High-earning roles, reserved for a select group of graduates

A ‘normal’ investment is usually in stocks, bonds and cash, made with a view to earning interest or dividends, or because the value of the investment is expected to rise over time.

Alternative investments cover a broader range – from wine to art and real estate. Here, however, we will look at hedge funds and private equity.

Hedge fund managers also invest in stocks or bonds but while traditional fund managers do so in the hope that prices rise, hedge funds use strategies to make money even if they fall.

Private equity funds invest in companies that are not listed on the stock exchange, from ‘seeding’ smaller firms (through venture capital) to buyout funds, which invest larger sums in established companies and usually use debt to finance the transaction.

Key players

In 2011, the top five ranked hedge funds by assets under management were Bridgewater Associates, Man Group, J.P.Morgan Asset Management, Brevan Howard and Och-Ziff Capital Management Group, according to Bloomberg Markets Magazine.

Within private equity, the largest firm by funds raised over the past five years is TPG ($49.8bn), according to figures from Private Equity International. Other US fund houses – The Blackstone Group, Kohlberg Kravis Roberts (KKR), Goldman Sachs Principal Investment and The Carlyle Group – make up the top five.

Roles and career paths

There are three key areas in the front office of a hedge fund: analysis, sales and marketing, and trading. Analysts look at the companies, markets and financial products the hedge fund invests in (often they are called ‘idea generators’); sales and marketing liaise with investors and persuade them to put money into the fund; traders act on the analysts’ recommendations and place trades.

In a private equity fund you’ll probably start out as an analyst looking for possible investment targets. You can then move into the role of principal, appraising whether a deal is worth pursuing and sorting out legal issues.

At the top are originators, usually partners in the firm, who sniff out deals and oversee everything.

Graduate recruits are rare, however, and either experience in investment banking or a top MBA is usually required.

Pay and bonuses

Skills sought

Hedge funds are not big recruiters of graduates, but an increasing number have programmes to recruit juniors. Man Group’s talent and recruitment management business partner, Helen Ogilvie, says that they recruit a “relatively small number of ambitious individuals”. Specifically, in order to work in the hedge fund industry, she says: “Graduates must be numerically strong with an active interest in the financial markets.”

If you want to work in private equity, it’s important to both have both expertise in various industries, highly developed numerical skills and an ability to build relationships with “management teams, senior advisors, external advisors and industry experts”, according to Sandra Ozola, head of HR at KKR Europe. “Our investment professionals need to identify attractive investment themes and opportunities, gather and synthesise industry and market data, and conduct extensive analysis on potential investments, including in-depth financial modelling,” she says.