by Brian DeChesare Comments (4)

The Hedge Fund Analyst Job: The Complete Guide

Hedge Fund Analyst

It’s tough to find a title in the finance industry that’s less specific than “Hedge Fund Analyst.”

Depending on the firm, your team, and your previous experience, that title could mean anything from “Just above an intern” to “On the path to Portfolio Manager.”

Hedge funds have less structure and hierarchy than investment banks or private equity firms, so it’s more difficult to generalize what each level represents.

However, we can say that the “Analyst” title usually refers to staff members in more junior positions.

For example, it might include recent hires who just finished undergrad or those who recently joined from other fields, such as investment banking or equity research.

Beyond that, it helps to have a guide if you want to understand the role:

The Hedge Fund Analyst Job Description

If you don’t already know what a hedge fund does or what the career path looks like, you should review our articles on those topics.

Analysts at hedge funds are junior employees who assist the Portfolio Managers (PMs) in:

  1. Generating and evaluating investment ideas;
  2. Monitoring current positions; and
  3. Building financial models and gathering data to support their views.

The tricky part is that the “Analyst” title could mean different things at different hedge funds.

You’ll even find some people with titles such as “Analyst & Partner” or “Analyst & Portfolio Manager,” among others.

Here’s a quick summary to explain the differences:

Junior Analysts vs. Analysts vs. Senior Analysts

“Junior Analysts” are generally those who join the fund right out of undergrad, without previous experience in fields like IB or ER.

They tend to be less independent than full Analysts, and they do not interact with the senior staff or generate ideas independently quite as much.

“Analysts” join after working in IB, ER, S&T, or another field, and they’re sometimes called “Investment Analysts” or “Research Analysts” as well.

They are more independent and spend more time on new idea generation rather than just vetting or validating existing ones.

If an Analyst stays for a few years and performs well, they’ll be promoted to “Senior Analyst” and specialize in a certain industry or strategy, while spending more time pitching ideas and managing the team.

If you see titles like “Analyst & Partner” or “Analyst & PM,” you should read them as, “This person did not start the fund, but joined and advanced to a senior position and now earns some percentage of the annual returns.”

As you move up the ladder, you become more independent and start generating more of your own ideas.

You’ll also be responsible for monitoring positions related to ideas that you successfully pitched.

By contrast, a new hire might spend more time on modeling and research to explore or validate existing ideas from other team members.

A Day in the Life: What Does a Hedge Fund Analyst Do?

This one depends heavily on your seniority, the fund type (single-manager vs. multi-manager), the fund size in AUM, and your team’s strategy.

An average day at a multi-manager fund where you try to predict companies’ EPS in individual quarters will be very different from an average day at an activist fund that aims to turn around companies over multi-year time frames.

But if we assume the following:

  • Seniority: 2nd or 3rd Year Analyst who joined out of investment banking
  • Fund Type: Single-Manager
  • AUM: $1 – $5 billion USD range
  • Strategy: Long/short equity or other long-term, value-oriented strategy

Then an average day might go like this:

7 AM – 8 AM: Wake up, check the news to see if anything will affect your current positions, and get ready and head into work.

8 AM – 10 AM: No major news events, so you pick 3-4 companies to work on for the day. Two are new, potential ideas from your firm’s “ideas database,” while two are existing positions (one long and one short).

You start by reviewing a valuation for one of the existing companies, a home-improvement retailer, from a new hire.

10 AM – 11 AM: Meet with this Junior Analyst and discuss his findings. He thinks the company is overvalued by 50% and is set for a big earnings miss related to the lending side of its business, but you question some of his assumptions and data.

You ask him to look into 4-5 specific points about the company’s revenue growth, expenses, and CapEx.

11 AM – 12 PM: Speak with the management team of a software company in which you have a 4-5% stake.

The CEO has announced a new strategy to pursue higher growth and add-on acquisitions, even if it makes them cash flow-negative “for a few quarters.”

The CFO seems uneasy with this strategy, and you start to worry about their next few earnings releases.

12 PM – 1 PM: Meet with a Sector Head and the PM for lunch and go over your findings from the morning.

They both want to sell the entire position in the software company immediately to cut their losses, but you argue for a longer-term hold and think the stock still has room to rise if held for a few years.

