5 Investment Analyst Qualities That Hedge Fund Interviewers Look For

By July 17, 2016Job Search

Great investment analysts come in all different shapes, sizes, and personas. They range from the ultra-aggressive Bill Ackman types who pound the table in management meetings, to the congenial Warren Buffett disciples who happily collects “cigar butt” businesses.

But despite the personality differences, all great investment analysts share 5 traits that make them successful. Regardless whether you are a Bill Ackman or a Warren Buffett, having these qualities make you a great investor.

Demonstrating these traits throughout your hedge fund recruiting process is important because these qualities are what hedge fund portfolio managers look for. Having these qualities make you stand out among the pack of investment banking analysts and management consultants. But how do you convey that you have these personality traits on a resume or cover letter? We’ll over this in detail.

In this article, you’ll find:

  • The 5 personal qualities that make a great investment analyst.
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  • Why these qualities are important to hedge funds.
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  • How you can show these qualities on your resumes and cover letters and in your interviews.

Here we go, we’ll jump straight to it.

5 Investment Analyst Qualities That Hedge Fund Interviewers Look For

 

1. Business Curiosity

Investment analysts are not only intellectually curious, but also have a special passion for learning how different businesses work. If you are in investing, you do a lot of reading. While general history, fiction, and pop culture are sprinkled here and there in your reading list, it largely consists of materials on industries, companies, and investment philosophies.

You binge-read these topics because you are curious about what the latest market and industry trends are, how businesses change their operations to adjust to these trends, and whether these changes make sense. Reading these makes you tick because it makes you feel like an active participant in the world economy and it satisfies your intellectual curiosity.

Why business curiosity is important to hedge funds:

Day in and day out, hedge funds predict market, industry, and business trends. If reading and thinking about these topics are natural to you, working at a hedge fund won’t feel like work. Instead, you’d feel that you are part of a community that shares the same hobby as you do. You’d want to learn about these companies to draw conclusions on their prospects and discuss them with your portfolio manager. You’d also be eager to cross-check your thoughts with peers and company management on road trips and at conferences.

2. Independence

I was an ex-investment banker at J.P. Morgan. When I moved to the buy side, the most drastic change I noticed was how much autonomy I was given. Back in investment banking, my projects and hours were purely dictated by a strict hierarchy of managing directors, executive directors, and vice presidents, down to every font size and punctuation on each powerpoint.

The buy side is on the other extreme of the autonomy scale, and it took me time to get used to the new environment. Between screening for new investments and reviewing existing positions, I choose how I spend time and where to spend it on. I decide where to look for potential investments, who I need to talk to for the right information, and which conferences I should travel to. Excelling in this autonomous culture takes an entrepreneurial spirit. If you are a person who loves working independently to get things done, you would be a great investment analyst.

Why independence is important to hedge funds:

Unlike big investment banks and consulting firms, hedge funds are lean teams without much of the rank and file middle management. Each person needs to pull his or her own weight to contribute to the portfolio.

This is especially important when you first join a hedge fund. Instead of having training fed to you, you would proactively seek out guidance and make yourself productive from the get-go. Portfolio managers prefer analysts who can learn the rope independently and contribute proactively.

3. Risk-Taking

As an investment analyst, you like to learn about businesses and do so with an entrepreneurial spirit. But more importantly, you act on your conclusions to make money.

This seems easy to say on paper – who doesn’t like to make money? But in practice, we know that predicting trends is difficult, and no one gets it right 100% of the time. You rarely have 100% certainty. The best you can do is assign probabilities to different potential outcomes. Investing is about taking calculated risks, and you need to be willing to put your money at risk to capitalize on your analysis.

Why risk-taking is important to hedge funds:

Your ability to take risk is what separates you from an investment banker or a management consultant. They work on transactions and earn commissions, while you generate alpha by making calculated bets on your analysis.

Calculated risk-taking defines the culture of successful investment teams, and everyone on the team needs to have this trait, from the Chief Investment Officer down to the junior analyst. If you can take risks and live by them, investing is a long-term career for you. Hedge funds want talent with long-term career potential in making money, not short-term analysts who just produce reports.

4. Healthy Skepticism

Not only are you intellectually curious, but you don’t take every word you read or hear at face value. You are an active thinker and a natural skeptic. Your Myers-Briggs type ends with “TJ”. When you read a research report, you have a natural tendency to judge whether a statement is a fact or an opinion and whether it makes sense to you. When making an investment recommendation, you come up with your own conclusions by gathering and analyzing facts.

At the same time, you are not neurotically contrarian by dismissing everything others say. You aim to have a healthy dose of skepticism. When you take in someone else’s opinion, you simply decide for yourself whether it’s true. After all, there are a lot of smart people out there who understand certain niches better than you do, and they are right a decent amount of time.

