Hedge Fund Search Digest
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Tips for Working with Recruiters
Recruiters can be a valuable resource for you, and not only for jobs. Top recruiters can often provide insights about where you are in your career path, your compensation levels, and how to address conflicts or challenges within a firm. They have met with and interviewed hundreds of hedge fund professionals and have a wealth of information to share.
But keep in mind a recruiter is not your personal agent. Their first responsibility is to the firm looking to hire. Some recruiters may be more aggressive than others in putting forward your credentials. But they are primarily looking to place someone in that position, and you may be one of several names they have put forward. Here are a few other tips to improve your results when working with recruiters:
1) Establish relationships with recruiters early in your career. Do the research and identify 1-2 top recruiters to work with and approach them before your job hunt begins. That way you will have laid the groundwork should you ever need their services.
2) Always be courteous and professional when a headhunter calls. Take their calls and spend a few minutes hearing what they have to say. If the position does not fit your career aspirations or background, let them know. Better yet, refer them to others who may be interested in the position. The recruiter will remember the gesture and keep you on their list of people to call.
3) Be a good listener. Chances are the recruiter knows more about the potential employer than you do, may have even placed people at the firm before. A good recruiter will be able to coach you on how to present yourself in a specific situation.
4) Set expectation levels. How often should you check back with the recruiter? Will they contact you if you’re a candidate for a particular job?
5) Provide feedback to the recruiter. If the position is not appropriate for your situation, explain why. If you go on an interview set up by the recruiter, be sure to report back on how it went and why. Share any useful information you may have learned about the company. In addition, a good recruiter should also be able to give you feedback after speaking with their client on how it went from the employer’s perspective.
If you are interviewing elsewhere or considering other job offers, let the recruiter know. The recruiter may share this information with their client and this could speed up the decision making process.
Hedge fund recruiters play a key role in the job search process. As you gain experience in the industry and move up the career ladder, chances are a recruiter will be part of your successful hedge fund job search.
References:
Job Search Digest interviews with Hedge Fund Recruiters – See Alpha Calling categories
No Comments » 
Jul 8th, 2009
Working with Hedge Fund Recruiters
In addition to using online job sites and personal networking, another resource that will pay off in your hedge fund job search is working with executive recruiters. The best recruiters know people at many of the top hedge funds and often hear about job opportunities that are not revealed publicly.
Cultivate relationships with one or two highly competent recruiters early in your hedge fund career, and maintain these relationships even if you’re not actively looking for a job.
Instead of waiting to get a call from a headhunter, be proactive and actively research, qualify and approach recruiters with the best reputations. Ask friends, relatives and business colleagues for their recommendations. Check out industry associations for recruiters who are members, and see whether the association itself has any formal relationship with recruitment firms. Check out the top recruiters’ profiles on their web pages and LinkedIn or Facebook pages. Then approach them as carefully as you would approach a prospective employer.
You will also meet recruiters by being visible in your industry. They will notice you from articles you’ve written, postings on blogs, and participation in industry events and networking groups.
Keep in mind there are two types of recruiters: retained and contingency. Some recruiters are retained by a firm to fill an open position and paid a set fee for the placement. Others work on contingency, meaning they only get paid if they happen to find the right candidate who is eventually hired. They receive a percentage of the salary paid to the new hire as their fee.
Both types of recruiters are interested in finding a candidate who fits the specific criteria set out by the hiring firm. They will turn to their existing database of candidates first. Some may work their network of people who are currently working in the hedge fund industry, to see if they can lure them to a new firm. Last on the food chain would be newcomers approaching them with their resumes.
Nevertheless, try to meet in person with the recruiter so you can both get an idea of the chemistry and whether you can work together. A face-to-face meeting also gives the recruiter an idea of your personality and ability to present yourself, something that can overcome limitations in your experience or the lack of a “brand name” school or company on your resume. Don’t be surprised if the interview moves beyond typical questions about your work experience or goals and explores your personal background, why you are interested in finance, early influences, and more.