1 PM – 3 PM: You skim through 10-Ks, 10-Qs, investor presentations, and earnings call transcripts for another potential idea: a manufacturing company with an aerospace & defense focus.

Another Analyst thought the company might be undervalued due to a few negative safety reports on new Airbus and Boeing models, but you do not see it.

But you think it might be worthwhile to visit a few suppliers and customers to check the on-the-ground situation, so you ask your assistant to arrange it.

3 PM – 5 PM: You go back to your final company of the day: a healthcare company that operates nursing homes.

Your fund hasn’t yet invested, but the PM is very bullish because of long-term demographic trends.

This company’s few earnings calls have been all over the place, though, and it’s extremely volatile for a healthcare stock.

You add more detail to the quarters and add two more scenarios to the revenue and expense build to see how it changes your views.

5 PM – 6 PM: After the markets have closed, news breaks that several executives at that software company from earlier in the day are “staging a coup” to remove the CEO because they don’t like his growth-at-all-costs strategy.

The PM and Sector Head immediately summon you for a heated debate about what to do.

You no longer have as much conviction in your long-term investment thesis, so they decide to sell off a portion of the firm’s stake.

6 PM – 8 PM: You start updating your models for this company to see how bad things could get in a “worst-case scenario,” and you realize the PM is probably right.

You finish up and head home.

This day was around 12 hours, which is fairly standard.

The time split between working on new ideas vs. existing positions varies based on the fund type and your seniority, but it’s fair to say that:

  1. When you first start, you’ll spend more time validating other peoples’ ideas; this will shift as you pitch your ideas and take ownership of them as the fund invests.
  2. After you’ve been there a while, it will probably be closer to a 50 / 50 split between new ideas and existing positions.

Hedge Fund Analyst Hours and Lifestyle

At smaller, single-manager funds, the average might be 10-12 hours per day, for a total of 50-60 hours per week (weekend work is rare).

As you move to larger, multi-manager funds, the hours and stress get worse, so the average may be more like 60-70 hours per week.

It’s still far from a 9-to-5 job, but you have a lifestyle advantage over bankers and private equity professionals because your hours are more stable and don’t depend on deal activity.

Even if there’s an “emergency,” as in the story above, usually it just means that you’ll stay at work a bit later.

Travel tends to be less frequent than in most IB/PE roles, but it does happen as part of the due diligence process and in initial idea generation.

Hedge Fund Analyst Salary (and Bonus) Levels

Hedge fund salaries vary a lot based on the fund size, type, strategy, annual performance, and other factors.

The most likely range for total compensation at the Analyst level is $200K to $600K USD.

Yes, I am intentionally using a wide range because of all those factors above.

Base salaries start at $100K to $150K, and your bonus could be a multiple of that salary… or a fraction of it, depending on performance.

The average pay is comparable to what you’d earn by going into private equity right after banking, but the standard deviation is much higher.

Why Become an Analyst?

As with most finance roles, the money is an obvious draw: few 25-year-olds in the world earn $300K or $400K per year.

And as you advance, the pay only increases, with Partners and PMs often earning into the millions.

You also get to be more creative and independent than in most sell-side and “deal” roles, and you’ll be able to study different fields and learn new things every day.

And you’ll be around smart, ambitious, somewhat quirky people all the time.

Unlike private equity and investment banking, most people do not “fall into” hedge fund roles.

Instead, they break in because they’re passionate about the markets and investing, they’ve invested independently for a long time, and they think of investing like a sport.

Recruiting: How to Become a Hedge Fund Analyst

We have a comprehensive article on hedge fund recruiting, so you should review that for all the details.

At a high level, you need a background in investment banking, equity research, or asset management to have a decent shot at most non-quant hedge funds.

Sometimes sales & trading professionals, management consultants, and fresh university graduates win these roles, but the IB, ER, and AM paths are more common.

An MBA rarely helps, the CFA may be marginally helpful, and other degrees and certifications are not even worth mentioning here.

You will have to do a lot of legwork – researching funds, networking with junior employees, and creating and presenting your investment pitches – independently because most recruiting is off-cycle.

