In life there is a natural process of things. There is the famous circle of life, a system of predators and prey competing in the animal kingdom. We humans however prefer a different circle of life, a process that is competitive in more complicated ways. A general example of this process would be a person’s competitive progression through primary school, high school, university, the work place and finally retirement. The problem however is that in our circle of life boredom can lead us to depravity or alternatively it can create dreams and the desire for change. Quite frequently actually this desire for change is the urge to have a six figure salary at a job that earns huge commissions and has the incentives of massive life changing bonuses. Hedge funds offer these benefits but to work at one requires ambition, intelligence and the ability to stomach above average stress levels.
The demand for a position in a hedge fund is intense. Some hedge funds receive over 100 resumes a week for available positions. This should not be a surprise to any prospective hedge fund employee, if it is, we will clear any confusion by outlining the benefits of working in a hedge fund. But let’s first examine the different jobs in hedge funds and what they entail.
Roles and Careers
Types of Hedge Fund Roles or Careers
The roles within a hedge fund vary depending on the size of the specific fund but all hedge funds require people to fit some general roles. These roles are: hedge fund manager, marketing and sales manager, accountants and analysts. There are also administrative roles and software developers but not all hedge funds require this. Also if a hedge fund is small there will only be a few key individuals running the fund. If the fund is large there may be various levels of a role, for example: senior and junior trader or analyst.
The hedge fund manager’s number one goal is to maximize return. A hedge fund’s manager oversees the analyst or group of analysts and selects the investments of the hedge fund. This selection of investments which can include stocks, bonds currencies or commodities in specific proportions makes up the hedge fund manager’s portfolio. A hedge fund can have different types of managers or more than one type of manager depending on the size and strategy being employed in the fund. The hedge fund manager could either be a highly experienced and skillful trader or investment manager, a risk manager or a quant. A large hedge fund could have them all. None the less, the hedge fund’s primary manager will also be responsible for explaining investment strategies and, if not entirely, partially responsible for client relations.
If the hedge fund manager desires to not be entirely responsible for client relations a hedge fund will require the role of a marketing and sales manager. A marketing and sales manager is required to bring capital into the fund by marketing the fund’s strategy and returns to potential investors. Once you begin receiving a salary a lot is will be expected from you and in this role you will be expected to be able to bring in at least about ten million Rand within your first year at a fund. A marketing and sales manager will have to manage and maintain client relations and continuously bring capital into the fund therefore someone in this role must be confident, persuasive and have good people skills.
A less glorious but essential role in any hedge fund is the role of accountant. Hedge fund accountants are the people responsible for keeping the books of the fund by accurately recording all the fund’s financial transactions in the required financial statements. These allow the accountants to look back and analyze the fund’s profits and losses.
A very common position in hedge funds is the role of an analyst. Analysts analyze an investments risk and reward to find an investment that will suite the strategy of the fund and bring in maximum returns. Analysts mostly specialize in some form of analysis; some may be highly skilled in analyzing the financial statements of a company in a specific industry while others will specialize in developing financial models used to forecast prices and spot trends of a specific asset. An analyst is expected to have a large knowledge base in an industry, region or specific asset class; such as bonds, equities, commodities etc.
The more influence your role has over the creation of returns in the fund the better your benefits will be but all these roles do offer similar starting salaries and bonuses that will no doubt improve your standard of living. In the next article of this section we will outline all the benefits of working in a hedge fund and describe the characteristics required to succeed in the hedge fund industry.
Perks of the Business
In the previous section I mentioned that the demand for some hedge fund jobs is so intense that they draw the attention of over 100 resumes per week, the reason for this extreme amount of applicants is due to the nature of the benefits a hedge fund job offers. Naturally this intense competition for such exuberant benefits only ends up benefiting one lucky applicant out of the hundreds vying for the position. This article will summarize these highly demanded benefits and outline the characteristics that any prospective hedge fund employee must work towards to be the most attractive choice in the eyes of the fund.
To kick start this section we will start with the most attractive and well-known benefit of the hedge fund industry. This famous benefit has over a million good reasons as to why hedge fund jobs experience a surplus of demand from the job market. The average base salary in a hedge fund for a fund manager is in the six figure range. You are going to have to compete well for this perk!