Be sure to share information about where else you’ve interviewed and other jobs you’re applying for. Recruiters probably know people at these organizations. If your interview went well at one particular firm, they probably know other firms with similar people and culture.
You need to interview the recruiter as well. How long has he or she specialized in the hedge fund industry? What type of firms does he have as clients?
Next time, we’ll look at some tips for working more effectively with hedge fund recruiters.
No Comments » Jul 6th, 2009
Networking within the Hedge Fund Industry
Informational interviews are another excellent way to expand your network and uncover hidden opportunities. Research and identify a dozen or more prime brokerage firms, fund administrators and at least 30 hedge fund analysts or portfolio managers to contact. Make sure your resume is airtight and your personal introduction is down pat. You will want to call each of these professionals, introduce yourself, and ask for a few minutes of their time and advice on their experience in getting into the industry and their firm.
It’s a numbers game. You may only get one meeting for 20 or 30 calls. But if you can parlay that one informational interview into referrals to other professionals in the industry, and so on, you can gradually build an outstanding network.
Finally, research and attend industry events such as MARHedge and others.
You never stop networking when you are in the hedge fund industry. Constantly expanding your network of professional connections is both a good strategy for breaking into the industry and being successful throughout your career.
Here are some other resources that can help you network better:
Alternative Investment News www.ialternatives.com
Hedge Fund Alert www.hedgefundalert.com
Hedge Fund News www.hedgefundnews.com
Hedgeworld www.hedgeworld.com
Hedge Fund Center www.hedgefundcenter.com
The Hedge Fund association www.thehfa.org
Hedge Fund Research www.hfr.com
Hedge Fund Intelligence www.hedgefundintelligence.com
CSFB/Tremond Hedge Fund Index www.hedgeindex.com
No Comments » Jul 1st, 2009
Networking for a Hedge Fund Job
If there was ever an industry where “who you know” matters as much as what you know, hedge funds would be it. In addition to a passion and track record in investing and a stellar resume, you’ll need a solid network of contacts to uncover that elusive hedge fund job.
Start with your personal contacts, of course: friends, family members, classmates and colleagues who may know people in the hedge fund industry. You’ll expand on this by joining online networking sites such as LinkedIn, joining investment groups and participating in online discussions. Get involved in a few industry blogs, such as Alpha Calling here at JobSearchDigest, and post comments whenever appropriate.
Your online efforts can pay off handsomely. We know of one professional who has parlayed his blog on the hedge fund industry into an active consulting practice and a hedge fund training organization. He did it through his passion for the industry, research, and providing relevant articles that provided more education than other hedge fund blogs.
Be sure to exploit the alumni network at your business and undergraduate schools. It’s possible that they have alumni that work in hedge funds, and the common bond of schools can potentially open doors for you. In addition, many top business schools put on networking events during the year and invite hedge fund professionals to speak at them.
Join investment and hedge fund clubs and associations. A quick web search reveals there are hedge fund clubs serving various regions of the world, such as the Asian Hedge Funds Club, clubs formed by alumni, such as The Wharton Hedge Fund Network (WHFN), and many others. The Hedge Funds Network for example, is a networking group of over 10,000 professionals currently managing hedge funds and alternative investments.
Next time we’ll look at other ways to expand your network and resources you can use.
No Comments » Jun 29th, 2009
Negotiating Hedge Fund Job Compensation
When you are finally offered a position at a hedge fund, whether it’s entry level or beyond, you have to look beyond salary and decide what other compensation you want as part of your package. This can include signing bonus, health and dental insurance, paid vacations, paid sick leave, retirement or 401k plans, tuition reimbursement, even things like flextime or remote work options. Have a complete picture of what you hope for.
When you go in to negotiate (and it’s always best to do it in person, where you can read the other person’s body language and respond immediately), talk in terms of what you can do for their firm. Quantify your skills if possible. Talk about the contributions you have made elsewhere, the performance you’ve achieved, awards and other recognitions and how you can bring that achievement to their firm.
