What Career Paths Lead to a Job in the Hedge Fund Industry?

Contrary to popular opinion, earning an MBA will not necessarily earn you a spot in the hedge fund industry. According to the 2017 Hedge Fund Compensation Report, just 4 percent of those surveyed were hired by a hedge fund as students graduating with an MBA.

This is not to minimize the value of an MBA in the industry. In fact, the report revealed significant salary advantages for MBA holders, with MBAs earning about 17 percent more than non-MBA peers in terms of base pay. The size of an MBA’s bonus also exceeded his non-MBA peers, in some instances by 73 percent!

However, the MBA cannot be realistically portrayed as a path to a job in hedge funds.

What Is the Path?

While there is no single answer to this question, one thing is clear; experience is a major factor in landing a hedge fund job. Those with investment banking, asset management and sell-side experience accounted for 35 percent of the hedge fund professionals participating in the survey. In short, experience seems to trump the MBA.

While it is demonstrably true that experience in investment banking, asset management and the sell-side will increase your odds of securing a position in a hedge fund firm, the actual appeal of the hedge fund industry is the extensive variety of backgrounds that enjoy the opportunity to make it into the industry.

The report referenced earlier demonstrates that people enter the hedge fund industry from a wide variety of backgrounds, including proprietary trading, public accounting, information technology, management consulting and a host of other fields—including the legal profession.

One may correctly infer that the hedge fund industry is open to applicants with diverse backgrounds, and, while it is true that certain backgrounds are more likely to result in hedge fund employment, the possibility of work in the industry is open to all.

The Internal Career Path

Hedge funds are shining examples of meritocracy. Experience, successful experience, is the key to advancement within the hedge fund firm. For example, if you are successful at landing a position as an analyst, it will take around three to five years to become a senior analyst. To reach the level of portfolio manager will require, on average, another three to ten years…if the opportunity presents itself.

This period is fairly well established in large-sized hedge fund firms, but less so in small to medium-sized firms. Consider acquiring a CFA to accelerate the path to portfolio manager.

Hedge Fund Jobs

The competition for hedge fund jobs is fierce. For those a couple of years out of college, recruiters, job boards and, most critically, the ability to shine in the interview process are the shortest road to a junior role in a hedge fund. Go to your interview focused on developing long and short ideas. Demonstrate industry knowledge and, of course, an understanding of what is happening in the markets.

Hedge funds are packed with alums, so any failure to tap that networking resource will be to one’s detriment. This is especially true for MBAs.

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