How to Break Into a Hedge Fund, Make Enough to Retire, and Travel Around the World Kiteboarding, Paragliding and Skydiving

130 Comments | Hedge Funds & Asset Management - On the Job

46 Flares 46 Flares ×

Hedge Fund Recruiting 101Everyone wants to work at a hedge fund.

It’s hard to resist the lure of piles of money, your own yacht, and a private jet or three.

But once you make it to that level, you run into another problem: what do you do with your life?

Our interviewee today faced the same problem, and then found a wonderful solution: take a sabbatical, go skydiving in Seville, paragliding in India, and then sail around the world on a kiteboarding expedition.

Hey, starting a nonprofit can wait.

I tracked down our interviewee during in his downtime somewhere between India and Brazil, and coerced him into answering all your questions about hedge fund recruiting, work, and how to live his lifestyle – so here’s what you’ll learn:

  • How to dominate your hedge fund interviews and what interviewers really want to see.
  • What you do at a hedge fund, day-to-day.
  • The hierarchy at a hedge fund and the different roles available.
  • And yes, how to retire early and spend your time jumping out of planes and kiting near exotic beaches (maybe).

Story Time

Q: Let’s start with how you broke into the industry and the “path” you followed, even though we all know there’s no real “path.”

A: Sure. I majored in Finance, Management Information Systems, and Economics in college, and I started working at a small private equity firm right after I graduated.

I left the private equity fund after six months and began my job search for a position at a hedge fund. Coincidentally, a close friend had been contacted by a headhunter for a fund that was looking for a junior analyst position. I gave them my resume and started the interviewing process there.

I started at the distressed, opportunistic and value-oriented fund, stayed there for almost 6 years, and then joined a long / short equity value fund after that.

I stayed there 2 years, went back to the first fund, stayed there for a year, and then left to travel around the world kiteboarding, paragliding, and skydiving.

Q: OK, so it sounds like you hopped around quite a lot but still managed to stay at that one fund for over (7 years) years – pretty amazing in this industry.

What exactly did you do at these hedge funds?

A: I was a research analyst, which means I conducted investment research and generated investment ideas for portfolio managers.

I first started covering distressed debt and equity investments all over the world, and then I began spending more time on short selling, also getting into distressed assets.

We only worked with public companies, but some funds cover private companies too.

Q: So where does “research analyst” rank in the hedge fund hierarchy?

It sounds like you were still a peon, but were you at least a highly paid or really, really, really ridiculously good-looking peon?

A: At my previous funds, the 3 major front office roles were:

  1. Portfolio Manager – The top of the ladder.
  2. Investment Analyst (IA) – The idea-generators and researchers. There are usually junior and senior analysts.
  3. Traders (ET) – There are usually two types of traders – ones that also generate ideas, and ones that simply execute ideas of others (Execution Traders).

Q: Your attention to detail is poor, because I don’t see “Research Analyst” anywhere there.

A: “Research Analyst” and “Investment Analyst” are used interchangeably, but “Investment Analyst” is probably more common so that’s the one I listed there.

Anyway, the way it works in a nutshell: the analysts generate or work on ideas generated from others and then research the ideas and present them to Portfolio Manager(s).

The PMs then ask questions to the analysts, express their concerns, and then the analysts do further research to answer their questions.

Then, the PM decides whether or not to make the investment.

Once the PM decides what to do, the trader then executes the trade and makes sure they can buy / sell everything at the right price, or as close as possible.

Remember that this is difficult because you’re often working with millions of shares / securities, so it’s not as simple as logging into your TD Ameritrade account and hitting “Execute.”

Beyond the front office roles, there are also back office roles in IT, administrative, and CFO functions.

Hedged Recruiting

Q: I’m going to cut you off right there, because let’s face it: no one really wants to learn about the back office. Let’s skip to the part that everyone reading wants to know about: how to break into the front office.

What’s the recruiting process like?

A: Sure. The process at most hedge funds is more extended than what you see with investment banking interviews – in addition to the interviews themselves, you can expect to get a problem or case study to work on for a few days.

You might, for example, get an income statement, balance sheet, and cash flow statement of a company and then be asked to provide a one-page summary of its valuation.

Q: OK, so let’s look at those 2 parts separately and let’s start with the interviews themselves.

What are the key questions to expect in hedge fund interviews?

A: Here are the most common questions you’ll get:

  1. Tell us about your background / walk us through your resume.
  2. Why do you want to work for a hedge fund?
  3. What sort of investing have you done lately?
  4. What stocks do you like?

And then there are the usual behavioral questions to determine the candidate’s personality: is he/she a person who studies all the time, or someone who likes to have a good time?

Since hedge fund teams are usually very small, we need to ensure that the candidate fits in with the firm culture.

Brainteasers can be common at some funds, but the ones I worked for didn’t use them at all.

Above all else, we want people who love investing and who have original ideas on how to trade the markets.

If you don’t follow the markets very closely and trade a lot on your own, you wouldn’t be a good fit at most hedge funds; people here actually enjoy their work.

Q: Right – that confirms a lot of what past interviewees and contributors have said about hedge funds and asset management.

What about the case study you get in interviews? Any tips on tackling that?

A: Sure. So, first off, we care mostly about how candidates simplify the problem and how they arrive at the valuation of a company.

I know you’ve stated that for private equity interviews, for example, it’s really important to give a firm yes/no answer.

But at least at the funds I worked at, we didn’t care about that quite as much if the candidate had no work experience.

We were more interested in seeing what analytical skills the junior analysts possessed, but didn’t expect them to make final investment decisions. Senior analysts would be expected to better judge whether particular ideas were good investments.

We expect candidates with a few years of investment banking experience to be able to spread the numbers, be very competent in Excel, and come up with the conclusions relatively quickly.

We’re also curious about how candidates come up with their one-page summaries: actually calling the company’s management team and asking them questions would really impress the interviewers.