Never be afraid to ask for something. Employers are prepared to negotiate, and often feel more comfortable hiring someone who knows his or her professional worth. And while entry-level jobs may be more restrictive on salary range, there are many other perks and benefits, from signing bonuses to an early salary review, that can be negotiated upfront. There is no harm in asking, and they will respect you for a thorough approach.
Negotiating your compensation should be a win-win situation. You are trying to find common ground where you both feel like you are getting maximum benefit from the arrangement. Keeping things positive and you can move forward towards starting your hedge fund job, even if you have to give up a concession or two.
It helps to negotiate from a position of strength. Knowledge about the market and compensation for similar jobs is one way. Whoever can walk away from the table also is in a strong position. If you have more than one offer at the same time this obviously gives you a tremendous bargaining position. You are able to mention that you are comparing compensation plans from both. Of course, this must be done diplomatically. You may want to indicate that you would prefer one firm if they could match the compensation offered by another.
Finally, when you have an agreement on salary and compensation, always get the offer in writing. Follow up with a letter to your employer mentioning how enthusiastic you are about working for them, when you are beginning your job, at what salary, and summarize all the other benefits you talked about. It’s crucial that you get it all in writing soon after finishing the discussion.
Keep in mind that this is an ongoing process. After you have worked at the firm for a year or longer, you will be thinking about negotiating for increased compensation. So if you truly want to work for a particular hedge fund, view your initial negotiations as the beginning, not the end, of an ongoing process.
References:
No Comments » Jun 24th, 2009
Salary Negotiations - Hedge Fund Jobs
If there’s one thing that makes people uncomfortable, it’s setting a value for what they think their skills are worth, and negotiating compensation with a new employer. In the hedge fund world, this task is even tougher given the wide range of jobs and salaries in the industry. Nevertheless, there are a number of principles that can help you do a better job at it.
First, welcome the process. If you have made it through rounds of interviews with various people throughout the firm, possibly even a presentation or case study or two, and are still seated in front of an interviewer, then you know they are interested in you. Employers want quality employees, so they expect you to know what you’re worth and to negotiate for it.
There are two critical steps you must take during the interview process. First, nearly every expert suggests avoiding any discussion of salary or compensation. By all means, don’t be the first to bring it up. If the person across the desk mentions it, deflect the topic with a polite, “we can work out the details of compensation at a later date.” Or “I’m sure my compensation package will be within the accepted range for someone with my skills and experience.” Avoid the topic entirely for now.
Whoever mentions a salary range first loses, in a sense, because they have set a firm stake in the ground that will be more difficult to move from. If you aim too high, you could disqualify yourself from the running. Aim too low, and you devalue your worth to the firm or open the door for a “low-ball” offer.
Next, you must do your research. Check out various online sources such as Job Search Digest’s annual Hedge Fund Job Compensation Survey. Take a look at the many hedge fund job listings on our site and compare salaries for jobs similar to the one you’re applying for. Create a range of salaries that represent: 1) what you’d really like to earn; 2) what you’d settle for; 3) the least amount you’d be willing to accept. Back this range up with data from job listings for people with similar skills and experience to yours.
Wait until they give you a firm offer to begin your negotiations. And above all, never, ever accept the first offer you are given. Recruiters suggest you thank them for the offer, express enthusiasm for the job and the firm and how much you’d like to work there, and ask for a few days to think it over. Most firms will gladly agree.
This gives you time to build a case for your compensation package. If you have specific skills that you’ve acquired, a successful investment track record, awards or recognitions, experience with “brand name” schools or employers, or some extra edge or unique ability such as sales, asset gathering, IT skills, or quantitative modeling, then you can build a strong case for a higher salary range.
Next time, we’ll look at how to add value to your compensation package without discussing salary.
No Comments » Jun 22nd, 2009
Trends in Hedge Fund Job Compensation
The figures from our annual Job Search Digest Compensation Survey are backed up by a corresponding survey by Alpha Magazine. In their 2009 report, Alpha notes that salaries range from $208,000 to $420,000, with bonuses starting in the hundreds of thousands of dollars and going upwards of several million.
