Investment banks will preach the need for a ‘cultural fit’ in the people they take on, but many hedge funds – where employee numbers can be comparatively tiny – will outright test applicants’ personalities to ensure potential employees slot into the team.
This can be anything from formal psychological tests by providers like Caliper, Myers Briggs or the Hogan, to more off-the-cuff bespoke questions aimed at getting an idea of candidates’ opinions and motivations. They can be tricky to manoeuvre; there’s no right answer and one firm's ideal response could be black mark from another.
For example, you may be asked to respond ‘true’ or ‘false’ to the statement ‘I don’t like being told what to do’. In one case, answering true could be an indication of your autonomy and independence – a valued trait in a hedge fund trader – but could also imply that you’re difficult to manage, which could count against you.
“Hedge funds use these tests both for recruitment purposes, and as valuable tools for self-learning, or to help coaching,” said one trading coach who works with hedge funds. “One problem for using tests for hiring is that many of them have embedded biases, as norms can be different for males versus females, or different racial or ethnic groups.”
Personality tests are not make or break, but they are both commonplace in hedge funds when it comes to developing an ideal fit for both new candidates and existing employees. In other words, hedge funds will assess the personalities of current employees doing well, and try to bring in similar new staff: “Those that do these tests often look to compare the candidate's profile to those who've been already successful at the firm,” said Anthony Keizner, managing director of headhunters Glocap.
They can be incredibly laborious. Michael Martinolich, a hedge fund-focused partner at headhunters Caldwell Partners, suggests that they can take five to six hours: “Most people are not rejected because of a personality test, but they can raise red flags that may not have otherwise been spotted throughout the recruitment process.”
Interview questions designed to test personalities also have the propensity to be inherently weird. At Bridgewater, for example, questions are asked on candidates’ views on abortion or god as part of the vetting process. Meanwhile, cryptic questions like ‘what is your favourite email address and why?’ have been thrown in among more technical and competency-based interview questions. The interview process is also generally designed to create a pressure cooker environment to test how candidates will react – sentences being interrupted, arguments being attacked.
Ultimately, though, there’s no secret sauce to success, believes Keizner. “Trying to 'game' the answers can end up with you looking confused, at best, and dishonest, at worst. And wouldn't you only want a job offer from a firm that has evaluated you as being a cultural fit and having a high chance of making a successful career at that firm?”
When it comes down to it, hedge funds are more likely to assess your academic qualifications and performance track record than whether you’re extrovert, intuitive, thinking or perceptive: “The hedge fund industry has been built upon talented managers generating returns for their investors, not 'ENTJs' or 'assertive, team-builders',” said Keizner. “Amongst industries, the hedge fund space is one that has supported some of the most diverse personalities - from the quiet, brilliant and intensely analytical to the most colourful, creative and charismatic. Regardless of their personality type, they can all be successful - as long as along the way, their strategies consistently make money.”