How to get hired by a hedge fund

Penetrating the world of hedge funds is notoriously hard, particularly for graduates or MBAs with little previous financial services experience.

A new booklet gives some tips. 'Hedge Me: Insider's Guide to US Hedge Fund Job Opportunities', is written by Claude Schwab, head of hedge fund and asset management at the recruitment firm Glocap Search in New York.

Schwab says hedge fund recruitment is booming. (There are about 8,000 funds worldwide, most of them in the US. In 1998 there were fewer than 6,000 funds). He estimates there are between 100 and 500 current vacancies for junior analysts and traders - a spread that shows how hard it is to get a handle on the sector.

Schwab says finding a job in a hedge fund requires a different strategy from getting into an investment bank or a traditional fund manager.

Graduate and MBA students face two main hurdles: few hedge fund positions go to inexperienced candidates; and the hedge fund sector is fragmented, making it difficult to identify key firms.

Schwab says fewer than 15% of entry-level roles for junior analysts or junior traders go to college leavers. Vacancies are typically filled by people with some financial services experience; many of them come from investment banks' trainee schemes.

Students who want to work in a hedge fund straight after college cannot expect much help. Unlike investment banks, fund managers or management consultants, hedge funds do not usually make campus visits.

Schwab says: "Even the top MBAs on the top programmes can't expect an army of recruiters from hedge funds to come to them. Candidates have to figure out how to get there for themselves."

This means making an effort to find out about top firms in the industry and their different investment strategies, says Schwab. He recommends that applicants look at rankings such as Institutional Investor's Top 100 Hedge Funds and indices such as the CSFB/Tremont Hedge Fund Index.

For US hedge funds, Securities and Exchange Commission filings such as 13-F, which reports equity holdings and can be used to work out a fund's long positions, can also be informative.

Schwab advises applicants who are working in investment banks to modify their CVs, to make them more suited to hedge fund positions.

Sell side CVs typically place too much emphasis on clients and deals that have been worked on, says Schwab. By comparison, he says a CV for a hedge fund application should emphasise experience of equity or balance sheet analysis, valuation work and modeling skills.

"Investment bankers who like doing deals are less suited to hedge fund work than people who love building models and enjoy analytical work", says Schwab. For successful candidates, the rewards can be considerable. Schwab says staff straight from MBA courses can expect to earn a basic salary of $100,000 to $135,000, plus a bonus of up to 100%.

Applicants moving from the sell side can expect a base salary up to $150,000 plus a bonus of 100%-400%.

The easiest route into hedge funds may therefore be through joining an investment bank or a traditional fund manager first.

Schwab cites top hedge funds in the US, in terms of funds under management, as including Caxton Associates, Andor Capital Management and Citadel Investment Group.

Two European firms, Man Investments and GLG, make it on to his global top 10 list. The UK is the most important centre in Europe, with Switzerland also a player and Italy and Germany increasingly important.