Let’s begin by saying that no one should be discouraged from pursuing an MBA. However, it is important that one is clear on the motive for doing so. If the motive is to fast track employment with a hedge fund, one might be in for disappointment.

Some Harsh Facts

According to the 2018 Hedge Fund Compensation Report, just 4 percent of MBAs enter the hedge fund industry right out of school. That percentage is equivalent to those entering from public accounting and broker/dealer backgrounds. Conversely, 14 percent enter the hedge fund industry from asset management, 12 percent enter from student backgrounds other than an MBA, 11 percent enter the industry from the sell side, and 9 percent enter from investment banking backgrounds.

What Does This Tell Us?

The take-away is this—experience is what matters. The great majority of hedge fund firms are small organizations with few employees, consisting in many instances, of a portfolio manager and a few analysts. This model is replicated in many large hedge fund firms, with multiple portfolio managers and analysts, each responsible for their own portfolios. The common denominator for firms, small and large, is the need to generate positive returns.

Small hedge funds do not have the resources, the time, or the inclination to train those they hire into the firm. Most large firms, because they are comprised of multiple, small groups, have a similar view. Rather, they choose to bring in candidates with a proven record and experience in their given role.

This is not opinion, but is in fact supported by data, as evidenced in the aforementioned 2018 Hedge Fund Compensation Report. The chart below illustrates the responses of hundreds of working hedge fund professionals on the subject of in-house training.



Fifty-six percent of the respondents identify their firm’s training as weak or non-existent, while a paltry 3 percent report an excellent training program. When you consider that the response of “average” mirrors an industry in which training is weak at best and non-existent at worst, then more than 8 of 10 hedge fund professionals must rely on the skills and experience they bring to the job to ensure their success and the success of the firm.

What about Hedge Fund Jobs?

Advanced degrees, such as the MBA, are no guarantee of a hedge fund job offer. Experience is far more important in securing a position in the industry. That, and a proven record of accomplishment in one’s area of expertise, will almost certainly be the greatest factors in securing a position in a hedge fund firm.

This does not mean that an MBA is unhelpful. In fact, the 2018 Hedge Fund Compensation Report makes it clear that MBAs earned about 18 percent more in base pay than non-MBA peers did. More to the point, in terms of total compensation, non-MBAs earned just 75 percent of the total take-home earned by MBAs.

So, while there are many valid reasons to take an MBA, increasing your opportunity to secure a hedge fund job is not among them.

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February appears to mark the end of 14 consecutive months of positive gains for the hedge fund industry, with HFRX weighted average returns posting a decline (- 0.35 percent) as the surge in market volatility worked its worst in hedge funds.

While the HFRX is much narrower in its scope than the HFRI, which comprises thousands of funds, it is unlikely that the HFRI, when released, will produce a positive number for the industry.

Performance Aside

Neither performance, assets under management or fee pressures will deter hedge funds from recruiting candidates with a great skill-set in mathematics and the hard-sciences, particularly engineers and developers. Quantitative skills are in demand, and while they will not guarantee a job, such attributes will put these job seekers at the front of the queue.

Demand for quantitative traders and analysts are on the rise. This is equally true for programmers experienced in MattLab, SQL, Java, Hadoop, Q, kdb+, C#, C++, HTML5, Python and other programming languages.

Additionally, a number of fundamental hedge funds are moving in a “quantamental” direction, hiring data scientists from academia and Silicon Valley, to better evolve with the times. This includes recruiting those experienced in not only data science, but also artificial intelligence, machine learning and other disciplines with a quantitative bent, to aid portfolio managers in making better investment decisions.


However, having the bona fides enumerated earlier, does not guarantee a successful placement in the hedge fund industry, or any other industry. Other attributes are also important, such as communication skills, interpersonal skills and overall intelligence.

Other Disciplines

The evolving nature of the hedge fund industry gives rise to opportunities for those who excel in a wide variety of endeavors. For example, the recent passage of the Tax Cuts and Jobs Act of 2017 may create opportunities for those in the legal profession. Extraordinary geopolitical events could lead to employment opportunities for those skilled in geopolitics, political science, and world history.

The variety of educational and employment backgrounds that already exist in the hedge fund industry are astounding. One need look no further than the 2018 Hedge Fund Compensation Report to see the myriad backgrounds from which hedge fund professionals originate.

The Takeaway

Hedge funds, which are known for innovation and evolution, are not merely a home for stock pickers and number crunchers. Successful hedge funds rely upon a host of experts in a variety of disciplines to achieve successful outcomes for their investors.

As the chart demonstrates, hedge fund professionals join the industry from technology, the law, public accounting, consulting, research, and many other fields. When you contemplate the existence of around 10,000 hedge funds employing many more thousands of people, it is not difficult to see the wealth of employment opportunities that exist in the hedge fund industry.

Anyone interested in a hedge fund job should carefully consider the juxtaposition of his or her skill set to a job in a hedge fund firm. It may require a degree of imagination, but that is what the hedge fund industry is all about.

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What Do You Think About the S&P 500 as a Benchmark Now?

February 19, 2018

The January 2018 results for aggregate hedge fund performance have been published. According to HFR, the industry showed a 2.8 percent gain. In contrast, the S&P 500 gained 5.7 percent in January before plummeting in the wake of February’s correction. Year-to-date gains for the S&P 500 as of February 16 stood at 2.19 percent, 61 […]

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The Patriots and the Markets Suffer a Devastating Loss

February 5, 2018

The hedge fund industry is off to a stellar start in 2018, as HFR reports. Average hedge fund gains of 2.45 percent, a January monthly performance record unmatched since 2006, were achieved. While this is, unquestionably, an auspicious beginning, we must remember that past performance is no guarantor of future success. What Happened Next? Post […]

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How Happy Will You Be in Your Hedge Fund Job?

January 22, 2018

One sees the adjective happy, in daily use, in many contexts. It may characterize a feeling, causing a sense of satisfaction, a willingness to perform a task, an unexpected pleasure, a greeting, and even a description of slight intoxication. The connotation most appropriate to describing one’s job in the hedge fund industry encompasses all these, […]

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What Did 2017 Hedge Fund Performance Do for Compensation?

January 8, 2018

Hedge funds begin a new year on the heels of a performance record  not matched since 2013. Gains will undoubtedly reach 8 percent or better, and assets under management stand at an all-time high. While these statistics are inspiring, the question on the lips of the aspiring hedge fund professional is what does this mean […]

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Hedge Fund 2017 Results Hold Promise for a Better 2018

December 25, 2017

It is not possible to allow 2017 to pass into history without acknowledging the achievements the hedge fund industry has made during the year. First, hedge funds made positive gains for investors in each month of 2017. Gains, year-to-date, stand at around 7.5 percent. Of course, December’s results are not final, but almost no one […]

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