One of the most effective ways of landing a hedge fund job is to interview for a job that doesn’t exist. If that sounds counter-intuitive, then check out a recent article in Forbes about mastering the “informational” interview.

More people land jobs through these informal interviews than formal job-openings, according to Sarah Stamboulie, a New York career coach who’s worked at Morgan Stanley and Cantor Fitzgerald, and has been a career coach at Columbia University.

The trick is to get a chance to speak with someone in your target company, either through a personal or business contact. Then to approach the informational interview as if you were a consultant on a fact-finding mission.

Stamboulie tells her clients to do extensive research on the company, the person and the market beforehand. Then to use that research in an email requesting a meeting. She encourages people to write at length about why they are interested in the company, what they admire about its strategy, how the company or department handled a particular challenge, and to write a bit about the person whom they hope to meet.

“Your email isn’t about how great you are,” says Stamboulie. “The bulk of the email is about why you want to meet with the friend or colleague. You need to make it clear you’ve done some grown-up research.”

Once in the interview, ask lots of questions about the company, its needs, and most importantly, what opportunities are being lost. Act as if you are a consultant trying to figure out how to help the company improve its business. Your goal, says Stamboulie, is to determine how your skills may somehow overlap with the company’s needs or areas of opportunity.

As an example, if you speak a foreign language or have worked overseas, ask about the company’s business in that region and see if your skills could expand opportunities for them.

Of course, there is also the chance that making a personal connection will lead to a job. One client of Stamboulie’s went for an informational interview at a hedge fund that he considered out of reach. Yet the manager was a Frenchman living in London who loved French food and wine. So did the candidate. The two hit it off on a personal level and a job eventually materialized.

Which is the whole point of informational interviews. Companies are always thinking about hiring. They may not have a formal job opening at that precise time, and many jobs are never actually posted. But these informational interviews get you on the radar screen and can lead to opportunities.

What about you? Do you have a careful strategy for developing informational interviews at your target hedge fund firms? Add your comments below.

This hedge fund made a whopping $76.9 billion in profits last year, on a portfolio of nearly $3 trillion in assets. And its track record has held up surprisingly well, even through the financial crisis.

The fund of course is the U.S. Federal Reserve, which Steven Davidoff labels a hedge fund because of the way it is leveraging its balance sheet to earn huge profits. The main difference is that the Fed can literally print its own money in the form of “quantitative easing”, so it doesn’t have any borrowing costs. And while its main purpose is not to spin a profit, the Fed has nevertheless been racking up some hefty numbers says Davidoff, in an article for the New York Times’ DealBook.

Unfortunately, those who have hedge fund jobs at this successful firm receive a “relative pittance” in compensation. The top salary class at the Federal Reserve carries a maximum of $205,570 a year. Ben S. Bernanke, the chairman of the Federal Reserve, earns $199,700 a year, while the other members of the Federal Reserve board earn $179,700. Hardly chump change compared to the average American worker. But far below what you would expect from a real hedge fund job.

Even Treasury Secretary Timothy Geithner’s old job as president of the Federal Reserve Bank of New York paid “only” $410,780.  Whereas the top 25 private sector hedge fund managers made an average of $880 million each in 2010, according to data from AR: Absolute Return + Alpha magazine’s annual list. One hedge fund manager made more than the Fed’s entire 17,000 plus employees combined, according to the article, even though his hedge fund earned far less than the Fed overall.

“These disparities show that compensation, like people, is a complicated issue. People are willing to forgo earnings for prestige and other benefits like job security. And perhaps top dollar simply does not need to be as high as those in the finance industry would want you to believe,” writes Davidoff.

Would you ever consider a job with the Fed or regional Federal Reserve Banks in return for the experience or job security? Add your comments below.

The $32.6 billion hedge-fund giant Brevan Howard Asset Management LLP emerged as one of the few firms to buck the trend of dismal returns in 2011. The firm’s $26.4 billion Brevan Howard Master Fund Ltd. returned a solid 10.8 percent for the 10 months ended Oct. 31, ranking the fund No. 20 in the Bloomberg Markets ranking of the 100 best-performing hedge funds.

