How to get a job in a hedge fund now
As we reported earlier this week, Barclays' prime services business has set about impressing its hedge fund clients with a very detailed report on how they can go about finding new talent. While hedge funds themselves might be interested in Barclays' work, so should anyone wants to work in hedge funds be: it's effectively a primer on how to land a hedge fund job now that funds don't hire as voraciously from investment banks.
This is what you need to know.
1. There are still plenty of jobs in hedge funds
Hedge funds haven't had a great year. However, if you thought hedge fund jobs were hard to come by, you were wrong.
Barclays says the global hedge fund industry employs 75,000 people directly and that headcount has grown at a CAGR or 10% over the past eight years. In the past twelve months alone, they estimate that hedge funds have hired 15,000 people - both as replacement hires and for growth.
2. It helps to work for a hedge fund already if you want to work as a portfolio manager or distribution professional. This is less important if you want to work in 'infrastructure'
Hedge funds like to hire from other hedge funds. But they also like to hire from investment banks, asset management firms, investment consultants, funds of hedge funds and other 'allocators.' The source of hedge funds' hires by function is helpfully shown in the chart below.
3. If you want to work as a portfolio manager in a hedge fund, it still helps to start out as a trader in an investment bank
Now that traders in investment banks are mostly market makers instead of prop traders, you might think hedge funds would be less interested in their talents. Not necessarily. "Alumni from Capital Markets programs tend to have developed strong trading skills, cross-market / cross asset class knowledge and expertise, and ‘street savvy’, all of which are often considered key ingredients for becoming a PM or a trader for many HF strategies," says Barclays.
4. The best way to get a job in a hedge fund is to know someone who works for a hedge fund
Do you know anyone who works for a hedge fund? Do you know anyone who knows someone who works for a hedge fund? Get in touch. Barclays says hedge funds' preference is to "hire using internal networks first." This is especially the case if the fund is small. It cites the case of one hedge fund which has just increased its 'referral award' for new hires recommended by existing employees from $10k to $30k.
5. The second best way to get a job in a hedge fund is to know a recruiter who recruits for a hedge fund
This isn't to say hedge funds don't use recruiters: they do. This is especially the case if they're large and are hiring for non-investment roles. Small hedge funds tend to hire almost all their investment professionals by word of mouth.
6. If you're a woman, you may struggle to get hired as a portfolio manager or trader
Hedge funds are sexist. Barclays says 25%-30% of their total headcount is women, but that women only account for 5% of hedge funds' investment professionals.
7. The scarcest hedge fund jobs (and therefore possibly the hardest to get) are in sales and marketing
Barclays says that around 40% of all the employees in hedge funds work in investment roles as portfolio managers, analysts and traders. Another 50% work in infrastructure and business support. Only 10% work in marketing and investor relations.
Within the infrastructure segment, the most popular area is junior accounting, operations and risk roles, 9,000 people work here.
8. If you want to be a portfolio manager, it will help if you have more than ten years' experience
Barclays defines senior staff as those having more than years experience. Mid-level staff are defined as having between five and nine years' experience. Junior staff have less than five years' experience.
The distribution of hedge fund staff by experience and role is shown in the chart below.
9. Your strategy for getting a job in a hedge fund should depend upon the strategy of the fund you want to work for
Barclays defines hedge funds who 'farm' as those who grow their own talent from the bottom up. Hedge funds who 'poach' are those who steal talent from elsewhere.
Hedge funds' predilection for farming over poaching is related to the strategy they follow. The chart below suggests you won't get poached by a credit hedge fund, for example.
10. Hedge funds are looking for some very specific personality traits
If you want to a job in a hedge fund, you'll need to cultivate the personality traits in the blue boxes below and stifle those in the brown.
11. If you want to make it to the top, you might want to have an MBA from an Ivy League University
75% of chief investment officers at hedge funds have attended a postgraduate program at an Ivy League University. That is huge.
12. Once you get a job in a hedge fund, you should really be able to keep it
Finally, much as hedge funds are renowned for churning through staff who don't perform, once you have a job in a hedge fund you ought really be able to keep hold of it.
Barclays says it costs an average of $100k to $250k for hedge funds to replace a member of staff. This is especially the case when headhunters are used, particularly when headhunters are used to find portfolio managers.
Nonetheless, Barclays says the average tenure for hedge fund portfolio managers is less than four years and that turnover is 25% a year here: "Only about 15% of PMs last more than six years at a firm, vs. nearly 50% of CIOs and analysts."