Q: Let me stop you right there: you’re actually saying that it’s a good idea to go outside the scope of the case study, look up the management team’s contact information, and call them?

A: It’s not strictly necessary, but it shows initiative and indicates that you have what it takes to work at a hedge fund – we’re always uncovering hard-to-find information (in a legal way, of course).

You also spend a lot of time speaking with senior management of companies, and if you’re not comfortable doing that and getting information from them, you wouldn’t be a good fit here.

So I would do everything possible to set yourself apart – if you can’t get through to the company directly, try to find the information indirectly by speaking with suppliers, customers, and so on (all of which are listed in filings).

With the case study itself, we can usually tell how sophisticated a candidate is based a few questions we raise.

Even if candidates don’t know how to answer certain questions, as long as they can demonstrate their thorough understanding of financial statements, have strong analytical skills (i.e. being able to connect dots and solve puzzles), the ability to learn quickly and passion for the role, they can usually learn the skills on the job in a month or two.

Q: OK, so that’s what to expect in interviews and with case studies – what about the process itself?

A: We usually have 2-3 rounds of interviews over 2-3 separate days. We have 4-5 different junior people interviewing the candidate individually in 15-30 minute intervals.

The Portfolio Manager(s) would only be involved in the later stage of the interview process, when the candidate has passed through the initial interviews and met other team members.

You can check out this interview series for more on hedge fund case studies.

Q: Great, thanks for those tips and for laying out the process, at least at the funds you’ve worked at.

Anything else to know about recruiting?

A: One last point I’ll mention: your reference check can be important, and many funds actually ask for references in interviews.

So unlike at banks, where it’s rare for anyone to call your references (at least in the US), hedge funds routinely ask for this information. 

Q: That’s an interesting point, because most people can’t even list many references unless they’ve worked full-time before.

Does that mean that you’re mostly looking for people with more experience?

A: Usually candidates work at investment banks for a few years before working at hedge funds. I broke in 6 months out of college, but that was only possible because the markets were better and I happened upon a great opportunity.

If you haven’t had any work experience, you’ll be judged based on your grades and your school’s reputation. SAT scores matter, too.

I don’t have a black-and-white cutoff number for the grades or the scores, and it depends on the individuals’ other qualities. Some individuals are referred to funds, and having a strong reference can increase one’s chances significantly.

If you’re in the process of getting the CFA certification or have already done the CFA, those will also increase your chances of breaking in.

To sum it up, we look for candidates who love investing, are passionate about the markets and ideally trade their own portfolio.

And if you’ve had a few years of work experience, your work experience matters more than your degree, CFA and grades.

On the Job, Culture, Work, and Pay

Q: Right, that makes sense and confirms some previous comments on certifications.

What’s an average day in your life like? How do you spend your time at work?

A: My average day starts at around 5:00 – 5:30 AM. I read the news, check emails and Bloomberg, and see if there’s any news that affects decisions in our portfolio.

I then chose 3-4 companies I want to work on for the day.

They might be existing investments, or they might be prospective companies we’re thinking about investing in – but in either case, much of the work is the same:

  1. I read a lot of material and talk to management teams of companies.
  2. I talk to the portfolio managers here, and sometimes sell-side analysts.
  3. I do a lot of research to come up with new investment ideas and see if, for example, a certain strategy or acquisition makes sense for an existing investment.

My typical day is 12 hours, and we usually eat at our desks.

I’d say I probably spend around 60% of my time on generating investment ideas, and 40% of my time on our existing investments.

Q: Well, at least you don’t have to worry about pitch books or pulling all-nighters!

What types of technical skills and modeling know-how are required? Is math wizardry a must?

A: For what we do, the math skills required are minimal. But we do want candidates who are comfortable using Excel and who understand accounting and financial statement analysis.

Certain types of hedge funds require more math / programming skills, though – if you’re at a place that focuses on automated trading or some type of high-frequency trading strategy, it’s completely different.

Q: What about the culture compared to, say, investment banking or private equity?

A: The culture of the firm depends 100% on the portfolio manager. I worked for a firm that was very quiet (like a library), and I also worked for one that had intense pressure and was almost like working at a bank.

Overall, culture at hedge funds varies a lot more than what you see at banks and PE firms, so you really need to do your homework when you go around interviewing for these positions.

Q: And I’m assuming that the hours and pay are also 100% dependent on the PM and the policies he sets?

A: To some extent, yes, but I think pay ranges are a little more standardized because you know the management fees and the number of people at the fund in advance.

Most people with a few years of experience in IB start off with a base salary of $75 – $125K USD. Your bonus might be 2-3x your base salary, so around $150K – $375K.

That’s a wide range because bonuses are more dependent on the fund’s policies and performance.

Overall, most juniors at hedge funds earn between $200K and $500K USD all-in.

Sometimes you may make more or less than that, but stories of junior people making millions of dollars are exaggerated and/or not common.

Q: Right, I don’t think it’s realistic to expect that kind of pay, especially as the hedge fund market has gotten more crowded and the overall market has become more efficient.

What about the senior people at your fund though?

A: That’s where performance comes into play a lot more. I’ve seen senior people at hedge funds make anywhere from a couple hundred thousand USD to $1 million, $10+ million, or more.

Your salary doesn’t change much as you move up, so you make most of your money from your bonus, which is either discretionary or determined by a formula.

If your bonus is discretionary, your PM will determine the number. If your bonus is a formulaic bonus, it’s usually determined based on a percentage of your base salary, the fund’s returns, and so on.

And with PMs, the sky’s the limit for bonuses: it’s 100% linked to your returns and how many new investments you generate.

The Future of Hedge Funds

Q: From previous interviews here, it seems like few people willingly leave the world of hedge funds.

But let’s say you actually want to move on – what are the most common exit opportunities?

A: As you said, people usually stay here if they want to be in finance; otherwise, they’re usually fired or retire early.

You might get fired if you have a bad attitude or if you can’t generate ideas and make money – funds are selective about their hires, but they make mistakes occasionally.