In total, Brevan Howard had four best-performing funds in the top 100. The others include the $1.7 billion Brevan Howard Asia Master Fund Ltd., at No. 31 with a 7.2 percent return; the $1.3 billion Brevan Howard Multi- Strategy Master Fund Ltd., tied at No. 43 with a 5.5 percent return; and the $2 billion Credit Catalysts Master Fund Ltd., tied for No. 74 with a 3.2 percent return, according to Bloomberg.

Brevan Howard co-founder Alan Howard has a long history of avoiding risks. Over a 25-year career as a hedge fund manager, he has successfully navigated through the bond market rout of 1994, the collapse of Long-Term Capital Management LP in 1998, and the recent financial meltdown of 2008.

In fact, since inception, his Master Fund has never posted a negative calendar-year return. Its Sharpe ratio of 1.96 means that, on a risk-adjusted basis, it has generated more than four times the return of the S&P 500 Index.

“When he senses danger, he is not afraid to enforce his view very forcefully,” says Zoeb Sachee, head of European government debt agency/covered bonds at Citigroup Inc. in London, who worked with Howard at Salomon. “The speed of exit was quite remarkable.”

All the more impressive coming in a year when the average hedge fund fell 2.8 percent according to Bloomberg data (others have it pegged at even more). The success of Brevan Howard’s funds are said to be a result of the firm’s pessimistic macroeconomic outlook. While other firms were predicting a mild recovery, Howard forecast a recession, and piled investments into U.S. Treasures, U.K. gilts and German bunds for safety. This positioned their interest-rate exposure to take advantage of falling yields.

Brevan Howard’s headquarters are located in Geneva, Switzerland. It is one of several U.K. hedge fund firms to relocate there when Britain announced plans to raise taxes on top income earners.

What’s your take? Are you familiar with Brevan Howard? Would you consider taking a hedge fund job at a European firm? Add your comments below.

A hedge fund is a fund that uses more non-traditional investing strategies to try to reduce volatility and risk, while attempting to preserve capital and deliver positive returns under ALL market conditions. This last part is the most notable difference from traditional investments. Regardless of whether the market is moving up or down, a hedge fund strives to capture positive returns.

Because of the use of non-traditional strategies, it takes a few more skills and characteristics to make your hedge fund experience a positive one. Here are the basics for those looking to land entry level hedge fund jobs:

Big, Balanced Brain – most investing is a numbers game, but hedge funds require the use of both the left and the right sides of the brain.  The left side of the brain is the logical, thinking side most often associated with reasoning, speech, writing, and numbers/math. The right side is the creative side associated with 3-D forms, art, music, creativity and imagination.  Hedge fund investing requires reading for specific details and facts (left brain), but also skill in showing relationships between ideas (right brain).

Big Wallet – historically, hedge funds have required upwards of $1 million as a minimum investment. There are funds lowering their minimums to $250,000 or less, but this is still more than the average investor has at his or her investing disposal.

Big Stomach – obviously I’m not being literal here, otherwise the U.S. would lead the world in successful investing, but I digress. Investing in the stock market at any level takes nerves of steel, but especially when you are working with large sums of money in non-traditional investment strategies. You must be disciplined and diligent to execute the hedge fund strategies to extract their maximum potential performance.

As for working in the industry, hedge fund managers are highly experienced, specialized professionals. If you are looking to enter this field, here are a few ideas to get you started:

Consider getting your MBA from a well-respected Business school – having a solid educational foundation will demonstrate business and finance skills that will be an asset to the fund. You will have learned everything from global economics and finance, to marketing and operations.

Get some banking experience – Hedge funds look for people that have a background in the financial industry, but also have client relationship management experience, good communication skills, and can demonstrate strength in teamwork, organization, quality, and accuracy.

Build your network – often talked about, rarely done well. People in hedge funds are notorious for keeping their networks small. To get in you need to identify people that will help support your efforts. Start with current associates, bosses, co-workers, and vendors/wholesalers with whom you already have a relationship. Ask if they know anyone in the hedge fund world. If so, would they be willing to introduce you? You can also attend hedge fund networking events or conferences. Talk to as many people as possible to identify people that might be able to shepherd you or serve as a mentor as you pursue opportunities that interest you.