The top earners in the industry are the stuff of legend. The 2009 Alpha Magazine Hedge Fund Compensation Report shows that several of the top-earning hedge fund managers in the world pulled in nearly $1 billion each in compensation. Making the top 10 list are:
1 James Simons Renaissance Technologies Corp. $2.5 billion
2 John Paulson Paulson & Co. $2 billion
3 John Arnold Centaurus Energy $1.5 billion
4 George Soros Soros Fund Management $1.1 billion
5 Raymond Dalio Bridgewater Associates $780 million
6 Bruce Kovner Caxton Associates $640 million
7 David Shaw D.E. Shaw & Co. $275 million
8 Stanley Druckenmiller Duquesne Capital Management $260 million
9 (tie) David Harding Winton Capital Management $250 million
9 (tie) Alan Howard Brevan Howard Asset Management $250 million
9 (tie) John Taylor Jr. FX Concepts $250 million
An Industry in Flux
It’s no secret that 2008 to early 2009 has been a tough time for hedge funds. Pay is tied to performance, and as the financial crisis took hold last year, many hedge funds experienced their worst performance in over a decade.
The credit crunch and economic downturn led to a sharp drop in assets under management, due to trading losses and massive redemptions by investors. This forced many managers to sell off assets to meet redemption calls. Many hedge funds put a freeze on redemptions, further shaking investor confidence in the hedge fund model.
According to Hedge Fund Research, a Chicago-based tracking firm, the industry lost a record 18.3% in 2008 and shrank by some $525 billion by December. The overall number of hedge funds may have dropped below 9,000. Some industry experts predict a third of the hedge funds in existence at the start of 2008 will be gone by year-end 2009.
Moving forward, the hedge fund industry will probably have fewer funds, using far less leverage than in the past, and will be forced to charge lower fees. Two and 20 (management and performance fees) may become the exception, rather than the rule.
Lower fees for the firm will put downward pressure on hedge fund job compensation. Already, Alpha’s Hedge Fund Compensation Report for 2009 shows average total compensation for all hedge fund professionals was down by 16 percent from 2008. Cash bonuses have been slashed by as much as 24 percent, and prospects for a reversal of this trend are far off on the horizon.
Nevertheless, hedge funds are, and will continue to be, a place where the best and the brightest minds in the investment world will want to compete. The broader range of investment strategies and fewer restrictions than public money managers will still draw those who believe they have a winning investment philosophy.
References:
JobSearchDigest.com
No Comments » Jun 17th, 2009
Hedge Fund Job Compensation
From the point of view of compensation, working at a hedge fund can be very attractive, to put it mildly. The traditional “2 and 20″ compensation scheme for the firm itself, meaning 2 percent annual management fees plus 20 percent of profits, enables hedge funds to pay their staff handsomely. Some very profitable hedge fund managers have taken an even larger cut of the profits. However, as we’ll discuss in a moment, the days of 2 and 20 may be drawing to a close.
In terms of individual compensation, some top-tier hedge funds have been known to pay their analysts base salaries in excess of $250,000, plus incentives for fund performance. It is not uncommon to hear of top traders making more than $500,000 a year in base salary.
The 2008 Hedge Fund Jobs Digest Compensation Report looked at salary trends in depth. The report is based on compensation data collected directly from hundreds of Portfolio Managers and employees from firms, both large and small, such as Bank of New York Mellon, Barclays Global Investors, Citigroup, Fountain Advisors LLC, HSBC, Kellogg Capital Group, Lansdowne Partners and many others.
The average cash compensation for hedge fund jobs was US$260,000 in 2008. The report reveals three primary drivers of hedge fund compensation: experience, the performance of the fund, and the size of the fund overall. Regarding fund size, bigger is not necessarily better. Although the hedge fund industry is often referred to as a meritocracy, many respondents to the survey indicated their bonus is disconnected from their individual performance and, instead based on overall firm performance.
However, the report also showed that larger funds, in the $500 million to $1 billion range generally pay the best. Small funds often struggle to reach a critical mass that allows them to cover a large salary pool.
