Last time we looked at the types of positions open at hedge funds for those who are interested in trading securities and executing investment ideas. Now we’ll look at the background required for junior and senior level traders.
At the most junior level, a trading assistant would perform a support role for trader or senior trader at a hedge fund. This person would need a college degree, excellent math and Excel skills, and would probably have worked as a summer intern on a trading desk, either on the sell side or buy side.
Believe it or not, even this junior-level position sometimes requires a Ph.D.-level background from a top school. That’s because many hedge funds use highly sophisticated, proprietary trading systems that require an understanding of complex algorithms and “black box” trading strategies.
At the trader level, a hedge fund would be looking for someone with a successful track record as a trader. A large money manager, for instance, needs a trader who can work with the firm’s portfolio managers to move in and out of positions with minimal transaction costs.
This trader would need to add value to the firm by developing his or her own market insights. He would build relationships with key counterparties and constantly be reviewing the firm’s trading processes to minimize risk and improve efficiencies.
Finally, for more senior level traders, hedge funds demand a solid track record, a definite philosophy on investing, and the numbers to prove it. At JobSearchDigest.com, we have seen employers ask for “a Sharpe ratio of 2 plus, as well as a scalable, proven strategy” and more than a simple back test to back it up.
Traders are a different breed than research analysts. You both may share an interest, or even a passion for investing. But as a trader, you’ll also probably enjoy the adrenalin rush that comes from executing a winning trade in a tight timeframe.
References:
Schwab, Claude. Hedge Me. The Insider’s Guide”U.S. Hedge Fund Careers. Lynx Media
JobSearchDigest.com
Traders are at the heart and soul of the hedge fund firm. That’s why trading jobs are so popular. Quantitative analysts work closely with traders to develop trading models based on Statistics and Computational Mathematics. The traders are the ones who execute the strategy and make the magic happen.
Hedge fund trading jobs usually require experience working with portfolio managers and various trading models, such as multi variant regression analysis and risk models. Many hedge fund trading jobs call for a background in statistics or mathematics. Often, the most successful firms hire only from the top colleges and universities. However, in the end, a great trading record will trump educational background.
Types of Traders
There are junior and senior level traders, and even a more junior position called a trading assistant. Typically, a trader has earned a college degree and has one to five years of full-time work experience.
A junior trader would have a degree plus about two years of professional work experience. After working at a hedge fund for five years or so, they might move up to senior trader, possibly even with profit and loss (P&L) responsibilities. Whether or not you move up the ladder is at the discretion of the portfolio managers, and reflects your individual trading skills and capabilities.
Within the job category of trader, there is a distinction between execution traders, whose job it is to primarily execute ideas provided by the firm’s research analysts or portfolio managers. And there are traders responsible for P&L, as mentioned, who both generate investment ideas as well as execute them. In this more senior role, the job of trader and portfolio manager often merge.
A hedge fund job as a trader job can be one of the highest paid in the entire organization. The trader has expertise in knowing when, how, and on what exchange the fund should buy and sell assets. Great traders have extreme discretion over the deployment of capital into the open market. Good traders like working for hedge funds because of the transparency and flat organizational structure. Success is easy to recognize, and hedge funds reward their top performers handsomely.
Next time we’ll look at what types of skills are required by successful hedge fund traders.
Last time we looked at what an analyst at a hedge fund does, entry-level qualifications and how quickly analysts can move ahead in their career. Now let’s look at the specific responsibilities of hedge fund analysts.
Given that there are so many different types of hedge fund investment strategies, it’s no surprise that hedge fund analysts’ jobs and focus vary widely, too. Here are some examples from recent job postings at JobSearchDigest.com
A junior investment analyst for a fund of hedge funds based in New York, for example, requires an undergraduate degree and a minimum of one year of work experience. This junior analyst would support the investment manager in in screening, researching, analyzing, and monitoring external investment managers. He would analyze performance data and do quantitative studies on different funds, attend due diligence meetings and assist with the administration of external investments.
A more senior analyst’s position, also for a hedge fund of funds, would be a member of the investment committee for the firm. He or she would report directly to the Chief Investment Officer. This particular analyst job requires an expert knowledge of derivatives and structured financial products, in keeping with the focus of the fund. A successful candidate for this position would need both a graduate degree that includes finance and quantitative courses from a top-tier university, along with five or more years of work experience in the category.
Then, of course, there are highly technical and specialized analysts’ jobs that require expertise in very narrow areas. One example might be an equity derivatives quantitative analyst. This mid-level job requires a graduate degree and possibly a PhD in mathematics, along with experience in quantitative analysis, finance, equity derivatives, proprietary trading systems, and possibly even some programming skills. In this particular case, a leading multi-billion dollar hedge fund was searching for a quantitative analyst to join its equity derivatives trading desk, and help in developing strategies for relative value trading, directional volatility trading, convertible bond arbitrage and more.
If you are passionate about investing or at least enjoy learning about the markets, and if you have the patience and skills to dive into mountains of research data to identify trends and opportunities, then a research analyst may be the right entry point for you into the world of hedge funds.
References:
Schwab, Claude. Hedge Me. The Insider’s Guide to U.S. Hedge Fund Careers. Lynx Media
www.jobsearchdigest.com