Like any other specialized job search, employment with a hedge fund will take time. You will have to build relationships, as well as demonstrate your knowledge and skills as part of creating the building blocks for lasting success.

About the Author:

Debra Wheatman, CPRW, CPCC, is a Professional Resume Writer and Career Coach with nearly two decades experience working with professionals in finance, management consulting, legal, and technology.

SAN DIEGO, CA, January 10, 2012 — The 2012 Hedge Fund Compensation Report reveals that hedge fund managers anticipated an increase in base salary but a shortfall in year-end bonuses. The average reported cash compensation for 2011 was $311,000, just slightly higher than last year’s compensation. The annual industry report is based on data collected directly from hundreds of hedge fund managers and employees.

Last year 45 percent of hedge fund professionals reported double digit positive returns for their fund. This year that number dropped to only 16 percent. The number expecting their funds to be down 10 percent or less went from 3 percent to 22 percent. Only 4 percent expect their funds’ performance to sink by double digits.

“Given the drop in fund performance this year, hedge fund professionals fared pretty well,” said David Kochanek, Publisher of HedgeFundCompensationReport.com. “Except for only a few positions in the firm, increases in base pay more than covered the lower bonuses.”

This decrease in fund performance and bonus payout has some professionals worried. Employees surveyed cited market conditions and the pace of redemptions as concerns and the hedge fund job market is supporting those concerns.

According to the Report, although one out of four funds is looking for research analysts, there is little other hiring going on in the industry. Even in this difficult environment, 44 percent reported that, overall, they are happy with their compensation.

“We’ve seen this before. When the investment job market tightens, professionals report more satisfaction with their pay. Their focus changes from greener pastures and moves to becoming content with where they are,” said Kochanek. “And, among hedge fund employees, there might be good cause for celebration — that is, celebrating that they don’t work for one of the big banks.”

About The Report

The 2011 Hedge Fund Compensation Report is based on compensation data collected directly from hundreds of portfolio managers and employees from firms, both large and small, during October and November 2011. The list of figures available in the full report can be found at HedgeFundCompensationReport.com

The Report has grown to become the most comprehensive benchmark for hedge fund compensation practices in the industry. Respondents participating over the years represent some of the largest and most recognized hedge fund firms, including: Bank of America Merrill Lynch, Barclays, Citi, Deutsche Bank, HSBC, JP Morgan Chase & Co., RBC, UBP Asset Management, UBS and Wells Fargo Alternative Strategies.

It’s a new year and time to kick things off with a little extra motivation to land your next hedge fund job. So you might want to pick up a copy of Diary of a Hedge Fund Manager: From The Top, To The Bottom, And Back Again, by Keith McCullough and Rich Blake (Wiley).

McCullough is CEO of Hedgeye Risk Management (formerly known as Research Edge). Prior to founding his own research company, McCullough spent 10 years managing money at The Carlyle Group’s hedge fund, Magnetar Capital, as well as at Falconhenge Partners and Dawson-Herman Capital Management. He got his start as an institutional equity sales analyst at Credit Suisse First Boston after earning his Bachelor of Arts in Economics from Yale University. You may have also seen McCullough on Bloomberg Television, where he appears regularly. And his pre-market commentary “Early Look” appears on Forbes.com every trading day.

In Diary of a Hedge Fund Manager, McCullough walks you through his early years. Hockey skills took McCullough from Thunder Bay, Ontario, to Yale University, and his tenacity and work ethic took him from Yale to Wall Street. He started as an equity analyst at Credit Suisse then managed money at various hedge funds.

With a backdrop of the hedge fund world and the impending financial crisis, McCullough’s tale focuses more on the point that having a tireless work ethic and confidence in your own conclusions is the cornerstone of good business and success in the financial industry, according to a review of the book in ABA Banking Journal.