Most people coming into hedge funds have some experience and specialized skills resulting from a job in the investment banking industry. These jobs demand work hours that are not for the faint of heart, professionals within the industry are expected to work 100 hours a week if need be but these gruesome working hours eventually pay off, to some extent, in an end of year bonus that is sure to put a smile on a rapidly aging face. However this article is about the perks of a hedge fund job which in most cases demands less than 60 hours a week while still providing bonuses that will dramatically increase the passion you possess for your career.
Another incentiveto strive for a career in hedge funds is that there are hedge funds of different sizes that employ different strategies. The advantage waiting to be exploited is one of choice. You will be able to apply to a hedge fund that has a specific corporate culture which will suite your personality and maximize your satisfaction in the work place. For example, you may prefer to work in a fund that is managed by only a couple of analysts and traders or prefer to work in one that is run by hundreds.
Characteristics required for Success
There comes a time in every student’s life when Mom or Dad begins to inquire, on an almost daily basis, what on earth you will do to make money and sustain yourself. It is mostly during this period of a person’s life when they must consider their choice of tertiary education and a future career. Obviously working at a hedge fund implies that your tuition plan was within the commerce faculty but some subjects are more important for hedge funds than others, these are the most important.
University Majors Required for Hedge Fund Jobs
Economics is crucial to the success of anyone working in the finance industry. Economics will teach a student how economies actually function and the affects that economic events have on different sectors of the economy. More importantly a comprehensive understanding of economics will provide a student with the ability to forecast economic events that will be triggered by changes in the economy of the present day. This knowledge is vital to a career in hedge funds.
In the hedge fund industry there is a surprisingly high deficit of capable and intelligent capital raisers. Marketing as a university major can also be used to bridge into the sales side of hedge funds as a marketing director. Bringing capital into your fund and maintaining relationships with clients is the role played by marketing and sales managers. With a marketing degree in hand a prospective hedge fund salesman will require nothing more than a few years of experience in the industry will have good chances of finding work at either a hedge fund third party marketing firm, hedge fund start-up firm or even find a position within a prime brokerage as a capital raiser.
Financial and/or investment management are vital in the hedge fund industry especially if the role you wish to specialize in involves understanding financial markets and instruments. This major will teach you essential skills such as how to analyze financial statements, market trends and annual reports to name a few.
Lastly, a university major that will endow you with some skills necessary to exist in the hedge fund industry is a major with a programming background. Programmers are also in very high demand. The reason for this is programmers possess the skill to create complicated financial models used to rake in profits or improve risk management techniques. With these kinds of skills to offer a hedge fund I can’t imagine why a fund wouldn’t want you.
What you decide to study in university or any tertiary education is crucial to the future of any career. However there are some personal traits a person will need to have a competitive advantage in this industry. These are a person’s natural characteristics that are either natural talents or personal skills developed over time and with experience.
After working in the industry for the last 3 years, since graduation, I would like to mention that majors in mathematics, statistics, computer science, and operations research are highly sought after in quantitative hedge funds. South Africa however is still vastly dominated by long short value hedge funds.
Personal Characteristics Required for Hedge Fund Jobs
Let’s start this section off with the obvious, to do extremely well in this industry willrequire a strong mathematical inclination with an ability to comprehend multiple financial components and changes over time.
Another characteristic that will eventually become obvious to anyone attempting to bridge their way into a career in this industry is that you will have to be passionate and ambitious. Hedge funds are extremely competitive, and we all know why that is so, but someone looking to truly progress and succeed in this industry will be required to stand out in the crowd. A person that is capable of sticking out their necks and who can take calculated risks to pursue their passion will succeed in this industry.
A skill that will definitely also improve your chances in this game is the ability to read and understand people well. This skill will provide you with many opportunities in this industry as your communication; concerning ideas, strategies or funding with co-workers and clients are vital for the future success of a fund. A person with the ability to efficiently communicate with others and understand their needs will excel in hedge funds.