The most common, non-firing/retiring exit opportunity is leaving to start a new hedge fund.

Q: What does the future hold for hedge funds?

Do you think they’ll still be hot in coming years, or have they already peaked?

A: It will be more competitive to work in the hedge fund industry going forward.

Back before they became popular and before news of billion-dollar paydays broke, no one wanted to work at hedge funds – but these days lots of smart kids want to go into the industry.

At the same time, though, it’s getting more difficult for hedge funds to make money because the markets have become more efficient and because competition is intensifying – so there will also be less demand in coming years.

Q: So what would you say to a smart college student who wants to work at a hedge fund today?

A: Get as much experience in investing as possible, own either a mock or a real portfolio, read books on investments, and network. All the good jobs come from networking.

A CFA also helps, because it demonstrates one’s willingness to learn about investing (but again, see my full comments on it above).

I wouldn’t say it’s a bad field to get into, but going forward I don’t think you’ll see as many out-sized success stories.

Ask yourself whether you truly enjoy the work and investing itself, or if you’re just interested in the money.

And make sure you’re truly passionate about what you’ll spend your time doing, as time itself is the most valuable asset you possess.

Q: So is that why you ended up leaving the field?

A: Pretty much – for me it was more about how I wanted to spend my time than anything else.

I had already worked in the industry for almost 10 years, and while the money was nice, I didn’t want to work 60-80 hours per week for the rest of my life.

I’ve been taking time off over the past year or so to go on adventures and travel all around the world.

I’m not going to do this forever, though, so I may do part-time consulting or some other type of remote work in the future.

Q: Great. Thanks for your time!

A: Sure, enjoyed the chat!

About the Author

has worked in institutional sales, private banking, and investment banking in Hong Kong. When she's not working, she enjoys kiteboarding at exotic beaches, jumping off planes and bridges, and shark-diving.

Break Into Investment Banking

Free Access to Exclusive Content for Members Only!

Loading the player...

Sign up for The Banker Blueprint today and enjoy:

ebook
  • Free Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews,
  • Exclusive emailed bonus material,
  • Free Banker Blueprint newsletter with more in-depth advice,
  • Unlimited access to all articles, videos, and advice - and free updates whenever new content is added to the site,

 

We respect your email privacy

Read below or add a comment...

130 Comments to “How to Break Into a Hedge Fund, Make Enough to Retire, and Travel Around the World Kiteboarding, Paragliding and Skydiving”

Comments

  1. Desmond says

    Would talking about your investments in practice (fake money) accounts be appropriate? Or would you just be making a fool of yourself?

    • says

      That’s fine, and it’s actually pretty common in entry-level interviews since you don’t have much to invest by that stage. And it’s much better than having no investment ideas to speak to.

      • Angry Analyst says

        First, I really enjoyed reading this even though I work in this area as it was interesting to here a more senior person’s thoughts. I had always wondered what happens to people who leave hedge funds, I was worried they exploded or had horrible lives.

        Second, I wanted to add a bit of color to what I look for in interviews if that’s helpful. One of the most common mistakes I see candidates make is trying to discuss something they don’t understand because they think they’ll impress me with some super complicated trade. Cultures certainly differ, but that’s not good at my firm and it tends to end the interview really quickly because very few people understand those trades well. Broadly speaking, I would be much more impressed by a well done pitch on something simple than a poorly done one on something complicated.

  2. Sharon says

    Hi! Thanks for the article. I noticed that it said that they want to see if you study all the time or if you actually like to have fun. Would some hedge funds actually want someone who studies all the time or would most firms want someone who actually likes to have fun? In other words, how would a candidate go about the personality part of the interview?

  3. Alpha says

    Love the buy-side stuff!!!!(only time you are allowed to say C F A)

    To all the guys at M & I (OLD and NEW),my gratitude for some really cool articles & advice this year,have a happy festive season and a crazy new year!!

  4. Evan says

    To anyone who knows,
    Are hedge fund research analysts usually confined to a cubicle or small office, or is it an open, trading floor-like environment?

    • says

      Depends on the firm but it’s more common to be in an open, trading floor-like environment where even senior people may sit next to you, especially at smaller places.

  5. steve seto says

    Hi Nicole,

    Thank you for your Q&A. You mentioned that you speak to key players within organizations when cold calling. What information / questions would you typically ask to gain insight about a company?

    Thanks and merry Xmas!

    -Steve Seto

    • M&I - Nicole says

      1. What is your company direction?
      2. What are challenges your company is facing?
      3. How is your company adapting to current volatile environment?
      4. What is your company culture like? What type of people succeed at your company..etc

      • Rahul Dravid says

        Hi Nicole,

        I was just wondering as to what would be the incentive for the company executive to give you this information, when he knows absolutely nothing about you (the caller).

        Thanks!

        • M&I - Nicole says

          Good question. You’ll have to establish a connection with the person on the phone and ask them information they are comfortable disclosing. You’ll have to be a bit indirect and engage them in a conversation, rather than just grilling them. It can be challenging because not too many are willing to disclose the information, which is why it will make you stand out if you could establish connection with people easily and obtain information which others don’t have access to (I’m not talking about non-public information here though)

          • Rahul Dravi says

            That makes perfect sense, but lets say we are trying to find whether or not we should invest in Microsoft. And I want to call up some senior person in Microsoft to talk.

            1. Since we are going to make our investment decision based on what we find out, I assume we would want to talk to some pretty senior person at Microsoft, not just any software developer. I doubt that it would be possible for any common man (in this case, the HF analyst / interviewee) to get to speak with such senior people.

            2. Given that there are literally thousands of HFs in the world, and many of them would be considering Microsoft as a potential investment, I think it would be next to impossible to even get in touch with such senior folks.

            So, practically speaking, (even if we ignore the fact that we are interviewing for a HF, and assume that we are a HF Analyst) is it possible to get info directly from senior executives at companies ?? Do HFs actually use this as a means to collect info ?