The book also provides insight into McCullough’s training methodology, a system based on exhaustive research, significant frequent-flyer miles, and resisting the status quo. His resisting of the status quo began early in the financial crisis of 2007, when McCullough’s analysis ran contrary to the powers around him and he was show the door at his firm. He then dived into the world of independent research and no-holds-barred criticism of an industry that all too often falls victim to groupthink.

Have you read the book? What other books would you recommend to kick off the year? Add your suggestions below.

When the latest unemployment numbers were released,  it showed an unexpected drop in unemployment. The unemployment rate fell to 8.6 percent; experts were predicting that the rate would remain at 9.0 percent. There were 120,000 new jobs added in November, many of which were in the professional and business services industries.

Unfortunately, this is not enough of a positive change for Wall Street.

A report out of New York cites that 10,000 Wall Street jobs are in danger in 2012. This translates into even higher joblessness outside of Wall Street. For every job gained or lost in the financial industry, two jobs are created or lost in other New York industries.

This gloomy forecast is based on the fact that many investment banks have incurred trading losses due to the declining market conditions, and will be reporting third quarter losses. Goldman Sachs reported that it may have to cut 1,000 jobs.

For those in the financial industry, the advice is “do not panic.” Retail banks are doing fine, and are not expecting to have to cut jobs or declare losses. There will still be plenty of jobs available, but the job market may become even more competitive.

Here are a few tips for finding a job in the financial industry right now and in the coming months:

Polish up your resume. If the job market tightens, then companies will be looking for highly experienced professionals. Make sure your resume highlights your talents, skills, and accomplishments. Consider a professional resume writer to make the most of your opportunities.

Take some classes. Consider enrolling in an executive MBA program or other online business courses. You might even think about a course in financial modeling. Especially, if you are not currently employed, this is a great investment of your time and will show employers you take the initiative.

Consider an internship. While there are some paid internships, even an unpaid one will help you get your foot in the door at a firm that may eventually want to hire you on a full time basis. If you really are good at what you do, then just being there every day will give you the opportunity to make a difference in the firm and become part of their success.

Get licensed. If you are lacking a particular license (securities, insurance, etc.) now is a great time to study for and take that exam.

About the Author:

Debra Wheatman, CPRW, CPCC, is a Professional Resume Writer and Career Coach with more than 18 years experience working with professionals in finance, management consulting, legal, and technology.

One of the big hedge fund job stories 2011 had to be the exodus of traders from the proprietary trading desks of the big banks, either to take jobs at hedge funds or start their own firms.

New regulations forced banks to take fewer risks with shareholder money, and that, along with the banks deferring more compensation in the form of stock rather than big cash payouts, made them a far less attractive environment for top traders.

The exodus began with equity and bond traders and continued with traders in energy, metals, and other commodities. By the end of the year, several high-profile traders had attracted from $500 million to a billion in new capital to launch new funds.

Then there was the story of Asia’s increasing prominence for the hedge fund industry. Bloomberg reported that assets managed by Asian hedge funds may exceed $180 billion in the next 12 to 18 months. The region’s faster-pace growth is attracting more investors, particularly as debt issues plague both U.S. and European economies.

“The Asian hedge funds industry continues to be one of the most exciting and fast-moving sectors of the global hedge fund industry,” according to a Eurekahedge report. “The region continues to develop at a fast pace with new funds starting up and employing an increasing number of different strategies and geographical mandates.”

Are the quants with their black box trading taking over the hedge fund industry? The Atlantic offered an outstanding article on the rise of the quants and how their machines are changing the face of hedge fund trading. The article profiled Cliff Asness, founder of Applied Quantitative Research in Greenwich, CT, one of the world’s leading quant-fund managers.

And back in July, 8,000 people applied for a chance to get on the fast track to a hedge fund job and become a new “turtle” trader, working with hedge fund veteran Mike Baghdady.

The program was modeled after an experiment by Chicago trader Richard Dennis, 30 years ago. Dennis reportedly visited a turtle farm in Singapore and was inspired to “breed” an elite group of traders. It was also a bit of a bet to see if traders were born with the personality for the job, or could learn it. Baghdady offered to teach his unique Price Behavior system to new traders. And each of the final 20 applicants was to receive $100,000 in their account to begin their trading careers.

