To get some additional insight on hedge fund jobs, we spoke with Richard Wilson, a hedge fund consultant, author of two books on hedge funds, The Hedge Fund Blog Book and Rainmaker, and the founder and publisher of one of the most visited websites covering the hedge fund industry.
Richard and four other professionals have also established the CHA Designation. The CHA Designation is the only certification program designed exclusively for professionals who work in the hedge fund industry or for wealth management and service providers who would like a better understanding in order to serve hedge funds as clients.
We caught up with Richard recently to get his views on the industry and the prospects for those seeking hedge fund jobs.
What is your professional background?
I went to Oregon State University for my undergrad degree in business. I helped a European currency foreign exchange hedge fund out of Germany and Denmark do leading indicator trading research. That was my first experience in the industry, while I was still in college, working for them on a part-time basis.
When I was done with that degree, I attended the University of Portland, and earned an MBA in finance. At that point, I was working for a risk consulting firm. So we reviewed risk processes for a variety of different groups, and analyzed their risk controls and what they had in place. That helped me later on when I was working with hedge fund managers. Basically, a hedge fund manager is just managing risk. Many times, people make the mistake of shooting for 20%+ returns. When a shrewd investor sees that they often ask, at what risk did you get that return? Are we going to get hammered the next time you try to take the same risk?
After that, my other experience was in capital raising. I helped raise capital from institutional investors, for a South African fund of hedge funds. And I also worked for a consulting firm for several years that provides outsourced marketing to investment managers, including fund of funds and hedge funds. Our pitch to clients was basically, “We have years of marketing experience. We have thousands of contacts with investors. Don’t hire a marketing professional. Hire our firm, and you can outsource your entire marketing department to us.” Hedge fund managers are so busy, they’re always trading, meeting with their traders and focusing on operations. It’s difficult for them to find the time to do the marketing work.
What changes have you seen in the job market for hedge fund professionals?
Many hedge funds that were expanding, as recently as two or three months ago, including large groups like Citadel, but also small groups in the $20 to $50 million range, are now waiting to see what happens because their performance is slightly negative and they’re not sure how that’s going to affect their marketing.
A lot of funds are still outperforming the average fund, but many are wondering, with the new presidential administration, and the SEC probably taking action after such a large retraction, how some new regulations might hinder the industry from growing as quickly as it in the past. I think a lot of people are playing the wait-and-see game, both with their money, in terms of allocating the cash, but also in terms of allocating to new positions. The only exception to that is probably in the marketing and sales area. There are some hedge funds which have positive performance and so they are optimistic about what that is going to do for their marketing. They are very hungry to bring on new marketing and sales professionals to take advantage of their track record and really get the word out.
What sort of background do you need for a hedge fund marketing job?
Generally if a firm is hiring for hedge fund marketing jobs, they want you to have hedge fund marketing experience. Sometimes people are willing to take on somebody who’s green to the financial industry and move them up the learning curve. But it’s not too common, and you won’t be paid nearly as much, because you’ll need to get your security exams and have your license in place. You need to learn the lingo and how everything works. It takes six months to get you productive instead of two months, if you’ve already been in the industry.
Even if you are working in a marketing function, do you still need to be licensed?
It depends if you’re working for an external marketing firm, which is quite common today, or if you’re working inside a hedge fund. Some funds and consulting companies that work in the marketing space are more strict about that than others. It comes up fairly often as part of the job interview discussion and it can be a barrier to entry for some folks.
To be licensed, you have to be sponsored by a broker/dealer. So it’s kind of a Catch 22 in terms of having to get licensed but not having a job yet. A lot of times you have to wait until you get hired.
Is this still a good time to be looking for a job in hedge funds?
I think if you really want to work in the industry then it’s always a good time. And you should be working as hard as you can. If you’re passionate about it, you should never stop. And if you’re not that passionate about it, then maybe you shouldn’t even try in the first place. It’s really competitive, and the first two or three years will probably be relatively tough in terms of compensation and trying to find positions.
There are people who say, “I want to work in the hedge fund industry. Period.” They identify the 2-3 positions they are most interested in. Then they commit to contacting 100 firms that offer those types of services or strategies. These people will probably get a job. It’s always a good time if you’re really passionate and really want to get in.
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