How to Get a Hedge Fund Job | This blog will try to explain to the finance professional how to get a hedge fund job. We will also look at the different kinds of hedge fund careers (buy side specifically), explore the hedge fund resume and interview process, and work on hedge fund case studies.

Hedge Fund Job – Generalist or Industry Specific?

28 July , 2010

A question I often get asked when candidates are applying to various buy side positions (including hedge fund jobs) is whether it is better to come from a generalist background, whether that be product group from an investment bank (i.e. leveraged finance) or from a specific industry group, whether that be on the banking or research side. In my opinion it really depends on what kind of hedge fund you want to join / be a part of.

A lot of the smaller funds rely on generalists to cover a lot of industries. These people will have a very good understanding of valuation but there industry contacts / insights will not be as deep. At larger funds, I think coming from a specific industry can be invaluable. And since most people that visit here are looking to join “name brand” funds, I am going to focus on this industry expertise and how you can use it as leverage to secure your hedge fund job.

Typically people trying to make it to the hedge fund world would investment banking analysts, recent MBA graduates, other buy side (including hedge fund) professionals, and sell side analysts. All of theses categories can do what I am about to explain – In my opinion though, the sell side analyst will have the biggest advantage at this point just for his/her ability to try reach management teams.

Before we get started, we need to pick an industry. I am going to use the shipping industry because it’s one I have never personally covered to any real extent.

First, let’s find the 5 companies in this space: Go to a Bloomberg and type: NSE Shipping <GO>. Look for a company in the space…I see Teekay. Pull up Teekay in Bloomberg and type: PVH <GO>. Now we are getting somewhere. This list shows the Bloomberg Peers of Teekay. Jot all those down (It’s a long list):

A P MOLLER – MAERSK A/S – B MISC BHD MITSUI OSK LINES LTD FRONTLINE LTD KIRBY CORP TEEKAY CORP D/S NORDEN SHIP FINANCE INTL LTD NORDIC AMER TANKER SHIPPING DRYSHIPS INC OVERSEAS SHIPHOLDING GROUP AEGEAN MARINE PETROLEUM NETW DIANA SHIPPING INC NAVIOS MARITIME PARTNERS LP SEASPAN CORP GOLAR LNG LTD GENCO SHIPPING & TRADING LTD NAVIOS MARITIME HOLDINGS INC TEEKAY TANKERS LTD-CLASS A TSAKOS ENERGY NAVIGATION LTD GENERAL MARITIME CORP SAFE BULKERS INC EXCEL MARITIME CARRIERS LTD KNIGHTSBRIDGE TANKERS LTD EAGLE BULK SHIPPING INC CAPITAL PRODUCT PARTNERS LP BALTIC TRADING LTD DANAOS CORP DHT HOLDINGS INC OMEGA NAVIGATION ENT-CLASS A FRONTLINE CORPORATION LTD
Now what I would do is note the names and number of each companies’ CFO and Investor Relations. If you have capital IQ you can make this process less cumbersome. If you can’t find the IR contacts name, it will be on their website.

With company names, CFO and IR names and numbers, it is start figuring out what analyst covers these guys. Again using TK as an example type TK EQUITY ANR <GO>. This pulls up all the analysts that cover TK. On Bloomberg, you can click through the analyst’s name to get their number as well (as well as other credits they own). Note these names down. And then go back to some of the other companies (the ones with the largest market caps will have the most coverage generally) and take down names and numbers of other analysts as well.

Now, start researching. Read a bunch of 10Ks and Investor Presentations. Get an understanding of the business. AND THEN START DIALING. Talk to as many of these people as you can – if they blow you off – who cares – Do not just TAKE value, also give value. For example, if you are talking to XYZ CFO you can say something like “I probably shouldn’t be telling you this, but I was talking to ABC CFO last week and he said shipping rates in the Mediterranean are weak” … You get the gist.

After your first round of calls, I would say you probably should have interacted with 50% of the list. And do you know what you do now? You call them again next month and the month after. You ask about industry events these people are attending, or conferences, or trade magazines. Once you get into the thick of it, your contacts will increase exponentially.

And that is how you get industry knowledge and a deep industry contact list. It’s simple but VERY few people that read this will go out and do the work necessary. No emails either – dial for dollars.

