are just throwing away resumes. I look at who they gave interviews to, to firms that I didn’t apply, and I’m shocked at how they missed out on a candidate that I know applied, whose resume I’ve seen, and I’m like, ‘He must be four or five times more talented than some of these they did give an interview to,'” she said.
A recent Columbia graduate and Ben Graham Fellowship winner said he had a hard time going through coffee chats, cold calls, and cold emails, to find what firms were genuinely interested in hiring.
“Frankly, a lot of hedge funds I feel are not the most honest when it comes to recruiting among the student rank,” he said. “For example, I definitely know stories of lots of hedge funds who will post job postings or internship postings just to collect stock write-ups. And they never say it out loud, but … they’re really just trying to get lots of free work.”
The newly employed analyst said he agrees that financial firms are often hard to break into on merit alone. He said although some hedge funds say they are looking for the smartest students, looking back, it really came down to the little things like networking.
“I’ve seen trading and more long-term investing, and I think what’s funny is that in both areas, I hear people talk about merit all day, and then I see the hiring process can be very subjective, in my opinion,” he said.
He said although it’s hard to compete with well-connected applicants, he’s feeling better now that he’s actually working in the industry.
“Once you get there, I’d say a lot of it is based on merit,” he said. “So what makes me feel good is that, ‘OK I got my foot in the door. Now for the next three years, it’s up to me to make good stock picks. It’s up to me to do good work. Because from here on out, I will have a clear way of showing my value.'”
“But it was a hustle, you know, before that,” he said.
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