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hedge fund job interview

Over the past several years, the hedge fund industry has struggled to grow, with market uncertainties pushing investors towards safer and more liquid asset classes. In many cases, investors are scared away from hedge funds by media sources that paint all hedge funds with the same brush, labeling them as speculative investment classes.

Redemptions Down

While hedge funds do offer unique diversification opportunities to certain investor classes, the industry has been unable to get this message through. However, data out this month shows that year over year, requests to exit from hedge funds are declining, signalling a possible turn around for the industry.

The GlobeOp Forward Redemption Indicator, which measures on a monthly basis the number of clients giving notice to withdraw their cash from GlobeOp hedge funds, measured only 3.71 percent in June. This is down significantly from June of 2011, where the indicator measured 4.01 percent.

While the Forward Redemption Indicator is up from May (3.31%) of this year, this is largely due to redemption timing by many institutional clients, which tend to withdraw near the June and December quarter ends. The year over year trend is a better indicator of the improving health of the hedge fund industry. In comparison to the same period in the prior year, the Indicator has shown fewer exit requests in each of the last seven months. This is certainly a positive trend that shows a potential opportunity for growth in the hedge fund industry.

Why the Change?

This declining trend in hedge fund redemptions may be due to a number of factors. Many of the most risk adverse clients left the asset class in 2009 and 2010, leaving more risk tolerant investors remaining. In addition, the high volatility of both equity and fixed income markets may have encouraged other investors to increase their weighting in select hedge funds that offer a lower volatility of returns.

Continuing strength moving forward for the hedge fund industry is a positive development however, and opportunities within the industry may increase as a result. In highly volatile times, such as we’re seeing lately as the European debt crisis unfolds, hedge funds can offer a lower volatility asset class for investors that are willing to tolerate the non-liquid nature of the investments.

If hedge funds can get this message out to the institutional investor community, there may be a substantial opportunity for the funds to grow their assets and operations moving forward.

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Perhaps the most important decision before interviewing at a hedge fund is to determine whether the firm’s structure, investing philosophy and culture aligns with yours. Many candidates spend a lot of time preparing for their interviews and developing investment ideas, but not enough time studying the firm and the person they will be interviewing with. As a result, they end up wasting both their time and interviewer’s. As Robert A. Jaeger puts it, if you are pitching a momentum-driven technical short-term trade to a long-term investor focused on fundamental drivers of equity value, your idea is going nowhere, no matter how brilliant it may be.

Today it’s much easier to gather information about hedge funds. Many have websites that provide some information, including history, product range, and sometimes investment philosophy. Other sources beyond simply Googling the firm include Hoover’s and Dow Jones Factiva business information services. Do your homework and figure out ways of uncovering this information for your interview. Digging for little-known information is, after all, a key venture capitalist skill.

You can expect three or four rounds of interviews with hedge funds. By the second or third round, you may be asked to do an on-the-spot investment or trading case study. You will also meet more members of the firm, to help them determine whether you are a good fit. If you make it to third round, you may be asked to pitch an investment idea to the fund principals, either in person or as part of a take-home assignment.

In general, portfolio managers are looking for those who are passionate about investing or those who are interested in investing but also have a specific skill set that the hedge fund firm is interested in exploiting. Someone with either of those two angles stands the best chance of making it to the next round of interviews, and possible even a hedge fund job offer.


Columbia University Graduate School of Business

Schwab, Claude. Hedge Me: The Insider’s Guide: U.S. Hedge Fund Careers. Lynx Media.

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Hedge Fund Jobs – Preparing for the Interview

June 1, 2009

The hedge fund interview process is similar to that of investment banking and private equity, in that there are usually several rounds of interviews with various members of the firm. However, hedge funds tend to focus less on deal experience and more on fit and your knowledge of investment markets and strategies. To get past […]

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