          • M&I - Nicole says

            1. Perhaps you can connect with the IR division at Microsoft and ask to speak with the IR director. Tell the IR division you’re working for a HF and interested in investing in the company.
            2. Not necessarily, it depends on how you approach them. You need to have a good strategy
            Yes it is possible. Yes I believe so.

      • Rahul Dravid says

        Hi Nicole,

        I completely understand your idea of speaking to the company representatives & getting some info from them. However, I am not sure what kind of info we can get from them, which is not available from the Annual report etc, YET is publically available. Could you please explain?

        Many Thanks!
        RD

        • M&I - Nicole says

          I understand what you mean. Perhaps you can read through research analysts’ reports and then read through the annual reports – look at how research analysts think, and what sort of information they look for from companies. The annual report may not disclose info (such as management’s explanation of recent stock price crash/earnings miss, etc) and IR/company reps will have to address such concerns through press releases, meeting with research analysts etc. You can even attend management meetings (if you work in a fund/or in research for IB), and people raise questions to get additional info, especially if management doesn’t directly address questions raised by analysts etc.

  6. Keron says

    Hi! I have had several interviews for hedge funds in the past but got somewhat nervous at the beginning. Any tips for shaking that nervousness off? Thank you!

    • M&I - Nicole says

      Know what you are talking about. Understand the industry landscape. Be yourself. Relax and chill out. Really try to figure out if you really enjoy investing. If so your passion for it will shine in interviews

  7. Tom says

    Could you suggest an accessible way to invest in fixed income on a personal basis (minimal capital)? Preferably avoiding sovereign debt, looking towards lev/HY.

    • Bruce says

      Not sure if this is what you are looking for but
      There are alot of decent ETF’s and other funds that solely focus on corporate debt.

    • Adam says

      You can trade many fixed income prods. on Interactive Brokers. Just a warning though, minimum order size on a fair number of them is US100k+ as FI is generally not aimed at the retail market, so ETFs or funds like Bruce said below might be your best bet.

  8. Larry says

    Hey! Reallllly interesting article!!! The first one ive read that actually dug behind the smoke and veil if you will. Just curious, would it be easier for a banker (analyst), quant analyst, or an asset management (ie, Goldman Sachs asset management or investment management) analyst to break into hedge funds? Thank you!

    • M&I - Nicole says

      Thanks!

      I can’t really say because it depends on the candidate himself/herself. I’d say it would be easier for banking/AM analysts to break in given the skill sets but it really depends on the person’s situation and circumstances

  9. Phil says

    Hey, do you think it’s possible to break into hedge funds as a treasurer/risk manager or a credit analyst? Which one may be better, if any?
    Cheers

  10. West says

    Can someone in the industry provide insights on any restrictions on your personal portfolio while working in a hedge fund?

    For instance, many banks prevent short term trading and has layers of compliance to go through before making a trade for insider trading reasons.

    • says

      You probably have some degree of restrictions at hedge funds too, though it’s more lax at smaller places. The bigger issue is that, just like with working at a bank, you barely have any free time to actively trade, even if you wanted to and had ideas that were not related to inside information.

    • M&I - Nicole says

      You could though I think they will be flooded with Christmas emails anyway so they are kind of pointless unless you can make yours stand out so bad that they have to open yours. Many peeps will be out of the office too so they might not necessarily check their emails as often. But again, the above is an assumption so you should test my assumption and see how it goes

      • Don says

        Hello, I’m a high school student trying to get into NYU Stern, I have a pretty good chance of getting in, if I do, should I major in Finance and Economics, or Finance and Mathematics to be able to have a greater chance of landing a job in Wall Street (whether that be an investment bank or a hedge fund)?

        • M&I - Nicole says

          Since you’re at Stern, I don’t think you’d go wrong either way. You’re majoring in Finance in both options and Stern is a target. Perhaps the Economics option may open you more doors, especially if you’re interested in a macro fund.

          • Don says

            I suppose, but I’m more interested in Quant analysis, in which case I should probably go the math route, but then again I’ve heard that many Physicists end up becoming Quants, so my question to you is (should I major in finance and physics If I want to become a quant, or is just doing Mathematics enough to help me become and Quant?

          • M&I - Nicole says

            I’d do Finance and Mathematics. However, I’m not personally a quant person or too interested in physics so you may want to seek a second opinion.

          • Don says

            Also I want to add that (whether its Math or Physics) I’ll only be getting a four year degree, is that enough to become a Quant Trader in the future, or would I need a phD in a Mathematical field?

          • M&I - Nicole says

            Some roles prefer candidates with a PhD and it really depends on the role. A PhD can potentially help you quite significantly but you can still find roles as a quant trader without a PhD I believe.

  11. Abigail says

    Hello M&I,
    I am a sophomore in a target school with a cum gpa of 3.5 studying economics and minor in Maths. I am in for BA/MA joint program in economics policy analysis but interested in investment banking which is why i will like to apply to business school after the program. I am hoping to get an internship with morgan stanley. QUESTION: I AM A GOOD CANDIDATE FOR WALL STREET AND IS BA/MA/MBA A GOOD ACADEMIC BACKGROUND. . FYI I am doing MA because i intend to get MY PHD in order to return to academia when am bored with investment banking or retirement. Thank you so much

  12. Abigail says

    My question was that will I be a good candidate for investment banking with a BA/ MA joint program in economic.policy analysis and am also still considering b-school after the program.

    • M&I - Nicole says

      I don’t think your degree matters as much as your work experience. If you don’t have any, I don’t think your candidacy is too attractive

    • Adam says

      Get internship(s) in IBD then you should be fine for getting a job. The MA is irrelevant and you won’t have a chance at a B-school worth going to until you work for a few years’ work ex.

      Lastly PhD – don’t bother if you want to work in IBD, it will work against you. A PhD in an econ subject will be useful if you are interested in the econ research team at a fin. inst. (think Jan Hatzius at GS), but will work against you in other areas of the bank.