Next time we’ll look at compensation figures for 2009, along with the stratospheric salaries earned by the world’s top hedge fund managers.
No Comments » Jun 15th, 2009
Questions to Expect in Your Hedge Fund Interview
If you are seeking a job as a trader in a hedge fund firm, you’ll be asked in-depth questions about market fundamentals, such as interest rates, the direction of the markets, what type of securities you invest in personally, and what you like and why.
Expect some behavioral questions, designed to reveal your character, judgment and how well you’ll fit in with the culture of their firm. These can range from:
-Tell me about a time when your boss was wrong in his assessment of a situation. How did you handle it?
-Tell me about a time when you worked on a team and one team member wasn’t contributing his or her fair share? How did you handle that?
-What happened when you faced more work than you could handle, how did you respond?
-What are your biggest strengths … and your biggest weaknesses?
-Have you ever broken the rules? Why?
-What are the easiest decisions for you? The hardest?
-What would your colleagues from your school or previous job say about you?
Finally, remember to prepare some questions to ask the interviewer about his firm, to show your research and interest. And finish the interview enthusiastically, repeating your interest in the firm and be sure to follow up with thank you notes or emails.
It might also be a good idea to purchase a comprehensive guide to hedge fund jobs and interviewing which contains a list of potential interview questions along with more details on the answers than we have room for here.
References:
Schwab, Claude. Hedge Me: The Insider’s Guide: U.S. Hedge Fund Careers. Lynx Media.
Davare, Aditi A and Goodrich, Holly S., Vault Career Guide to Hedge Funds
No Comments » Jun 10th, 2009
Hedge Fund Job Interview Questions
In the course of a 30-minute hedge fund job interview, you may only get a chance to answer a dozen questions. But developing a larger list of potential questions in advance, and practicing your responses, will make your answers seem that much more clear, natural and convincing.
Naturally you need to prepare answers to the basic questions about yourself, and be able to quickly introduce yourself, what you’re doing now, and walk the interviewer through the highlights on your resume. You’ll also need to answer questions such as:
-Why do you want to work in hedge funds?
-Why do you want to work for our firm in particular?
-What would you say are our firm’s strengths and weaknesses?
-What skills do you bring to our firm?
-Why do you think you’ll be successful as a hedge fund manager?
Anyone involved in hedge funds will likely have a passion or deep interest in investing and the markets. So you can expect a bunch of questions that explore your interest level and opinions, such as:
-What do you invest in?
-Do you own any stocks or do any non-work-related investing?
-What do you think of the markets in general right now?
-If you could invest in anything, anywhere in the world right now, what would that be?
You should have a thorough understanding of hedge fund investing strategies and terminology, so that you can answer technical questions such as “What is convertible arbitrage?” or “What is global macro?” Or “what is short selling?” You may also be quizzed on technical aspects of the industry, such as what is a prime broker? What role does it play? What is a 10-K report?
You may be asked a brain teaser or mathematical question in the course of the interview, to see how you respond. One classic example is known as The King’s Conundrum.
A king demands a tax of 1,000 gold sovereigns from each of 10 regions of his nation. The tax collectors for each region bring him the requested bag of gold coins at year end. An informant tells the king that one tax collector is cheating and giving coins that are consistently 10% lighter than they should be, but he does not know which collector is cheating. The king knows that each coin should weigh exactly one ounce. How can the king identify the cheat by using a weighing device exactly once?
Answer: The king should take one coin from bag one, two coins from bag two, three coins from bag three, and so on, finishing with ten coins from bag ten. Place this collection on the weighing device, and look for the discrepancy from 1+2+3+…+10 ounces. If the actual weight is .40 ounces short, for example then bag four is light, and collector four is the cheat.
(Special thanks for this interview question to Timothy Crack, author of Heard on the Street: Quantitative Questions from Wall Street Job Interviews.)
Next time, we’ll look at some other hedge fund job interview questions, especially if you’re looking for a job as a trader. Along with the best way to finish a job interview.
No Comments » Jun 8th, 2009