To start, I would like to open up my commentary to not solely hedge fund jobs, but also to the more general, “buy side jobs.” I will lop all research analysts, traders, and portfolio managers at mutual funds, insurance companies, endowments, etc into this category. In my opinion, for many of you looking to make the jump to a hedge fund career and are having difficulty, you might want to start looking for the more general buy side jobs and then making the switch 2 years down the line.

When I pull up the JOBS function on Bloomberg, and look for hedge fund jobs, I see a lot of job listings specifically looking for people with buy side experience. Why?

I think there are three main reasons:

  1. People with buy side experience have experienced profit and loss on individual investment recommendations which (in my opinion) better sharpens your skill set than having a “Buy” recommendation flop.
  2. People with front – office buy side experience will have more familiarity with middle and back office processes (CDX rolls, trade breaks, etc) that a small to medium sized hedge fund might need as their infrastructure may only consist of a CFO.
  3. People with buy side experience can come into a situation and have a number of recommendations ready to go.

Now, you might look at point 3 and say: “Won’t the sell side analyst have that as well?” Possibly – but a sell side analyst may have many reasons for putting a buy on a situation. I am not saying the sell side is biased to secure investment banking revenue – but it does make you raise an eyebrow. In addition, when the sell side puts a sell on a company, they may be shut out from even speaking with management. Just another reasons why I think the sell side leads more towards the “Buy” rating.

With that in hand, where can you find these buy side opportunities? The credit markets are crazy right now and honestly it’s not hedge fund money doing the buying. It’s high yield and investment grade mutual funds, its insurance companies, it’s index funds, etc. Let me list 8 kinds of places where you can secure front – office buy side experience:

  1. Traditional mutual fund/Asset management company. Probably the best place to get your feet wet, but sometimes just as hard to break into (and even hard) for the Tier 1 firms (Franklin, Legg Mason, Fidelity)
  2. CLO manager. Fantastic place to get work if you want to move to the credit / distressed world. Unfortunately, lots of consolidation combined with a broke securitization market has caused the number of jobs to dry up.
  3. Insurance Company. Very good place to get experience but (depending on the place) can limit your investment options (i.e. little equities, can’t go short). Of course if you were going to Markel or Fairfax, I’d say it would be the best option on the list
  4. Endowment. Very often a lot of “fund of funds” business but that gives you an opportunity to meet many people in the investment world. Some endowments take individual investment risk and these places can be great because there is just SO MUCH MONEY.
  5. “Trading Shops”. I do not have a better word for it. These places traders trade the house money and get a small cut. Good if you enjoy day trading. I would avoid places asking you to put up capital as well.
  6. Private Equity. Incredible to have on your resume, but also just as hard to get involved in as hedge funds.
  7. Family Office. A good combination of many of the shops above. I have two friends at two different family offices and both love it. Make sure you get involved with one doing individual investments versus just allocating to funds.
  8. RIA / Investment Advisor / Seperate Account Manager. Unfortunately, I do not know many people at these sorts of places so hard for me to comment.

Now, there may be more – but this is a good list for those that are having difficult securing hedge fund interviews because of a lack of buy side experience.

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