Remember the SATs you took when applying to college? If you interview at a hedge fund, you'd better: You may be asked to provide your scores, even if you've been working for several years.
In all likelihood, you'll be asked if you're interviewing with a quant fund. But don't fret that you'll be rejected for getting a math score of "only" 750. That's just an urban legend.
Even with experienced candidates, the majority of hedge funds want to see the results of those college entrance exams, says Kyle J. Ramkissoon, principal and founding member of IJC Partners LLC, a hedge fund-focused search firm. The interest is greatest among quant shops like D.E. Shaw and Renaissance Technologies, whose strategies draw on statistical arbitrage techniques. But some fundamentals-driven funds ask for SAT scores too, Ramkissoon says.
The SAT's role in hiring decisions varies inversely with a candidate's level of experience and education. If you have a doctorate in theoretical physics, you might be quizzed about your Ph.D. dissertation or academic publications. Standardized test results will be a mere formality in the application process. And SAT scores tend to carry less weight than college grades and the reputations of the universities you attended. Sandy Gross of search firm Pinetum Partners says she requests test results only from people with less than two years' experience. For others, she favors grade-point average, career path and progress, and formal credentials.
For Portfolio Managers, Bar is Set Higher
How test scores are viewed also depends on a candidate's functional specialty. Both grades and test scores are weighted more heavily for investment professionals than for people in fund accounting or operations, notes George Yulis, principal at Rothstein Kass Executive Search Group. At hard-core quant funds, Yulis says, "Everybody has a certain bar on those exams that needs to be covered, a certain hurdle." That "hurdle" may be set lower for accounting and operations staff than for portfolio managers. While even the latter aren't required to have a perfect 800 in math, "even the mail room clerk" must exceed a certain level, Yulis says.
An August 2006 BusinessWeek story touted the belief that the two leading quant hedge funds, Renaissance and D.E. Shaw, hire only mathematical geniuses. The story asserted that liberal arts majors "need not apply," and called an 800 on the math SAT a "must-have."
However, the last sentence isn't true at D.E. Shaw. The fund group "is also an active recruiter of extraordinary talent from non-quantitative fields like the liberal arts, investment banking, and law," Trey Beck, a D.E. Shaw managing director, wrote in a comment on BusinessWeek's Web site. And, he wrote, "while standardized test results may be a consideration, there's no particular minimum score" required.
What's It Matter, Anyway?
It might seem odd or even downright silly for employers to consider the results of a test administered to teenagers. But recruiters say the SAT has a number of things going for it.
Because it's the same for everyone, the SAT represents a well-calibrated scale for weighing rival candidates. Employers "look at that as a differentiator between people with similar backgrounds. Those are the close calls," says Ramkissoon.
High test scores also can help level the playing field between candidates from radically different backgrounds, by creating an alternative badge of intellect for those who didn't attend prestigious universities. Ramkissoon says he knows several successful fund managers who were able to break in without the traditional Ivy League or top engineering school degree, thanks to stellar grades and test scores.
And consider this: A recent academic paper found an indirect, but statistically strong, link between hedge fund performance and SAT scores. Specifically, funds whose portfolio managers attended colleges with higher average scores consistently outperformed funds managed by graduates of institutions with lower scores, while taking less investment risk. The authors found that a 200 point higher average SAT score at a fund manager's undergraduate institution equated with 0.73 percent higher annual returns.
So if hedge funds are your area, it might be worthwhile to get hold of your test scores and keep them handy. The New York City-based College Board, which administers the SATs, says it retains results essentially forever, and has fulfilled requests for scores from as far back as the late 1950s.