Not long ago, hedge funds were known for recruiting trading talent from investment banks. However, this is changing. These days, hedge funds are hiring an increasing number of people from masters in finance and MBA courses.
At the London Business School we have a good relationship with hedge funds: we opened a hedge fund research centre in 2001 and it’s now incorporated into our AQR Institute of Asset Management. Each year, we have around 100 hedge funds coming to campus, which gives us a pretty good idea what they’re looking for.
If you want a junior job in a hedge fund, there are few things you need to consider.
If you want to work for a hedge fund, you probably want to be a portfolio manager (PM) or analyst. But you’ll restrict yourself unnecessarily if these are the only hedge fund roles you’re considering.
These days, not all jobs in hedge funds involve analysis and portfolio management: we also place people straight into investor relations, compliance, operations, accounting and risk. People think hedge funds are just about analysis and investment, but this isn’t the case.
Hedge funds pursuing different strategies like to hire people with different types of qualification. We find that the more quantitative hedge funds like to hire people from our Masters in Finance or Masters in Management programs. However, funds with a stronger focus on company engagement- for example, event-driven funds and equity long short funds, are more likely to hire people from our MBA and MIM course.
Whereas banks will still train people, hedge funds are looking for people who can add value from day one. They still want an excellent academic record, but they also look for people with expertise in the industries they’re investing in. If you’ve worked in pharmaceuticals, for example, you might get hired by a hedge fund that invests in the pharma industry.
Just because you’ve worked in a bank, that doesn’t mean you’ll have the skills hedge funds are interested in. Hedge funds place a premium on skills like making connections between data and understanding the supply chains in investment projects. People with banking experience don’t always have that ability.
An understanding of supply chains is also popular – it means you can work across a number of different sectors.
If you go to work for an investment bank after one of our courses, you can expect to complete an internship. When you go to work for a hedge fund, it’s a bit different. – A lot of our students who go into hedge funds will work for the fund one day a week while they’re studying. They then have the opportunity to join full time when they graduate.
Lastly, hedge funds are happy to pay a premium for good talent, but the people earning millions and millions a year are outliers. We also advise our students to do some due diligence on the funds they join. If you join a fund with less than $100m under management, you might be taking a risk. Hedge Funds only start to become profitable above this mark and it has been difficult for them to raise capital in this current market as investors have poured their money into larger funds.
Ki Kuganesan is the Senior Sector Manager, Hedge Funds at London Business School's careers centre.