Finally, hedge funds demand a person who is well balanced. If you are humble and disciplined while also being ambitious, hungry and intelligent you will find that hedge funds will welcome you into their corporate culture. An overall balance is important; this includes a balanced life style of good physical and mental health. Being a passionate sportsman can even give you a much needed competitive advantage.
While all these skills and characteristics will make you as attractive as possible for that dream hedge fund position they won’t help one bit if the fund itself is not profitable. If a hedge fund’s strategy is poorly performing in the markets no university degree, amount of passion or degree of jawline will make you rich. Choose the fund you want to work for carefully!
In the next section of bridging the gap into hedge funds I will discuss helpful tips to create competitive advantages necessary to compete for jobs in this industry. The next section will provide insight to begin working towards building a bridge into the hedge fund industry.
Tips and Steps for Beginners
So what have we learnt so far? We know that within hedge funds there are different roles, we know that hedge fund jobs offer top tier benefits and we know that a certain character type who possess a certain set of skills will flourish within this industry. While this remains useful and of importance to anyone seeking to discover life in a hedge fund; it is all theory and no action. The question we set to answer in this section is: where does one start in order to improve their chances of bridging the gap into hedge funds?
The first tip is to know what you want! This is valuable advice in any case but in the case of hedge funds it is the most important decision of your potential career in one. A half hearted effort to attain a position within a hedge fund will get you as far as a mutual fund if lady luck is on your side. The decision to pursue a career in hedge funds must be definitive. The certainty in your desire must provide you with passion and drive to begin this action packed process towards realizing your dreams. This passion must be evident in a growing knowledge, networking and skills base so make up your mind and begin educating yourself today. If you have decided that a career in hedge funds is the way forward, be sure to read up on Richard Wilson’s SKAR formula. Once you have confirmed that your pursuit of happiness is synonymous with your pursuit of a future in hedge funds the next steps to bridge the gap should be easier and more enjoyable simply because of a clear mind and determination.
The next step is to be familiarized with the hedge fund industry. Do this by collecting information that is relevant to the industry and up-to-date. Be sure to know the developments of the industry over time with regard to your specific geographic area, South Africa in our case, and the global industry. It is important to know where you will be able to add value and meet demands in the local industry but it is also highly beneficial to be well informed of the developments undertaken by the global pioneers of this ever changing industry. “Live locally and get inspired globally” is a great quote for this.
Furthermore, when gathering information and knowledge of hedge funds it is vital to learn who the major players are in this industry. This is essential for networking skills and goals. Lastly, being well acquainted with the jargon/definitions of this industry is of paramount importance. If you ever find yourself exchanging ideas with hedge fund professionals it is important to come across as someone who is knowledgeable and as a person that people can interact easily with. Being comfortable with the jargon/definitions within hedge funds will dramatically increase your chances of maintaining a healthy reputation at any networking event of this industry. These jargon/definitions includes common strategies used by hedge fund managers, so be sure to accustom yourself with these. The easiest ways to begin gathering all this knowledge would be to read a couple chapters of a hedge fund book every day, sign up to newsletters and stay up to date with the latest developments and begin associating yourself with people interested in hedge funds to share knowledge and insights.
The last step and tip for any prospective entrant into this industry is to figure out which role within a hedge fund your personality and passions suit the best. Are you passionate about trading or portfolio management, the analysis of assets or marketing and raising capital or a combination of roles? Figuring this out is easier said than done as this decision will greatly affect your future. This is a decision you will have to make as specializing into a role of hedge funds is vital! Once this choice is made and you are comfortable and sure of your choice, you can begin developing the knowledge, skill set and experience that is greatly needed in order to efficiently position yourself for potential employment in hedge funds. A helpful method of finding your specialty is “the three-circle approach”. This is done by considering three elements: your passions within this industry, your natural strengths and experience and the potential to be extremely profitable. The best decision to be made would be one that incorporates all three elements, therefore, choose the option that lies in the intersection of the three circles. This is a general decision making method and is always helpful in this industry.
