While it may be true that fewer MBA holders are entering the hedge fund industry, it is certainly true that recent headlines suggesting that these students “scorn” hedge funds or that fewer MBAs “want to work” for a hedge fund border on fiction.
Here Are the Facts
The articles referenced above are inspired by Training The Street’s (TTS) seventh annual MBA Employment Survey, which encompasses 293 first and second-year student respondents. This is not a large sample. Therefore, it is not unreasonable to assume a margin of error in the 2 percent to 3 percent range.
In last year’s survey, 4.9 percent of participating students aspired to a hedge fund job. This year’s survey saw that drop—to 4.78 percent. This is a 2.45 percent year-over-year decrease, but, when the margin of error is taken into account, the significance of this statistic diminishes. To interpret this statistic as evidence of MBA scorn for hedge funds or being indicative of fewer MBAs wanting to work in the industry strains credibility.
Additionally, 3 percent fewer survey respondents reported being the subject of hedge fund recruitment efforts. This is a more defensible case for any decline than is scorn for, or lack of interest in, the hedge fund industry.
An Honest Take on the Survey
There has been no statistically significant movement in the percentage of MBA students who have expressed an interest in pursuing a hedge fund career, and, therefore, no basis in TTS’s MBA Employment Survey to support the negative tone of the headlines referenced above.
Scott Rostan, Training The Street’s founder and CEO, said it best, “While positions at hedge funds, private equity firms, and to some extent startups, are highly coveted job posts, they are only available to a select few MBAs. Job seekers understand this reality and are focusing their job search on more readily available positions in banks and consulting firms.”
It is fair to say that “scorn” is NOT a factor. It is also apparent that students are placing the need for employment ahead of what they may “want” in a job.
Hedge Fund Compensation
While Mr. Rustan is dead-on with regard to hedge fund selectivity, it would behoove any MBA student aspiring to a hedge fund career to bone-up on the earnings potential an MBA enjoys in the industry. According to the 2016 Hedge Fund Compensation Report, hedge fund employees with an MBA enjoyed a mean base pay of almost $186,000 and a mean bonus check approaching $270,000 for total mean earnings of around $456,000 annually.
To put this in perspective, 16 percent of the MBAs surveyed by TTS earned between $76,000 and $99,000, while thirty-six percent fell into the $100,000-$124,000 tier. Only 40 percent can boast an annual base salary exceeding $124,000.
Hedge Fund Jobs
Employment in the hedge fund profession can be a lucrative proposition, especially for individuals holding an MBA.
Prudent investors perform their due diligence on all investment prospects. They do not rely on headlines, tips and biased reporting. A student is also making an investment when deciding the direction in which he will take his career. Make no mistake—this investment deserves the same due diligence.