  13. BBB says

    I was part of a finance rotational program (MO role) for a little over two yrs at a top BB in Asia and attended a top-target in the UK for a Msc Finance for 3 months before interrupting my studies (dropping out but having the option to come back in a yr) due to family reasons.

    I have been working at another lower-tier BB in a product control role and am really worried because I don’t want to get pigeon holed, which I feel will most likely happen if I stay any further.

    My options as I see it are:
    – Work here long term (do not want to do this)
    – Continue this role for another yr and go back to the Msc Finance program (will have accumulated 3yrs of work experience at this point and will have quit two companies already)
    – Quit this job now and do a front office internship (through Analyst Exchange) and look for a job or go to grad school again next yr after the internship (would be tough financial as internship is not paid)
    – Search for another job while working here (building more experience at a MO role which is not good)
    – Quit now and look for a job (tough financially)

    What do you think is the best option? Also, will my next company care when they see that I quit this BB after two weeks?? Would the background checks be able to tell that I worked here for this short amount of time?

    • M&I - Nicole says

      Honestly, Brian or myself or anyone else can’t answer this question for you. You should be the one making the call because ultimately you are the one who will be dealing with the consequences of your choices. Do what your heart calls you to do.

      Yes quitting after two weeks isn’t the best idea and may not look good on your resume. Background check – not necessarily, don’t know how thorough of background check they do

      – Continue this role for another yr and go back to the Msc Finance program (will have accumulated 3yrs of work experience at this point and will have quit two companies already) – From the wording of your comment, this might be what you prefer

      • BBB says

        Thanks for the reply.

        Wouldn’t leaving two companies in the span of three yrs look bad when looking for a job?

        Also, would I have to put the firm on my resume if I were to stay for only two weeks??

  14. AnnieT says

    Hi there,

    Just wondering – what is the difference between an investment bank and a securities firm? In Asia, it seems that major securities houses e.g. Citic Securities, Nomura Securities etc., do a lot of IB (esp. ECM) work.

    Thanks.

  15. Chris says

    How much do hedge funds care about undergrad GPA when recruiting IBD analysts? Can a low-ish GPA (3.5) keep you away from interviews even if you’re in a strong IB group?

    Great interview, btw! Thanks a lot

    • M&I - Nicole says

      If you’re from a strong IB group, I think you should be fine. They care more about your previous experiences and passion in the markets

  16. CB says

    Hey M&I,

    I just graduated with an accounting major. I have a background in investment banking (summer internship) and just got offered a full time position at an accounting firm auditing hedge funds. I know theres “no real path” to getting into a hedge fund however what would deem the better path in this situation: should I go ahead with auditing hedge funds and see if I can slip in that way or should I hold out until I get an offer from an investment bank (which I do have interviews lined up but am considering not going based on my offer from the accounting firm)?

    • M&I - Nicole says

      I don’t know if auditing HFs will help you break into the industry. It may if you want a back office role at a HF though I may be wrong. I think the IB experiene is invaluable so I’d suggest you to hold out and buy yourself some time w the other offer – don’t say yes or no yet, make up some excuse and buy some time.

  17. Mfan says

    Great article! Keep up the great work guys

    I have one question on my education
    on my third year in economics at a decent school
    I could graduate with just a BA (3 years) or proceed into my specialized honours in Financial Econ. Which do you think it would be better for me? I want to advance to MBA and all that afterward. Any words on this matter will help me a lot. Thanks!

    • M&I - Nicole says

      I don’t think it really matters. If you believe the economy will be better after you obtain your specialized Honors in Financial Economics, do that so you can graduated in a better market. If not, I don’t think it makes a big difference.

      You need to focus on gaining work experience in Finance.

  18. KJ says

    Hi,

    Does a track record using a virtual platform count in anyway or does one need to use real money in order for it to count as valid in your CV?

    Thanks,
    KJ

    • M&I - Nicole says

      You mean an investment portfolio? Virtual platform counts but you need to specify it. Of course having real money is better

  19. Jay says

    Hi

    Can you tell me whether a position like investment grade research/high yield research with a top ranked team in North America at a top BB I-Bank (for an undergrad) would be helpful in gaining entry to HF industry pre/post MBA. (I have such an offer) With such a position I assume there will be possibilities in L/S credit HFs or Distressed Debt HFs. Equity Funds would be a long shot. Am I right?
    Also what about getting into Multi Strategy, Event driven or Global Macro funds?
    Thanks.

    • M&I - Nicole says

      Working on sell side in area most closely related to the area that the hedge fund would invest is excellent way to transition to buy side. You will be interacting all day with clients on the buy side.

      • Jay says

        But I’ve heard all sorts of things, such as investment banking analysts are much more preferred, and sell side research guys have very less chances for moving to HFs etc. Are these true?

        • M&I - Nicole says

          Whether IB analysts are much more preferred to research analysts or not – in some cases yes but I think it depends on the interviewer

          No, I believe quite a few HFs value sell side research experience. You’ll also be dealing HF clients in sell side research so you should be able to use this network and break into HFs.

  20. Angela says

    Hello,

    I was doing some research on hedge fund then I hit on your article. To me, the buy side sounds more attractive than the sell side, comparing to the crazy working hours.

    My situation is I just graduated with my MS degree in statistics last year from a top school and doing data analysis in a marketing firm since then. I also got another MS degree in accounting before that.I really want to get out of marketing and break into finance.

    I know a bit about VBA and SQL.Just finished my CFA Level II in June, and waiting for my test results. My concern is I do not have finance working experience only three months internships in a small PE firm last summer.

    Wondering if you could help me with some suggestions about which function in banking and investment management could fit my background and easier for me to break into? Does risk management hire a junior analyst like me?