Making these choices and progressing towards your goals is the best way to begin your path towards a career in hedge funds. Be brave! Create daily, weekly and monthly goals for yourself. Write articles of your own while consuming knowledge. Come up with ideas and get involved with a like minded group of individuals to begin developing much needed skills and connections. With a clear mind and determination resulting from a sense of direction based on your choices you will continually grow and reap what was sown.
The hedge fund industry resides in the world of finance. A world that is complex, competitive, hungry and fast paced. People in this world take advantage of what they perceive as finite opportunities available only to a fortunate few, thus, minimizing the extent of chivalry in this industry. Naturally, this should lead you to realize that working towards your dream job in a hedge fund will entail an action pact strategy that requires hard work and produces results. This is the reality of the finance world, a world that burns the fingers of anyone trying to exploit it without the sufficient education or connections. This world is inhabited strictly by professionals, so if you desire to move into it listen up and get ready to step up to the plate with these tips.
The first professional tip with regard to becoming a hedge fund professional is to specialize as much as possible. Specialization goes hand in hand with qualification, therefore, after earning your degree it is advised to begin an honors course which will further progress your skills and knowledge towards your desired role. Gaining an honors degree can add an additional zero to the end of your starting salary but there are more important qualifications in the hedge fund industry. All hedge fund professionals will agree that on graduation day it is of paramount importance to register and prepare for a Chartered Financial Analyst (CFA), Chartered Alternative Investment Analyst (CAIA), Chartered Hedge Fund Professional (CHP) or a combination of these qualifications. This will grant you the sufficient education to be recognized as somewhat of a professional in this industry and will provide you with a foundation to build a reputation.
On the topic of reputation, there is great advice that professionals in this industry would agree to; don’t ruin it! Take extreme measures to never engage or be associated with people engaging in unethical operations. These extreme measures entail due diligence and research into your own operations or the operations of your own boss. Being sure your actions are on the right side of the law will save your career and create sustainable personal development. Hard work, intelligence and experience will be more than enough help to be successful in this industry. Being lazy and cutting corners will result in your career being cut short and losing a reputation that has the potential to be priceless.
The most important tip is to begin proactively and practically developing relationships with industry professionals. These relationships must serve a clear purpose so choose wisely and hope for the best! The easiest way to begin building relationships is to complete an internship or several internships. Even the most elementary tasks within hedge funds can yield valuable information and experience. Be sure to give special attention to the details of how people come up with trading ideas, market the fund to raise capital and the activities of the fund manager and other employees. Engage with people and the environment to learn as much as you can about the workings and experiences within hedge funds. However, be sure not to annoy anyone. Asking too many questions is a quick way to irritate someone in a fast paced and aggressive environment typical of hedge funds. The key is to know when to act and when not to act; learning how to read people’s moods and how to adjust your behavior accordingly will prove valuable in this case.
Another possible relationship that will noticeably improve your chances of entering the hedge fund industry is a mentor-apprentice relationship. Developing this kind of relationship can prove to be lengthy but the benefits are worth the time it will take. Choosing a mentor wisely is important as a mentor can influence you greatly. Before developing this relationship know what position you want in a fund and choose a mentor in the same position. In fact, this relationship will work wonders for the learning curve of any apprentice, as the mentor will share many years worth of experience to his\her apprentice.
Lastly, once you have endured a couple of internships and a relationship with a mentor for the development of your specific career choice it is time to begin actively seeking jobs within hedge funds. This can be done in many ways. Networking will prove to be your greatest ally in this case. There are institutions such as the Hedge Fund Association or the Hedge Fund Group that can provide you with contact details to apply for an advertised hedge fund job or to cold-call for an unadvertised hedge fund job. Remember, confidence is key!
If you experience problems with developing any of these relationships or landing that first hedge fund job be sure to apply for positions at smaller funds that are undergoing rapid growth. These smaller funds may even provide you with a position that is better suited for your natural skills and passions, thus, creating more satisfaction and potential for growth.
Once again confidence in your abilities will be of vital importance for establishing your career path and future. Getting a foot in the door is essential, after that you simply have to prove to be resilient, passionate and humble. A great quote to summarize this section is,” It is not about what you know; it’s about who you know, but who wants to know someone who knows nothing?” So don’t be shy and keep in mind that it’s never too late to start learning!