What do you think were the most important stories of 2011 that affected hedge fund jobs? Add you comments below.

One of the big stories of 2011 was surely the exodus of traders from the proprietary trading desks of the big banks. Financial firms are bleeding traders as U.S. and European regulators clamp down on the banks’ ability to trade aggressively using shareholder cash.

“Banks are particularly vulnerable at the moment to losing people,” according to Peter Henry, New York-based head of front-office search at Commodity Search Partners, in an article from Bloomberg. “Increasing regulations are forcing banks to defer more pay in stock as opposed to cash as well as constraining the traders’ ability to trade.”

Traders in energy, metals and agriculture are taking hedge fund jobs or launching their own funds after leaving financial firms that have cut jobs this past year. Departures of commodity traders from banks rose 10 percent this year, according to Commodity Search Partners Ltd., a Brighton, England-based recruiter.

“The top proprietary traders at the best bank desks have many competing opportunities, perhaps the strongest of which are the physical trading houses that are building derivatives businesses,” said John Thompson, a partner at Energy Alpha Strategies Ltd., an investment firm that helps set up and finance commodity hedge funds. “The amount of traders hoping to launch is increasing, and will accelerate in 2012.”

Though it’s a dicey time to raise capital, some of the more high-profile traders to leave big banks have succeeded handsomely.

George “Beau” Taylor, the 41-year-old former head of global commodity proprietary trading at Credit Suisse Group AG, started a hedge fund in February that has now attracted more than $1 billion in assets.

Gil Saiz, a 36-year-old who spent a decade at Goldman Sachs in New York, has recently closed his Vector Commodity Fund to new money after raising $600 million.
Kieran McKenna resigned from Zurich-based Credit Suisse as global head of oil and refined products at the end of July and started the Mastic Commodity Fund.

“It’s very clear that it’s possible to operate in a much more efficient manner to take advantage of significant opportunities that are becoming increasingly difficult to exploit in more complex corporate structures,” said McKenna.

What about you? Have you worked at or are you working on a bank’s trading desk now and contemplating a hedge fund job? Add your comments below.

If you’re looking for inspiration over the holidays for your hedge fund job search in 2012, check out the story of Jim Chanos’ big trade in a recent BusinessInsider article.

Chanos, as you may know, is the founder of hedge fund Kynikos Associates. He’s been in the news lately prognosticating on the “bubble” he sees growing in China.

But back in 1983, Chanos was fresh out of Yale and just starting his career as an analyst at brokerage firm Gilford Securities in Chicago. Meanwhile Baldwin-United, a piano company turned closed-end investment company, was a Wall Street darling. The company grew by 20 times in the 1970s and by 1981 had amassed $24 billion in assets. Fortune magazine published a profile of then CEO Morley Thompson, lauding his success.

But Baldwin had grown fast partly due to a new product it was selling called the single premium deferred annuity (SPDA). SPDA’s are like IRA accounts, but an investor pays one lump sum (over $20,000 usually) up front instead of making small payments. The tax-free SPDA then collects a high rate of interest over a number of years until the depositor is ready to start taking income from the account.

The accounting was even more convoluted on the business side, with Baldwin paying high commissions to brokers, then selling the annuities to a subsidiary. BusinessInsider goes into the details, if you’re interested. But the bottom line was that the whole scheme depended on interest rates not falling and a certain favorable tax treatment from the IRS continuing.

But Chanos smelled trouble. He did a cash-flow analysis on Baldwin and made a “sell” recommendation, going against the prevailing sentiment around him. The Street ignored his report and many analysts still had it as a “buy” for weeks. Then in December, 1982, bad news began to leak out. A cascade of whispers then rumors then Baldwin “restating” its numbers in 1983 finally led to $9 billion bankruptcy, the biggest in U.S. history at that time. CEO Thompson was even charged with several SEC violations for false and misleading news releases.

Chanos’ star burned brighter as he later joined Deutsche Bank and took on his next target: junk bond king Michael Milken’s Drexel Burnham Lambert.

Do you know of any other hedge fund stars whose careers have been launched by a single stellar trade or contrarian call? Add your comments below.