Starting a career at a hedge fund can be hard for those who don’t know the process. For most funds you simply don’t walk in off the street and get your job. This is because these funds have closed interviews where they invite people to apply. You have to know someone to even get a chance at landing one of those coveted positions.
There are only 3 paths to landing a job at a hedge fund.
- Get a Bachelor’s Degree from a ‘target’ school
- Obtain industry certifications and network
- Switch over from sell side firms
Each of these above paths require years of dedication and energy. Very few people land a hedge fund job as their first job without knowing someone at the fund. For us average people these paths are the only way to get an extremely high paying job in the world of hedge funds.
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Without wasting any time, let’s jump right into the 3 paths to getting a job at a Hedge Fund.
A Word of Warning on Hedge Funds.
Before we even begin on the paths I have to warn you. The world of hedge funds is dying, it’s a dying industry because now clients often manage their own money (family office) or invest in industries outside the market (private equity firms). Funds are having to cut traditional pricing structures (2&20) to keep capital from flowing out of their firms. (Source)
Of course there are outliers such as Elliot Management (‘activist firm’), Bridgewater Associates (‘Global-Macro’), and Renaissance Technologies (‘quant’). These funds are amazing at their respective investment methodologies and the prevention of Alpha decay within their portfolios.
That being said, a majority of the industry is changing. In the 90’s ETFs started popping up in the market, allowing clients to directly invest in an Index. Further, clients have started growing their own family offices internally and diversifying their total portfolio.
What this means for possible fund applicants is that there is a good chance that your fund will begin to stagnate or decline in total AUM (Assets Under Management). Management will have to cut costs, and the first to go are the junior employees.
That being said, working at a hedge fund is an amazing possibility where you will learn from professionals in the field. There really is no other industry and if you’re passionate about the markets and how to grow a position/portfolio properly then I highly suggest looking into a career.
For an article on what the lifestyle is like for a fund analyst/manager check out this article I wrote. (Here)
Path 1: Get A Bachelor’s Degree From A Target School
Although target schools have become less and less common in the past couple years, graduating from an Ivy League University in the U.S is still an easy way to get recruited. The top funds hold recruitment drives at universities such as Harvard, Princeton, Stanford, Princeton, Yale, and Wharton (UPen).
There are two reasons for this. First is networking. The current fund employees graduated from one of these universities and believe that the only good candidate for the fund’s analyst position is at one of these universities. Often a funds HR team will get a recommendation from one of these analysts who knows of a possible candidate that graduated from one of these universities.
The second reason is because the skills needed to properly analyze, hedge, and generate capital are not taught at most universities. Even in a finance degree at a normal state school your professors won’t teach you everything you need to know to compete in the interview against other more qualified candidates. The Ivy leagues know that their candidates go to funds and investment banks, so they teach them the skills needed to land that job.
Recently however this has begun to change. With the advent of computer driven investing you can easily grab a job fresh out of college at a top tier firm with just a computer science degree. Renaissance Technologies, one of the best funds in the world, will hire you with a bachelor’s degree in computer science for example. (Source)
One of the main paths to a hedge fund job and career is to simply go to the right school. It’s pretty easy, and will get you an internship/interview if you play your cards right.
Path 2: Obtain Industry Certifications and Network
Networking, this is the secret ingredient to getting any good job.
If you did not graduate from a target school or have a computer science degree another path you can take to getting your first fund job is to get the proper certifications and network. The main certification you should look into getting is the Chartered Financial Analyst certification (CFA). (Source)
The CFA is going to show potential employers that at the very least you know the math surrounding the industry of hedge funds. However, it is important to know that the CFA is not a golden ticket into the land of hedge funds. Rather it is a stepping stone.
What is really going to get you that coveted job is to network professionally. After signing up for the CFA program you will have access to your local chapter, my local chapter always hosts meetings and events. You need to show up to these events and network with others. Doing so will get you at the very least a paid internship, which will lead to a fulltime job.
Another industry certification that is gaining traction is the Chartered Market Technician (CMT). (Source)
The CMT is a great program that will set you apart from other candidates. However just like the CFA it is not a golden ticket. You will need to network and interview well to beat out the other possible candidates.
If you’re interested in the CMT I wrote an entire article explaining it. It will allow you to see if it’s a good pick for your career. (Article can be found here)
Getting those industry certifications and networking is one of the fastest paths into the field, however it is a ton of effort. For someone who has no experience in the industry the CFA and CMT will take you about 900 hours of dedicated studying to get. (Source)
Path 3: Switch Over From Sell Side Firms
For the uninitiated there are two sides to the professional investment world. Those who sell the securities (sell side) and those who buy them (buy side). Buy side is hedge funds, as they buy the assets/securities to profit off closing their position at a later date.
Sell-side on the other hand creates the market in which the investors play. A sell side firm or investment bank will take a company IPO (Initial Public Offering) or offer capital/bonds to public entities. Also they will “sell” research to the general public or stock brokers.
Working on the sell side of high finance is extremely time consuming and most sell side analysts will put 80-90 hour work weeks in, every week. Because of this they very quickly become experts in their designated sector/field. Also they end up sitting on boards of companies that will eventually go public, thus they have networking possibilities. (Source)
The common thing you see on the street is people doing their “time” sell side and then switching over to buy side. This is because they already have the skill set and now just work for the other side of the coin, the buy side funds.
This path to a job in a hedge fund will start you out with the highest salary, often in the $200,000 range. However you will have to do close to 2 years of 90 hour work weeks at an investment bank or sell side firm to be able to finally switch to a buy side hedge fund.
I don’t recommend this path, but if you’re already in the field on the sell side it might be the easiest one for you. If you chose this path to get a job at a hedge fund over the other ones, you will suffer from burnout and might leave the industry within the first year. It’s a hard life, and not everyone is cut out for it.
There you have it, the 3 paths to getting a job at a hedge fund. Each of the above paths take their own route and lots of energy. By far the easiest way to take is to just get a bachelor’s degree from a target school and then intern. I personally know people who have taken this route and they never worked more than 50 hours in one week.
Compare that to the sell-side or certification/network route. Those guys will put in 100 hour weeks if that is what it takes to get to their dream buy side hedge fund job. If you meet one of these guys in the field, know that they are the real deal. They can recite an entire 10-k to you at a bar at the end of the day.
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Further, you can check out some of the other articles below.
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Until next time, I wish you the best of luck in your investing journey.