When one thinks of a hedge fund job, the more high profile and exciting positions such as portfolio manager or research associate come to mind. After all, these are the people developing the big investment decisions that can lead to multi-million dollar profits.
Yet as we’ve noted in this blog, finding or moving into one of these positions requires exceptional investment skill and knowledge, great personal connections and probably years of experience in the hedge fund industry.
There are, however, a variety of jobs within hedge funds that play a supporting role to the “front office” investment professionals. Every hedge fund requires a host of support people to process trades, manage the financial aspects of investments, and handle other operations such as accounting, recordkeeping, human relations, marketing and investor relations.
Given that most hedge funds are smaller than private equity firms or investment banks, there’s often less infrastructure to support these functions. Sometimes a partner in the firm will take on the added responsibility of managing these operations with a small group of support staff.
As a hedge fund grows in assets, it can afford to more hire specialists to take on these functions, such as accounting professionals, who ensure that all trades are well documented and settled correctly. An entry-level position in the accounting department could eventually lead up the ladder to a supervisory position such as controller or even chief financial officer for the firm.
Even small hedge funds that are limited in support staff understand the need to hire experienced professionals to handle accounting and compliance tasks. The demand for these skills continues to be strong and can provide compensation in the low six figures and up.
Other back office positions that hedge funds need include: 1) risk management – working out a hedge fund’s risk exposure and keeping the principals in the firm apprised; 2) quantitative software developers and IT experts, who help develop sophisticated proprietary trading systems; 3) marketing professionals, who identify potential new investors for the firm and bring in new capital; 4) investor relations staff, who build and maintain relationships with the firm’s investors, and keep them informed through written and personal communications.
It’s worth noting that the marketing role within hedge funds has turned into an industry of its own, with many firms today making arrangements with unaffiliated third-party marketers to source new investors and manage these relationships.
The Case Against Back Office Jobs
While some people may think that working in a back office role may be a good way to get your foot in the door of a hedge fund firm, and work your way up, others caution that this approach doesn’t often work out.
The skills required to research securities and markets in-depth, develop and demonstrate investment expertise necessary to be a part of the firm’s investment team are quite different. Some experts suggest it would be better to work as a trader or work for a small boutique fund as an analyst rather than aim for a support role in a larger firm.
Next time, we’ll look at some back-office jobs and their specific responsibilities.