What Does an Analyst Do and What Do They Earn?

Although there are more than a few avenues leading to a job in the hedge fund industry, it can be argued that an analyst’s position is a typical entry-level position. Make no mistake; although the term entry-level often connotes the absence of a need for skills, education, prior experience or other attributes, this is not the usual scenario for an entry-level position in the hedge fund industry.

What They Do

An analyst is responsible for evaluating company financials, bonds, commodities, real estate, currencies and hard assets in the context of current (and future) economic and market conditions to ascertain their suitability as an investment in the hedge fund with a perspective to the fund’s strategy.

This requires the ability to analyze financial statements and prepare financial models to facilitate risk evaluation and alignment with a particular investment strategy.

What Are the Prerequisites?

The disciplines most valued are in the areas of accounting, economics, mathematics and statistics. It should be said that although there is a strong preference for these educational backgrounds, nothing is etched in stone. That said, aspiring analysts must demonstrate the ability to research, analyze and evaluate. The analyst must also possess excellent communication skills, an ability to work under pressure, meet deadlines, and multi-task in a fast-paced work environment. This requires a high degree of self-confidence, personal initiative and tenacity.

Apart from strong mathematical proficiency and quantitative skills, prospective applicants must be able to work effectively in a team environment. Analysts must also demonstrate flexibility and an innovative spark coupled with an interest in current affairs and insights on their impact on the markets. Equally important is a demonstrated commitment to further study, the pursuit of additional formal qualifications and a global mindset.

Clearly, computer literacy is essential, especially with respect to Excel, which is required for financial modeling and projection work.

Small vs. Large Hedge funds

Small hedge funds, generally speaking, seek candidates with broad knowledge bases. Large hedge funds are much more likely to seek a candidate with an industry specific or regional knowledge base. One example would be a knowledge base specific to the pharmaceutical industry.

What They Earn

According to the 2017 Hedge Fund Compensation Report, analysts in hedge firms with assets under management (AUM) of less than $100 million, earn a mean base pay of $110 thousand annually. In contrast, analysts in firms with an AUM greater than $1 billion earn a mean base pay of $157 thousand. The report also reveals mean bonus pay of $62 thousand in small firms as compared to mean bonus pay of $176 thousand in the larger firms.

Analysts are also going to earn a great deal of unpaid overtime, untold hours of telephone calls, endless meetings and inescapable amounts travel time in the bargain! These are the elements necessary for success.

For those willing to make the needed sacrifices, a hedge fund career can be extremely rewarding, which is doubtless the reason for the incredible level of competition encountered by anyone pursuing a job in the hedge fund industry.

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