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10 Steps to a Career in Hedge Funds

by Giulio Rocca

Hedge funds refer to private investment partnerships that employ a variety of advanced and often risky trading strategies, such as leverage, short selling and derivatives. For career-seekers, the hedge fund industry is well known for its lucrative compensation that can run into the millions and, in some cases, even exceed a billion dollars a year for managers such as Steve Cohen of SAC Capital.

Perform a Self-Assessment

Before going further, ask yourself whether you truly wish to pursue a career with a hedge fund. Not only is the industry unstable, with hedge funds closing down every year from risky investments turned sour, but the work environment is highly competitive, high-pressure, and fast-paced. Ensure that these conditions align with your career aspirations, risk tolerance and personality.

Earn Relevant Education

If you haven't already, ensure that you acquire the requisite educational credentials. Hedge fund professionals usually hold bachelor's degrees, especially in quantitative fields such as economics or the sciences. In many cases, they also hold advanced degrees such as an MBA, MD, JD or PhD, which grants them additional expertise in finance, medicine, law or another discipline.

Acquire Relevant Experience

While you may work directly out of college for a hedge fund, most professionals have prior work experience in areas such as investment banking or investment management. Consider working as a sell-side or buy-side analyst to acquire relevant skills in analyzing and evaluating investments.

Familiarize Yourself with the Players

The hedge fund industry is highly fragmented, with thousands of small and larger players. While most of the industry is in New York City, many funds operate in other cities, if your geographic preferences lie elsewhere.

Familiarize Yourself with the Strategies

In order to intelligently select and interview with hedge funds, you first have to understand their investment strategies and, if appropriate, zero in on those funds specializing in strategies that best align with your skills and interests. Examples of strategies include macro, event-driven and relative value.

Network

Having identified the players that interest you the most, proceed by networking with professionals and recruiters who work in the industry. Leverage whatever contacts are available to secure informational interviews and meetings to learn more about the funds and current or future openings.

Prepare a Resume and Cover Letter

Once an opening becomes available, prepare your resume and cover letter ensuring that your skills and experience meet the needs of the hedge funds for which you're applying. Generally, you'll want to emphasize your financial and quantitative skills as well as any track record as an investment manager.

Prepare for the Interview

If you're selected for an interview, prepare in advance for the kinds of questions that you may receive. Hedge fund interviewers often test general quantitative skills as well as subject matter expertise. Further, they may employ brain teasers to assess how quickly and logically you think on your feet.

Attend the Interview

As with any job interview, dress accordingly. The majority of hedge funds adopt formal business attire, particularly in New York City. In addition to answering the interviewer's questions, demonstrate enthusiasm for the position and establish rapport with the professionals that you meet on the day of the interview.

Accept an Offer or Extend the Search

If you don't receive an offer of employment, continue networking and submitting applications to different hedge funds. Don't be discouraged; it's a competitive industry. If you're unable to secure a hedge fund position, consider strengthening your resume by acquiring more relevant experience in investment banking or investment management.

About the Author

Giulio Rocca's background is in investment banking and management consulting, including advising Fortune 500 companies on mergers and acquisitions and corporate strategy. He also founded GradSchoolHeaven.com, an online resource for graduate school applicants. He holds a Bachelor of Science in economics from the University of Pennsylvania, a Master of Arts in English from the University of Hawaii at Manoa, and a Master of Business Administration from Harvard University.

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