Defending Your Quest for a Hedge Fund Job

It’s certainly not as popular to say you work (or want to work) in the financial industry these days. In the wake of the financial crisis and now, the Occupy Wall Street movement, saying you want a hedge fund job will get the same disapproving looks in some circles as opting to become a tobacco farmer.

In that vein, Business Insider recently re-posted a letter from a disgruntled first-year analyst at an investment bank claiming that Wall Street was a “rigged game” designed to siphon money from the 99% of the public “through hedge funds” and channel it to the ultra-rich 1%.

They followed up, however, with the best of the angry letters they got in response, defending the industry. One detailed response provides some useful ammunition should you find yourself under attack either from friends or at a cocktail party.

Point one: hedge funds are just for the ultra-rich. The rebuttal points out that a significant amount of hedge fund money comes from public pension and retirement funds for some of the nation’s largest public pensions. CalPERS, for instance, invests in hedge funds to benefit state, public, school and local public employees.

Point two: ordinary people don’t have access to the exotic financial instruments that hedge funds use, like commodity future swaptions, FRA/OIS swaps, CLOs, exotic future options, p-notes, index/commodity/equity exposures, and a huge array of OTC (over-the-counter) instruments.

Rebuttal: “Most people also don’t have access to tools required to make jet engines or access to labs to make their own drugs. That doesn’t make them inherently evil or the situation unfair. In fact, these instruments are too complicated for the average to use to invest. Most people can barely figure out what an Adjustable-Rate Mortgage is and you want to allow them to invest with what Warren Buffet called ‘financial weapons of mass destruction’?”

The angry letter claimed that ordinary investors are “utterly screwed” going up against hedge funds as a result of their unfair advantage. It was the one point with which the rebuttal author agreed, primarily because hedge fund managers are full-time, professional investors. It’s their job to be tuned in to the markets. They also have access to tools and special deals from Prime Brokers that the ordinary investor won’t have. But that’s simply because their trading volume justifies it.

What’s your opinion? Do you think hedge fund professionals are being unfairly tarnished with respect to the financial difficulties the economy is facing? Add your comments below.

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