Hedge funds are often portrayed by the press as a nameless species of investors living off the inefficiencies of the financial markets. Hedge fund managers, who control billion-dollar global funds, and sometimes earn billion-dollar salaries, are regarded as financial superstars.
Less reporting space, however, is devoted to the multitude of start-up and under-performing funds that join the endangered or extinct species list every year. But hedge funds are more numerous than you may have thought: a heady mix of intrigue and potential for financial glory is more than enough to inspire aspiring hedgies.
Hedge fund roles are relatively rare and highly sought-after compared with those in investment banking and even private equity. Hedge funds are alternative investments and need an alternative approach. Here are some tips to help you find a role in this sector.
1. Don’t quit your day job, but be prepared to strike
Chances are that the hedge fund job you really want is not currently available nor publicly advertised. Unless you are already working in a similar position, your resume will probably need updating to highlight relevant experiences and skills. Work out why a hedge fund career is attractive to you, then recast your resume with this emphasis. Having a well-structured goal is crucial and you must be able to express this. Be prepared and be one step ahead of your rivals when the hedge-hunting season begins.
2. Develop relevant skills
If you are already working in financial services, you probably have the basic skills required to work in a hedge fund: numeracy, analytical thinking and communication. However, will separates the contenders from the pretenders are innate qualities, such as a strong work ethic and good judgement, and skills like relationship building and market awareness. It is important to articulate that you have the full arsenal of weapons required.
For example, try the following exercise: Hypothetically construct an investment portfolio of securities worth $X. Now articulate for each security the reason it is in the portfolio, its allocation weighting in the portfolio, and the return expectation for a certain time period (just having a hunch will not cut it when you have to answer to your investors should an investment go wrong). Revisit your portfolio over a consistent period of time and with the benefit of hindsight, critique your investment decisions. How did you go? Would your portfolio be “investable”?
3. Be proactive and create your own opportunities
Having a thorough understanding of the hedge fund industry is an essential starting point. You should research and identify which funds actually exist in the market and study their investment strategy, fund size, organizational structure and performance track record. This will help you get a better feel for the type of hedge fund you will be best suited to.
Traditional executive search firms (akin to tour guides) will not always have a good insight into hedge fund roles, so take a proactive approach and start building a network of industry contacts. Look at industry associations like the Alternative Investment Management Association, talk to sales and trading reps from the IB trading desks, or even follow up with journalists who report on hedge fund news. Networking will provide further insight and help you build a profile of the nascent hedge fund industry.
Happy hedge hunting.
The author is an Australian hedge fund professional. The views expressed are her own and not those of eFinancialCareers.