    Thanks a lot,

    • M&I - Nicole says

      Yes though hours on the buy side can be long too

      Its hard to say on the comments board because I haven’t spoken with you before. I’d suggest you to examine your strengths and weaknesses. Figure out what you are interested in by speaking with people. Combine your strengths and interests and you can then find an area in finance you are interested in and can contribute to

    • M&I - Nicole says

      I think it varies from fund to fund. I believe they’d recruit at Wharton, Stern, MIT, Harvard, Stanford though I may be wrong

  21. stephanie says

    Can you talk about funds of hedge funds instead? What are the exit opportunities like? If I had competing offers from a bulge bracket and a multi-asset class fund of funds, which one should I take?

    • M&I - Nicole says

      Depends on what your goals/aspirations are. I’d probably take the multi-asset class FoF because I think I’d be more interested in the nature of the work & the lifestyle might suit me better

  22. Christopher Sarda says

    Great interview and post, like always for this website.

    Thanks a lot to both interviewer and interviewee.

  23. DVH says

    Hey Nicole,
    Thanks for the great article!
    I would like your opinion on this.
    I love investing, run my own portfolio (some savings) as a hobby as well and I’m very interested in working for a hedge fund.
    The problem is that I have a fairly uncommon background, (BSc in Aerospace engineering, MSc in Management with quite some finance and economics courses).

    The reactions I get from networking couldnt be more different. Some say its great to have an engineering background while others say I dont stand a chance. Whats your take on this?

    • M&I - Nicole says

      Yes you stand a chance. You just need to demonstrate your knowledge of, interest & passion in finance.

  24. Justin says

    Do you think it would be easier to break into hedge funds with an equity research background or an investment banking background?

    The reason I ask is because I am a Master’s Finance student and would someday like to land a job at a hedge fund. I am more interested in equity research but if investment banking provides a much better chance of landing a job at a hedge fund than I may go that route.

    • M&I - Nicole says

      I think both offer good background for you to break into HFs. If you are more interested in ER, I’d pursue ER – quite a few people have moved from ER to HFs, especially since ER deal with HFs as clients on a regular basis.

      The key here is to show your analytical skills you learned in your previous roles, be able to spread the numbers, be very competent in Excel, and come up with the conclusions relatively quickly. Most HFs look for candidates who love investing, are passionate about the markets and ideally trade their own portfolio. http://www.mergersandinquisitions.com/hedge-fund-recruiting/

  25. Schrodinger says

    I am currently pursuing a phD in physics, I should graduate in the next year or so. What would be a good career trajectory for me to get into a hedge fund? I understand that if I were to look for jobs in finance now I would most likely be looking at quant jobs. How quickly I am pigeonholed taking that path? As I know very little about finance, would pursuing an Mfin at a top-tier school help or again define me as a quant? Or what about the CFA? Perhaps working as a quant for a couple of years and then an MBA? What route would you take from where I am sitting?

    • M&I - Nicole says

      Yes MF from a target will help you. A CFA will also help. I’m not 100% sure, but I think if you start off in quant and build experience in this area, you’ll probably progress within the area especially since you won’t be starting off as a junior given your PhD background. Yes working in quant then pursuing an MBA may help, but if you progress within a HF, I don’t think you’d want to go back to get your MBA unless you don’t like what you do

  26. Cheteshwar Pujara says

    Hi M&I team.

    I’m currently working in a backoffice role (software developer) in a big buyside firm, and am looking to move to a front office hedge fund role. I graduated recently from a top 10 school, and was thinking of using my university alumni base to try for a Hedge Fund gig (basically, I was thinking of emailing my alumni who work in / run their own hedge funds, and ask if they have an opening as a research analyst).

    1. Do you think this is a good idea?
    2. I’m not sure if I should directly ask them if they have an opening, or if I should approach this in any other way.

    Could you please advice. Thanks :)

    • M&I - Nicole says

      1. Yes it is a great idea. Even if there aren’t any openings available, you can always arrange for an informational meeting and learn more about the industry and make another friend!
      2. Yes, since you’re already working in a BO role. You can also ask them if they have any insights to share re. breaking into the field.

      • Cheteshwar Pujara says

        Hi Nicole,

        Thanks for the reply. I was drafting my initial email to an alumnus, and I ran into issues.

        After introducing myself & telling him that we both went to the same univ, I describe my current job profile & talk about my interest in a HF front office role. What should my next line be ?

        a. “Since you are a PM at XYZ Capital, I wanted to ask if you have a suitable opening”

        b. “Do you have any advice on how I can break in as a research analyst at a hedge fund ?”

        The 1st option seems too direct, while the second does not seem to serve my purpose.

        Any suggestions?

        • M&I - Nicole says

          Keep your email to 5 sentences at the most, and introduce yourself by explaining how you found them, and summarizing your work experience. Tell them your interest in transitioning to a front office role, and ask if their group may be hiring. If you think that’s too direct, you can ask them if they have any suggestions on how you can position yourself for such roles, then propose 2-3 specific dates and times to speak with them.

          • Cheteshwar Pujara says

            Hi Nicole,

            I had emailed my resume to some headhunters, and I got an email from one of them today, saying that he will call me tomorrow to discuss my background. In the past, when I have spoken to HHs, they ask about my current salary & what my salary expectations are from the new job.

            1. I am not comfortable disclosing my current salary in the 1st conversation with a HH. When I have mentioned this to them in the past, they suddenly loose interest in me & stop responding to my emails etc. How do you suggest I handle this in tomorrow’s call ?

            2. Regarding the expected salary, I don’t have a specific number in mind, and I would take/decline an offer based on multiple factors (including salary, but not ONLY based on that). Again, when I tell them about this, they think I am avoiding the question & they loose interest in me. Any suggestions on how to tackle this one?

            Can’t thank you guys enough!!

