"Never stop being paranoid": an MD's guide to staying in a bank (and then jumping to a hedge fund)

'Robert' (not his real name), has form. He's had an illustrious career in banking, culminating in promotion to managing director (MD) before the financial crisis. He survived the turmoil and rose to become head of a division of over 80 people. When he was tired of banking, he quit. And now? He's just landed a new position as head of marketing at a well-established hedge fund.

How?

Given that many banking careers come unstuck in years two to seven and that moving to a decent hedge fund is far from easy, we asked Robert to explain his success. Speaking off the record, this is what he told us.

Never, ever, stop being paranoid

"If you stand still in a bank, you will get run over," warns Robert. "Never stop being paranoid about evolving," he elaborates. "The industry will move on: returns will get eroded away and you'll need to stay one step ahead of the trend. If you're in sales, you always need to be looking for the next best thing for your clients. You have to constantly adapt to the new market environment and new technologies."

Change with the market

Robert's own career is a case in point.

He started out selling equity derivatives to quantitative hedge funds. "I added a lot of value by finding structures that fit hedge funds' needs and the bank's needs," says Robert. "It was about setting up bespoke structures that correlated to both sets of needs - creating a money-making opportunity for both parties."

Over time, however, the opportunity shifted. Instead of hedge funds wanting bespoke products,  institutional and asset management clients wanted exchange traded products. Robert switched away from hedge funds and focused here instead, building a $500m business.

Even this wasn't forever though. "The latest trend is about risk premia strategies," says Robert. "Banks are taking the algorithmic strategies employed by asset managers and hedge funds and putting them into an index format that can be sold to clients." The next big thing will be sentiment trading, he predicts (trading against sentiment data gathered from social media): "You need to keep changing the algo, If you're still the running the same one from a few years ago, you're going to lose your edge."

Be nice to EVERYBODY 

As you climb up the hierarchy and start generating big revenues for your employer, you might start feeling like a big man. Don't.

"Treat everyone with respect," says Robert. "Whether it's your boss, or a VP or an analyst or a janitor. Keep everyone happy."

Speak of your strengths

This doesn't mean you need to hide your light under a bushel. Robert's niceness doesn't preclude him from expounding upon his abilities. "I've spent over 15 years at a top investment bank and I have skills that are very relevant to hedge funds," he says. "I understand the derivatives market very well, and I understand how the market has changed. I've spent my career covering hedge fund clients, pension fund clients and insurance clients and I'm very broadly diversified. This means I can bring fresh ways of thinking to the buy-side as a fiduciary."

Know your niche

As other senior salespeople fall out of investment banks and sink without trace, Robert is clear that hedge funds need the kind of sell-side experience he can offer.

"If you want to succeed as a hedge fund now, you need to deliver for clients," he says. "There might be some billion dollar hedge funds out there that can ignore clients because they're 'better than God', but that's not the case for most of the hedge fund industry."

Hedge fund clients/investors want to be treated as partners, says Robert. "It's a marriage over the long term. Investors want returns and hedge funds need to adapt to meet their needs."

In this sense, he says working directly for a hedge fund and persuading pension funds and insurance companies to invest with you is harder than working for a bank and selling products to these same clients. "In a bank, it's about developing as many products as you can and letting clients decide which one they like. In a hedge fund, it's about developing one or two strategies which the client really loves."

Contact: sbutcher@efinancialcareers.com

Photo credit: Paranoid by Aaron Tait is licensed under CC BY 2.0.