From the category archives:

Hedge Fund Jobs

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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Many have the preconceived notion that jobs in the hedge fund industry entail hundred hour work weeks that wear down employees in a matter of months, not years. While it is true that a small percentage of firms may have this view, it is equally true that there are multiple roles in a hedge fund operation, which offer the opposite experience.

Hedge Funds Are Like Snowflakes

Each hedge fund is unique, established in its own way. As a result, one should use caution when making generalizations. For example, the responsibilities associated with job titles can vary considerably from one firm to another. This is typically a function of the firm’s size, with smaller firms folding in higher levels of responsibility in single job title than one would see in the identical job title in a larger firm. This is why there can be widely disparate salaries when comparing job titles in small vs. large-sized firms. For this reason, smaller firms pay typically pay higher salaries and bonuses for a particular job title in the firm when compared to a larger firm. For specific examples and further clarification, read the 2017 Hedge Fund Compensation Report, which covers the topic in greater depth.

First Quarter Trends

According to the HFObserver, which tracked more than 1100 hedge fund job moves in 2017’s first quarter, Ken Griffin’s Chicago-based Citadel led the pack by hiring more than fifty staffers, while Bridgewater Associates and Balyasny Asset Management, each added between 30 and 50 new hires.

The bulk of Citadel’s hires were front-office investment roles comprised of analysts, portfolio managers and traders, with most being senior hires. Citadel’s hires ran the gamut, from conventional financial and research analysts, to analysts with strong quantitative, market data, and machine learning backgrounds and software developers.

In contrast, HFObserver reports that Millennium Management hires were weighted in favor of the usual finance and research analysts with sector-specific experience.

The Surprising Trend

The surprising trend is that there is no trend. As was said earlier, hedge funds are not snowflakes. Each hedge fund makes its personnel decisions based upon unique needs, strategies and cultures. Hedge fund managers, administrators and analysts do not share a common background. Hedge funds are acquiring staff with the skills, background, and education that best suits its unique needs.

What This Means for Jobs

Anyone looking for one of those hundred hours per week jobs can surely find one. However, there is hope for those who seek a position in a hedge fund that offers more opportunity for work/life balance.

For example, a position in administration has little to do with trading. Such positions focus on client relations, accounting, reporting and myriad other functions that keep the firm humming. Make no mistake, these positions are not easy jobs, but they are often less stressful than the work of a hedge fund manager or analyst.

The takeaway is that the hedge fund industry is wide open to a vast variety of skill sets and backgrounds. Never sell yourself short—no pun intended.

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Hedge Fund First Quarter Gains Are in the Black

April 17, 2017

Hedge funds posted an aggregate 2.3 percent gain through the first quarter, which marks the strongest start for the industry since 2013. Long/short equity strategies lead the pack with composite returns of 3.2 percent. Back to Reality At first blush, this sounds terrific but, realistically, the industry is beating a very low bar—its own performance […]

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Hedge Fund Numbers Shrink as Assets Under Management Soar

March 20, 2017

The suggestion that assets under management are soaring is admittedly a bit Trumpian, but the fact is that the number of hedge funds shrank to 9,803 (including funds of funds) while 2016 industry assets under management climbed to just over $3 trillion according to the HFR Market Microstructure Report. What Can Be Inferred From the […]

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Surprisingly Investors Remain Bullish on Hedge Funds

March 5, 2017

After an inglorious 2016, many pundits jawbone about a continued investor exodus from the so-called overpriced and underperforming hedge fund industry. However, the facts are in stark contrast to the rhetoric. January 2017 redemptions total $5.2 billion, about one-quarter of the $19.3 billion outflow the hedge fund industry experienced in January 2016. Furthermore, a substantial […]

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Hedge Funds Face-Off with the 4 Horsemen of the Apocalypse

May 31, 2016

Who are these four horsemen? Pitiful performance, available alternatives, reduced fees, and impatient investors. Abysmal hedge fund performance has been the norm for the past five years. Hedge Fund Research reported the global hedge fund composite to be down almost 1.2 percent when averaged over the past five years. Contrast this with the S&P 500, which is up […]

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Trump Defies Gravity and So Do Hedge Funds

February 22, 2016

Anyone following the primaries will recognize this phrase, used frequently in the context of Donald Trump’s foray into presidential politics. For example, in the recent South Carolina contest, the phrase was employed ubiquitously by talking heads in the mainstream media, who were largely incredulous regarding the margin of Trump’s victory in the wake of his […]

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