          • M&I - Nicole says

            1. Tell them you will disclose your information at the later stage of the process.
            2. Ask them if they have any roles that would fit your background and your areas of interest first. Tell him/her you can discuss the expected salary as you progress in the process. If they object, ask them why they need this number. You can then tell them salary is not the only factor you’re considering at this moment, and tell them if there’s a good fit, you are happy to discuss this further.
            http://www.mergersandinquisitions.com/financial-services-headhunters/

          • Cheteshwar Pujara says

            Also, if i HAVE to quote my current salary, is it okay to quote a higher-than-actual number, or is salary something that they can easily verify from somewhere?

            I’m asking bcoz lets say my current = 50K… I think saying this may put a limit on the salary I can expect in the new position… What do you think about this?

          • M&I - Nicole says

            No, because they can verify that pretty easily. Either tell the truth or dodge the question. I’d suggest you to establish trust with the person you’re speaking with first before you disclose such information. Remember, you’re helping them just as much as they’re helping you in this case.

  27. Andrew says

    Hi Nicole,

    I’m not sure if you’ve know of friends/colleagues that work/worked in Multi Family offices. I will be working for one that does direct investing. My primary role would be idea generation for equities, with secondary role being manager analysis, asset classes analysis and speaking to portfolio managers that are seeking capital from us.

    One of the biggest hurdle for investment analysts at family offices is lack of brand recognition, since family offices are highly secretive and private. So, my question is, when recruiting for a hedge fund at the end of my stint there, what do you think is a good strategy? It would be great if you have had former colleagues/friends that moved from family offices to hedge funds and if could speak about their experiences.

    Thank you so much! Great candid interview btw!

  28. Josh says

    Great Article! I had a question: In reading this article (and many others on this site), it seems like the best Exit Opps come from starting in Investment Banking and going from there. How does working in Investment Banking apply to working in Hedge Funds? (as far as job function and whatnot) More specifically, what skills and knowledge would I gain from Investment Banking that would help me at a Hedge Fund? Forgive me if this was posted elsewhere but I did not see it.

  29. James says

    If you’re trying to strictly trade at a hedge fund, would you be asked to complete case studies and perform valuations and such during interviews or would questions generally focus more on trading?

    • M&I - Nicole says

      Yes I believe they have such tests too for traders too. I’m not quite sure because it depends on the hedge fund – different HFs’ recruiting processes are different.

  30. Artificial Construct says

    Hello Nicole,

    I am considering starting hedge fund recruiting but I have a predicament. I went to a target school, completed a buy-side internship at a small group, but now work for valuation firm. My greatest concern is that I don’t have the “traditional” M&A current position that leads to most hedge fund analyst interviews/jobs, but I am completely open to shifting banks in order to maximize the likelihood of joining a hedge fund. My friends on the buy-side advise against this and instead suggest leaving investment banking as soon as possible and being prepared to laterally move once on the buy side in order to get to a mega-fund. Can you comment, should I try to move now, immediately following 1 year of valuation work at an investment bank, or try to move to M&A at an elite boutique and restart the process next year? What are the pros and cons of each approach? (Please assume ideal background scenarios of top grades, top performance review, and working in New York, the issue is lack of well-worn relevance from an M&A bulge-bracket bank). Should I just approach Dynamics Associates instead? (Perhaps this is futile and I should revert to developing a quantum computer in my garage).

    Thanks for your help, I sincerely appreciate it.

    • M&I - Nicole says

      Headhunters can help though I wouldn’t rely on them especially since you’re still early in your career. I’d agree with your friend and try to move now if possible. If you move now, and then attempt to move in a year, interviewers may question why you’ve been jumping around in your career. If your attempt to move now fails, I’d then move to M&A at a reputable bank and then transfer from there.

  31. Jack says

    Hello Nicole,

    Fantastic article and you’ve made this career path look even more appealing to me!

    I’m going in to my second year studying Mathematics with Economics at Loughborough University and I am currently undergoing an internship in a boutique IB. I’m going to start a dummy portfolio over the next year but would like to find out what analysis I should use to determine my decision to invest or not. If there is a book or anything that you could recommend that would be fantastic. I can already do a lot of the analysis I saw in the CFA Level I mock papers and would like to apply it. Also, could you give me any pointers in how I would go about finding some work experience within one of these firms? Would work for free just to try and network and gain more of an insight in to what goes on.

    Thanks for your time,

    Jack

    • M&I - Nicole says

      Thanks for your kind comment.

      Have you been reading Warren Buffet’s shareholder letters and his books? They’re all good reads if you’re interested in fundamental investing.

      Finding work experience – network a lot, cold call/email people on LinkedIn, through your professional, alumni, and personal networks, perhaps even try to attend industry events. http://www.mergersandinquisitions.com/networking-investment-banking-jobs/ maybe useful. Since you’ll be contacting funds vs. IBs, most of them maybe smaller so it can actually be easier to network with people within the firm. And make sure you work on your pitch – why you want to work for a fund

  32. Kristian says

    Hello M&I,
    I am currently an analyst at a top-tier consulting firm. I graduated with a BSBA from a top 10, semi-target program, and had a second major in math. I am looking to do an M.S. in Financial Engineering, hopefully from a place like Berkeley, Columbia, NYU Stern, MIT, etc. and after that I wish to transition to a hedge fund. Will the consulting experience hurt me when looking for a hedge fund job? Is IB a required prerequisite to become an investment analyst at a hedge fund? What types of funds might hire me?
    Thank you,
    Kristian

    • M&I - Nicole says

      No it wouldn’t though the experience isn’t too relevant to HF roles. Your experience maybe more relevant to IB. Perhaps you can try to move into IB first. Otherwise, an MBA will help you retool yourself. In regards to your last question, long/short funds maybe a better fit for you (vs. other strategies).

  33. John says

    Hi Nicole,

    Thank you very much for such a great article. My background is in Electrical/Information Engineering. After graduation I did two years of research and then two years of high-tech start-up. After my company is fully functioning I left to pursue a bigger challenge and I always had a great passion in the market. Only recently I realised investing can be a full time job and to be successful it has to be a full time job.