I once went into an interview and the second question I was asked was: “Who do you talk to in the retail space?” I listed the vendors, CEOs, CFOs, IR professionals, reporters, sell side and buy side analysts that I knew in retail. Not only did I list them, but I provided color on what these people were saying about the industry. That is valuable information. Information is the most valuable commodity? I think so. Do this work, and next time when you go into a hedge fund job interview, you will be prepared to blow them away with your industry knowledge and contact list.

28 June , 2010

I often get asked, “Hunter – what are typical hedge fund interview questions for XYZ fund.” Now, unfortunately (or fortunately depending on whose vantage point you are coming at it from), I have not interviewed at all funds out there. And I know each fund has a different set of interview questions for different candidates. For example, I know of one fund that literally asked probability questions throughout the entire interview process for one candidate, and then barely asked any for another candidate friend of mine. Alas, I do not have a silver bullet. But when I am in the interview seat, I like to ask three interviews questions of all candidates:

What are your thoughts on the equity / credit markets? – Now, technically this is unfair because I generally have little conviction one way or the other in terms of where the market is going to get in the next month or three months or six months for that matter. Instead, what I am trying to get to is how you approach market valuation and really who you read / listen to. If you quote something from John Mauldin I will probably come away more impressed versus quoting something from AJC (if you don’t know what whose initials those are, you probably should start reading more). I am not looking for an answer such as “I think the S&P; 500 will end the year at 1150″ – I am looking for things like what is happening with capacity utilization here and abroad, where inventory levels are at retailers across the country, what is going on in train traffic, etc. I want to see that you are interested in these things and have a view point that you can articulate well and can base in factual data and not solely water cooler opinions.

What is your favorite investment right now? I do not want to hear about your best investment from 2005. I want to know if I gave you $5M in capital today, and you had one shot, where would you invest said capital. If you say “Well – nothing is really interesting right now” I may just ask you to leave right there. Again, I might not agree with your assessment and frankly could be short a long your propose, but if your reasoning is sound supported by fact, you may have my ear. Every candidate that goes into a buy-side interview must come equipped with two or three ideas he/she can succinctly present (and defend) because that is how you are going to add value in the trading room

I will pose four investment alternatives: You rank them in order of preference. 1) A single site casino 2) A single peaking power plant 3) A commodity chemical company 4) A regional retailer. Note: All 4 companies have the same top line. I hope no one I interview is reading this post right now because that is a unique question, but I truly think it sheds light on how an analyst thinks. This question is solely for credit interviews mind you, but could be spun for long/short equity funds. In my opinion, there is a correct answer, but I have heard fantastic explanations of why I was completely wrong. For this type of question, I want you to list the pros and cons of each of the four alternatives and then tell me how that relates to credit spreads, default risk, recovery rates, etc. I know it sounds tough, but each of you should try this exercise on your own and see what you come up with. Hell, shoot me an email and I’ll debate it with you if you want.

Over the next month, we hope to have the new site laid out and on a new server. We plan to have our own hedge fund job board, and contributors helping candidates out with buy-side interviews, resumes, and case studies.

19 April , 2010

First of all, thank you to all readers who have sent me emails over the past few months. We are lucky to have such a strong readership.

Secondly, I wanted to announce that I have begun development on a new layout / format for the site which will combine hedge fund and buy-side interview, resume and career tips, as well as a number of articles myself and a few colleagues have penned over the past few months. If you would like to contribute, please contact me at hunter@ distressed-debt-investing.com.

Finally, we are looking for one or two advertisers to partner with in the site. As some of you are aware, this site ranks very high in Google for a number of queries related to hedge fund jobs, hedge fund careers, hedge fund interviews, etc. If this is something your company would be interested in, please email mat at hunter@ distressed-debt-investing.com.

Thanks!

21 March , 2010

…you should probably also know how to set one up as well as a hedge fund’s basic structure. The world wide web yet again comes up strong in a INCREDIBLE document from www.howardrice.com which I have embedded below. On any hedge fund interview, you may want to have these things in the back of your mind so you know what you are getting yourself into. Enjoy!

Some Considerations in Setting Up a Hedge Fund — Client Introductory Article (1) http://d1.scribdassets.com/ScribdViewer.swf

1 March , 2010

Hey guys – wanted to give you all a heads up that we have set up a new merger/risk arbitrage investing blog: You can visit the blog here: Merger Arbitrage Investing. Enjoy!