The main goal of this chapter is to give our readers the best chances of landing a position within a hedge fund. We must now ask ourselves, “How does one get a hedge fund job?” The answer to that question is simple, you apply for one and a person decides whether you are the best choice or not. The keyword in the last sentence is “person”. Knowing the right people will get you places, for example: on the receiving end of a hedge fund salary. This example should lead to another question, how do I meet the right people? The answer to that is by networking!
When it comes to networking there are two main mediums; online social networking and personal networking which mostly occurs at networking events. A great motto which is applicable in many situations is,” if you fail to prepare, prepare to fail!” The first tip is to prepare for your oncoming networking experiences in every way possible! To prepare for as many possible networking encounters as possible you will firstly need to know what you want. In this specific case we want to network within the hedge fund industry but more specifically you must know what niche within the industry you want to network in and why. You may have multiple networking goals that demand networking with many role players, but no matter what the case is you must have a well understood set of networking goals.
Once these goals are well defined and understood you will need to begin preparing a variety of sales pitches for all your different goals; typically being: job hunting, marketing to potential investors or simply expanding social capital (your authority). However these pitches must be naturally executed during normal conversations. Do not come across as too forward and intimidating; rather be relaxed, focused and confident. Good tips for this would be to listen to the person speaking, ask questions, discuss market or industry news and initiate conversations that will allow you to comfortably make your pitch. If your only goal is to seek a job and you prepare a pitch based on research of firms that are currently hiring and you fortunately find yourself talking to a representative of one such firm you will have the opportunity to deliver your pitch. The pitch can be direct, if the time is appropriate, or indirect. The direct pitch will begin with the acknowledgement of an available position within the representative’s firm followed by an eloquent and well rehearsed request to be interviewed or short-listed for the position. Lastly, contact details should be exchanged and an answer will either be given to you immediately or at a later stage, be sure to follow up on this. An indirect pitch focuses on the development of connections in your social network, this occurs by reaching a comfortable level of communication with representatives of as many firms as possible. Then at an appropriate time you must simply describe your skills and preferred role, for example an equities analyst, within a hedge fund and exchange business cards. The point is that when the firm is seeking to employ an equities analyst you may already be short listed as a part of the firm’s network and therefore will stand a better chance of scoring the job. Prepare your pitches well and prepare your communication skills to deal with any situation to the best and most professional of your ability.
As you may notice it is a great idea to simply just exchange contact details or business cards. This is the process of reaching out and making new connections. Making new connections through networking events is ideal because shaking hands and personally meeting someone will allow them to be more influenced by your composure, professionalism and intelligence thus you will have a better chance of being remembered when a job is available or becomes available. However in today’s modern world a lot of networking takes place via the internet. With online professional social networks, such as LinkedIn, in today’s world someone keen on developing connections has an exponentially larger amount of potential connections than our fore-fathers did. These connections can be well utilized but in order to get noticed you will need to separate yourself from the average job seeker. To do this requires confidence and great communication skills. Your confidence will have to be backed up by written publications, positive referrals or a good reputation from your experience in this industry. In this regard it is important to gather and/or request referrals from people who you know will support you by describing your talents and passion in a positive light. Also to boost your networking attractiveness you should produce a body of work either in the form of a tutorial or a regular news update into the industry niche you desire to be in, this will give people a reason to want to know you. What you produce can be published via blogs and online social networks. Once your social network profile is backed-up by a viable knowledge base and referrals of your abilities and passion you will have the confidence to begin pursuing online connections, once again, remember to be goal orientated.
To conclude, let me remind you that even though online social resources open up hundreds of opportunities and new connections; goal-orientated networking is a very personal game. For example, the internet gives us information as to who is seeking new employees but an online application for a job is not likely going to beat a personally referred and well known connection ( applicant) of the human resources department. This being said, it is important to proactively attend networking events. Go out of your comfort zone to meet new people but remember that being honest and true to others is vital when networking. Make friends and business partners and be sure to check up on key connections to ensure your friendly face is fresh in their minds.