    I want to get into event driven hedge funds. I traded stocks for 4 years using my own money, on a relatively large scale compared to my own financial situation. Lost a lot of money in the first three years,and made them back in the fourth year with a good profit. and I enjoyed it so much and I know this is exactly what I want to do in life. I have started my networking already and most replies I got were I don’t have any M&A investment banking experience. Well, for me to get those experience would probably be too late and I wonder whether it’s a good idea to start with reading some basic M&A books? If so, could you give me some recommendations? In the mean time, I will keep trying to break into it.

    Thank you for your help.

    Best
    John

    • M&I - Nicole says

      What about trying for new/boutique smaller funds? Yes you can read M&A books such as Damodaran’s Valuation book though I think the key is to network and get your name out there so you get real life experience. You can start off as a research associate role or something like that first to learn about how to value companies etc. And you can also take courses like http://breakingintowallstreet.com/biws/ to hone your M&A/valuation skills in the fundamental course.

      • John says

        Thank you very much indeed, Nicole. I totally agree, I think it’s more important for me to get some real experience rather than reading books right now. I will try my best to network, what do you think is the best way? Do they have events published on any websites?

        Thank you for the link you provided, I will follow the link and start learning the basics on how to value companies.

        Thank you once again.

        Best
        John

        • M&I - Nicole says

          Yes, if you join local CFA/finance associations you should be able to find events in your town to network. You may want to explore HF publications and check out those events. However they can be costly.

  34. says

    I am always looking for outstanding hedge fund analysts. If you want to retire like this article says and you have what it takes to break into the hedge fund industry, let me know. For lack of opportunities you will not be denied.

  35. PVT says

    Fantastic article! I, unlike most people here it seems did not come from a target school and I entered banking and finance through retail banking. I’ve been promoted to several positions, but ultimately I’ve realized that asset management/HFs are the way to go for me.

    I do my own investing and follow the markets extensively. My question is this: I have a little over a year in full-time employment after college (Canada) is this type of work experience not seen in the best light when trying to enter HFs/asset management? Would people just chuck my application after seeing this?

    Thanks in advance,

    PVT

    • M&I - Nicole says

      Not necessarily though spinning from retail banking to AM require some thoughts – you need to point out an investment experience you’ve had there and why you want to transition into AM. I don’t think people would chuck your application though you’ll have to demonstrate the above and best if you have some sort of connections in the industry

  36. Michael says

    Hi,
    I am a young keen individual who has recently gained interest in finance and more specifically investing. My long term goal is to be involved in hedge-funding, however I was unsure of what route to take to achieve this goal. I have not got a degree, and have no experience with regards to the financial industry, I was wondering if this would impact my chances. Is it essential to have a degree? If not what qualifications do I need to be considered to be a junior analyst? Any advice would be greatly appreciated.

    Thanks

    • M&I - Nicole says

      Yes having a degree is pretty essential for a HF unless you are a genius at trading. Trading your own portfolio and knowing the markets inside out would help you in your case. you need to demonstrate your passion in the markets and your skills (ability to analyze news etc) especially since you don’t have a degree.

  37. John says

    M&I – I have an opportunity to interview for a financial control/operations gig with a pretty well known hedge fund. My question is – is it possible to lateral from a gig like this to an Analyst position? (Hedge Fund Analyst position is my ultimate goal)….I figure with the smaller working group and whatnot it would be easier to make this move at a HF versus a bank, but still don’t know if it’s relatively easy (I plan on obtaining the CFA credential)

    • M&I - Nicole says

      Yes you can try to do that though without the relevant valuation experience it can be more challenging.

  38. King Kong says

    Hi Nicole,

    I am interviewing for a hedge fund on Friday for Research Assistant role, which was located under the Investment Opportunities Section. Is this the equivalent of an Investment Research as detailed above? I am first year working in Fixed Income Sales and Trading hoping to transition to the buy side.

    Position:
    H/F is looking for a dedicated Research Assistant to support a Portfolio Manager within our multi-strategy fund. Responsibilities will include ongoing analysis of research reports and industry articles, updating earnings data and preparing for earnings calls, monitoring sell-side recommendations, attending management meetings, and conducting ongoing ad hoc data mining.

    Qualifications:
    Strong academic background with undergraduate degree. Open to all majors of study
    Background in finance is NOT required but should have strong curiosity to learn
    Recent graduate with internship experience and/or 1-2 years of work experience
    Extremely organized with strong attention to detail
    Excellent team player with good interpersonal skills and a positive attitude

  39. ER_newbie says

    Hi,

    I currently work in sell-side equity research and am looking to move to a hedge fund. I read somewhere that in hedge fund recruitment, the HF can/will ask you to provide a statement of your personal account to see what stocks you have invested in (and they can then question you on the same). Is this true?

    I’ve just opened a brokerage acct recently and I’m looking to invest my money in a couple of stocks but I’m apprehensive that if my thesis on those stocks is wrong, it could spoil my track record for HF recruitment.

    Do you have any views on this? Thank you!

    • M&I - Nicole says

      Yes this may be true. No, I don’t think there’s right or wrong, but you will need to spin your rationale and be able to talk about your investments eloquently.

  40. Harold says

    Hi,

    I’m currently a second year BB IBD analyst and getting plenty of PE interviews and very few hedge fund interviews, despite being more interested in hedge funds. Do you think I would be better off going to PE first and gaining more experience first or moving to equity research to get more exposure to the market? Either way, it seems that there aren’t that many people who break in straight from IB into HF.

    Thanks M&I team, you are the best!

    • M&I - Nicole says

      If you’re interested in HFs, I’d move to ER first since the role is more market oriented. With the above being said, if you’re talking about a very big name PE fund with a HF arm, I’d go for that role and use that to transition into HF. Even if that fund doesn’t have a HF arm, its credibility can help you break into a top tier HF, assuming you have the skills. However, ER serves its purpose by equipping you with the tools and skills necessary to succeed in HF roles.

Leave a Reply