The good news is that you don’t necessarily need a highly specific background in the same way you do for most private equity recruiting.

The bad news is that you’re still extremely unlikely to break in from a completely unrelated field, such as marketing or non-profits or medicine.

Also, even if you have a closely aligned background (IB, ER, or AM), you’ll have to be far more aggressive in your networking.

How to Succeed and Get Promoted

The next official level after Analyst is Senior Analyst or Sector Head, and after that, it’s Portfolio Manager.

At hedge funds with only a few PMs, it can be very difficult to get promoted because existing PMs have no incentive to leave.

Internal promotions tend to happen when an existing PM is fired, leaves the industry, or quits to start his/her own hedge fund.

You have a higher chance of promotion at large multi-manager funds because they operate more like “companies” rather than “practices,” and they groom people to become PMs.

Another promotion option is to switch funds and move from a bigger one to a smaller one, especially if that smaller one is looking to grow or develop a new team.

To advance with any of these methods, you need a track record of great investment results over many years.

What’s less obvious is that you need more than just investing prowess because the Portfolio Manager role is fundamentally different from the Analyst one.

These skills are also critical:

  • People Management – You will be in charge of Analysts and other staff in your group, so you must be able to resolve interpersonal conflicts, set the team’s direction, and recruit effectively.
  • Risk Management – You need to understand risk not just for individual positions, as Analysts do, but also for the entire portfolio and how you can hedge these risks.
  • Big Picture Understanding – Going along with the point above, you must be able to accept or reject ideas not just based on their merits, but also based on their fit with the rest of the portfolio.
  • Marketing and Capital Raising – You will also have to spend time on marketing the fund and building relationships with new and existing Limited Partners (LPs), so you must like some amount of “schmoozing” and show an aptitude for it.

Many Analysts don’t want to become PMs because they enjoy the investment process, but not the marketing and management responsibilities.

The good news is that unlike in banking, it’s not an “up or out” culture: you could stay in the same Analyst role for years and years as long as you perform well.

The hedge fund has no reason to fire or replace you as long as you’re making money.

Your title might not change, but you will earn more and gain more responsibilities over time.

The Hedge Fund Analyst Job: Right for You?

If you have to ask this question, then the answer is simple: no.

With roles such as investment banking, corporate development, and private equity, there’s no way to “test the waters” unless you do an internship or take a full-time role first.

You can’t just spend a few hours on the weekend casually putting together an M&A deal.

With hedge funds, though, it is very feasible to do much of the job from home because it involves research, modeling, and following companies.

So, by the time you graduate from university, you should have a good idea of whether or not it’s for you.

Are you constantly reading about the financial markets? Do you research companies and other assets and make investments in your spare time?

Do you procrastinate by trading, and do you participate in investment clubs and competitions?

And would you like to spend most of your working hours on these tasks?

If so, then the Hedge Fund Analyst role might be perfect for you.

If not, get back to thinking about other exit opportunities.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. General question for HF on the job modeling and even case studies, is it a standard practice to model the GAAP numbers as presented or is it a better practice to use 8-k non-GAAP figures?

    1. We always start with the GAAP numbers and then sometimes make adjustments from there. But it’s really hard to answer this question because it depends on what the adjustments here… if there’s a one-time Goodwill Impairment that only occurred once in the past 10-15 years, sure, you can add that back. But if the company is doing nonsense with metrics like “Community Adjusted EBITDA” (WeWork), you should ignore the adjustments and go with GAAP numbers.

  2. Which parts of this article are relevant for quant/data analyst roles at a hedge fund?

    1. This article is for non-quant roles. Quant funds are different because there are more different roles (Quants and Programmers in addition to PMs and Analysts and Traders).

      But, if you consider those types of roles plus standard Analyst ones at quant funds, I’d say the salary + bonus range and hours/lifestyle are still accurate, as are the paths to advancement. The main difference is that the day-to-day tasks differ quite a bit because you’re not really researching individual companies or current positions, but rather researching new quant strategies, seeing how existing ones perform, and then tweaking and updating them. So it’s much more of a macro view involving math and stats and not a micro view down to interpreting the CEO’s comments on a call.

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