Are you an investment banker? Do you want to go to the buy side?
Bankers usually look to exit to private equity. However, the smartest bankers usually go to hedge funds.
Private equity is supposed to pay more and have more interesting work. In reality, modeling for IRR and operations is not much better than modeling for accretion dilution. Neither is rejecting 40 CIMs a week.
For private equity, it is hard for a junior team member to screw up a deal. For a hedge fund, bad ideas will get you fired. So no pressure.
As with private equity firms, the best ones pay the same or better than investment banking. For prestige and pay, the top firms are well known.
Blackstone, KKR, Apollo, Oaktree, Warburg Pincus, Texas Pacific Group and other megafunds will always be extremely hard to get into and offer a consistently good (but very hard) experience.
A small mid-market fund with a spotty track record is probably not a good decision purely on the basis of economics.
For hedge funds, getting into a good fund is a little harder to figure out. Sure there are obvious famous names such as Farallon and Pershing Square, but how many people does Bill Ackman hire a year? If you are not a finance aficionado have you really heard of Silver Point and do you know who Izzy Englander is? While private equity firms have very expensive websites, good hedge funds may have one page with a login for investors. You won’t find anything else and have to look at 13-F filings to look at what they are holding (which may not tell you anything).
Just like anyone with a search fund or who remortgages their mother’s investment property can call themselves a PE fund, anyone with a few hundred thousand dollars of their family and friend fund can call themselves a hedge fund. But you wouldn’t want to work for them.
Some signs that a hedge fund is good include high comp on par or in excess of bulge bracket investment banks, a rigorous hiring process, a track record of alpha generation (or fulfilling whatever mandate they have) and the employment history of the CIO or PMs or analysts.
Junior Level Hedge Fund Hiring
For junior hiring, usually a headhunter will reach out to you – or you know someone at the fund.
Depending on the jurisdiction and how serious the hedge fund is, the interview with the headhunter may be as difficult as the hedge fund itself – although abbreviated – if the headhunter used to work in finance in a serious capacity. No headhunter has time to go through a long thesis presentation and case study.
Most serious funds will have a multi-round (at least 3) hiring process where they meet a large number of key stakeholders – portfolio managers, analysts, head of credit, possibly the Chief Investment Officer. These will include various pitches and case studies – possibly take home, with a presentation in a final round. A full powerpoint deck, notes and Excel (model and supporting graphs) are expected.
The first round may be on the phone, and one of the rounds may be with HR or non-revenue generating staff.
In my experience there are around 3-5 rounds. Some funds will have assessment centres or those annoying IQ tests that some banks in Europe make you do (testing your pattern recognition skills by looking at ball shapes – for what it’s worth the ball shape test indicated my IQ was 148 just sayin’).
Mid-Level Hedge Fund Lateral Hiring
At the middle management level such as VP, hiring is more scarce and the stakes are much higher for the fund as the new employee will likely be making investment decisions.
Track record if moving from another asset manager is important, but it is not uncommon for mid-tier hires to come from non-investment or sell side backgrounds, especially in more illiquid or more structured asset classes such as private debt. Anything where you have to be familiar with credit documentation or workout situations would hire more at the middle level.
At these levels, case studies and pitches are common. A larger emphasis will be on meeting with all senior staff and having breakfast or lunch with the broader team to assess fit and to have a larger market or investment driven conversation.
I have seen IQ tests and actually some interviews with the firm psychologist (like Wendy in Billions).
Senior Level Hedge Fund Hiring
Not sure if any senior level people need to know this but for the dorks who read the website and will never end up working in finance anyway, the process is similar to the mid-level hiring but the emphasis will be on walking through past experience (especially around structuring a previous deal) and meeting with all of the top management of the firm.
There will also be dining with the rest of the team and possibly a psychiatrist interview.
Usually, what can be brought to the table is obvious and much more conversation is had around the compensation negotiation.