Hedge Fund Jobs

What is a Hedge Fund?

In this article, we will discuss an outline on Hedge Fund Jobs, before that we will understand what is Hedge Fund.

A hedge fund is a place where every finance guy wants to be. Considered to be a desirable path in the finance domain it provides tremendous opportunities to have an exciting work life and make piles of money which makes it enticing. I am sure you would want to know how and why?

We will try and reveal all of it but before that let’s understand what is a hedge fund? Simply put it is a pool of money from large wealthy investors. The fund recompenses itself for that facility by taking a hefty management fee (typically 2% of assets under management per year) and a carry (a percentage of returns over a benchmark) that is paid for performance.

In this process the hedge fund manager works with a goal of maximizing returns. He is supposed to research and analyze wide array of financial assets such as stocks, bond and currencies and then identify the best one for the portfolio. They then buy and sell these investments on behalf of the hedge fund. They are responsible for creating investment portfolios to safeguard against probable losses for corporations and individuals.

Pros and Cons of Hedge Fund Jobs

Hedge fund jobs permit a greater level of individuality than other areas of the domain. As hedge funds are generally smaller than investment banks, it gives hedgies greater intimacy and control.  Considering that fact it is a highly rewarding career option, it is not unusual to see people in this field at the big funds pulling down $5 million a year. As like in most financial institutions, hedge fund is a job where one can easily measure the contribution to the total profit the fund makes, that number is huge over here and hence it is a highly compensated job. But obviously there are people who make much less than this and many who have failed miserably.

Looking at the other side of the coin managing a hedge fund can be a task which involves lot of pressure. This is because the investors entrust huge amount of money with a promise of guaranteed return regardless of the market condition.  Hedge Fund managers do this by using various hedge fund strategies. Hence someone just cannot start managing those funds.

Nevertheless if you’re doing well, you get noticed quickly but also if not, you would become a guiding example.

Pre-requisites

Being a fund manager isn’t the type of role that you can pick up straight after an MBA degree. The size and structure of the fund decide the positions which are where the candidate would be eventually placed depending upon the academic credentials and skills.

The positions in a hedge fund generally include being a junior trader; strategist; analyst; quant; software developer; risk manager; and in various administrative roles.

To survive and excel in this field you need to be bright and one step ahead. To get a hedge fund job and advantage over other counterparts being from one of the top universities and a degree in maths, science, engineering could be helpful. There is a high demand for candidates with expert skills and advanced degrees such as Ph.D.’s who are familiar with currencies and macroeconomics. Apart from these, professional designations such as Chartered Financial Analyst (CFA) could be an additional advantage.

For those who are fresher’s and want to join this field right after college must have as much as an experience of investing as possible. One should either own portfolios or work on a mock one. Read books on investments and securities and network with people. Be very proficient in Excel, financial statement analysis and come up with the decisions relatively quickly and accurately.

After having a relevant degree the next step is hunting for companies. Getting information on this is difficult as hedge funds are unregulated and do not reveal much. It is quite a challenge to locate these jobs and some funds may cease to have even a website. You need to go out, meet people in this field and search for openings. They won’t be available at a fixed time during the year but would occur when the fund is inviting more capital or it has had strong returns. You could probably find a good position by applying at funds that are doing well.

When it comes to interviews, hedge fund companies have around two-three rounds of interview over two-three separate days. There are usually 4-5 different persons who judge the candidate individually over 20-30 minute intervals. After the candidate has cleared the initial rounds the portfolio manager would have a round with them at a later stage.

Having few years of work experience in trading and investing is a great bonus point because that would matter more than any degree. Many hedge fund managers come from the sell side of the investment banks. They are typically the persons who trade and analyze securities in research. And these candidates are hired because they know the in and out about investments and require no training.

Skills Required

• High intellect.
• Confidence.
• Competitive.
• Strong domain knowledge.
• Consistency and attention to detail.
• Deep investing and finance knowledge.
• Strong quantitative and legal skills.

Apart from these you need to have a strong feel of the financial markets and sense the changes and act accordingly. The most important quality expected is credibility as you would be handling huge sum of money coming from public.

Hedge Fund Career Track

Hedge Fund Analyst

For those who just start their career in finance into the world of hedge funds usually begin with a job as a junior hedge fund analyst. As an analyst you would conduct due diligence on investment decisions for which you would conduct deep research and analysis and support the team of senior analysts and portfolio managers.

After working for say about 2-4 years based on your performance you would be promoted to a senior analyst position. At this level you are expected to have thorough knowledge of derivatives and financial products of the fund, directly reporting to the Chief investment officer.

Hedge Fund Trader

Traders are a very important part of a hedge fund firm. A decent education background coupled with trading experience could get you at this job. Like in case of hedge fund analyst we have Junior and Senior level traders, A junior trader would have a degree and about two years of work experience. After working for five years or so, they might move up the ladder to become a senior trader. Within the traders clan we have the execution traders who execute the trade or ideas of the research team and there are there are others who do both the tasks of generating ideas as well as implementing them.

Hedge Fund Salaries

People with a few years of experience in the Investment Banking usually start with a basic salary (excluding bonus) of 75-125 thousand USD. The bonus would vary according to your and funds performance but is usually 2-3x of your basic salary. Talking about the seniors in this profession earn anything between a couple hundred thousand USD to $1 million, $10+ million, or even more. These huge figures could get really inspiring but keep one thing in your mind straight your bonus would completely depend upon the funds’ performance.

The other reality about the pay for hedge fund jobs is that the senior portfolio manager takes most of the money home. And if you are aiming for that position it going to require loads of hard work, skill and luck. So make sure the work excited you and not just the money.

Hedge funds industry is going to get competitive and is surely is here to stay in fact it will grow with time. But before you get into this exhilarating field ask yourself if you actually would enjoy the work or is it just the money?  Get in only for the right reasons since this domain requires candidates who love investing and are passionate about the markets and not because they want to make a few million bucks.

Infographics:

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