Why a healthy dose of skepticism is important to hedge funds:

This is your value-add as an investment analyst. Each day you are fed with tons of analysis and thoughts from external sources – sell-side analysts who are perpetually bullish, and company investor relations whose job is to speak well of their management. Without your healthy dose of skepticism, you are simply the messenger passing unfiltered opinions straight to your portfolio manager. Your portfolio manager wants YOUR analysis on the investment decision at hand.

5. Emotional Stability

This is something I learned from business school that I’ll remember forever. There are 5 overarching categories of personality traits:

  • Openness to experience – inventive/curious vs. consistent/cautious.
  • Conscientiousness – efficient/organized vs. easy-going/careless.
  • Extroversion – outgoing/energetic vs. solitary/reserve.
  • Agreeableness – friendly/compassionate vs. analytical/detache.
  • Emotional stability – sensitive/nervous vs. secure/confident.

Every successful person scores on the extreme end in 1 of the 5 categories. For Warren Buffett, he scored on astronomical levels in emotional stability.

This has been an underappreciated fact of Buffett’s success. He is psychologically wired to withstand market volatility and hold to his conviction in his portfolio companies. (It’s also because of his extreme emotional stability that his marriage ended.)

What does it mean to have high emotional stability? It means that you are less sensitive to the highs and the lows of external emotional stimulus. Your life is far from an emotional roller coaster, but rather a cruise on a steady path. You have an air of calm and think logically at all times, regardless whether you are going through the excitement of generating alpha or feeling the pain of losing capital.

Why emotional stability is important to hedge funds:

Having discipline is one of the most important traits of a good investor. You set your upside and downside price targets, and you adhere to them. The natural human tendencies in investing are that:

  • When we make money, we tend to do nothing and enjoy the ride.
  • When we lose money, we want to stop the pain badly by selling our losses due to risk aversion.

This is why investing is difficult. Hedge funds want investment analysts who recognize this behavioral tendency and can provide logical recommendations at all times, regardless of market conditions. Great investment analysts have the innate ability to stay disciplined, adhere to their price targets, and hold onto their convictions.

How to Convey These 5 Qualities on Resumes / Cover Letters and in Interviews

 

Now we know what hedge funds look for in a great investment analyst, let’s talk about how to demonstrate these personal qualities to your hedge fund interviewers.

The first 3 qualities can be directly demonstrated on resumes and cover letters:

  • Business curiosity
  • Independence
  • Risk-taking

It’s tougher to say that you have a healthy dose of skepticism and emotional stability on your resume and cover letter. These are personal traits that can only be shown through your demeanor during interviews.

Resume:

Talk about your industry knowledge and deal experience to demonstrate your business curiosity. You can either talk about the depth of your experience – the amount of work you’ve done on a project from start to finish – or you can show breadth by listing multiple projects across different industries and geographies. Both depth and breadth would convey to the resume reader that you love learning about businesses and that you’ve done a ton of it in your current role.

Next, take your resume one step further by adding bullet points of your leadership roles. When did you proactively seeking out new projects to work on? How about when you led initiatives yourself? These are great examples to demonstrate your independence / entrepreneurial spirit.

Lastly, risk-taking. Unless you are a trader, it’s hard to directly say that “I’ve taken risks at my current role”. Instead, end your action bullet points with results. What were the outcomes of the projects you’ve taken on and the initiatives you’ve led? How did they help your clients? Listing your results, and quantifying them where you can, would show that you are a performance-driven person.

Cover Letter:

Your cover letter usually starts with a short summary of your career path so far, and the rest describes on your experience, achievements, and fit. When you write your cover letter, make sure that you demonstrate the 3 traits mentioned above. After the reader finishes reading, his or her takeaway should be that this is a curious, proactive, and results-driven person.

The best way to do this is to list these 3 traits as bullet points to make them stand out to the reader. After describing your experience, use this bullet point template to demonstrate your 3 qualities:

“I’m passionate about investment research for the learning opportunities, entrepreneurial environment, and measurable performance:

  • Learning Opportunities: I have a natural curiosity to learn about industry dynamics and business strategies. Covering a range of securities and making investment recommendations at [firm] would satisfy my intellectual curiosity.
  • nbsp;
  • Entrepreneurial Environment: I love being in an entrepreneurial culture, where I can proactively add value by performing independent analysis and discussing with the team to draw investment conclusions.
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  • Measurable Performance: I enjoy building to a long-term track record and get quantitative measures on my investment recommendations.”

Having these bullet points improves your cover letter’s readability, and directly gets the 3 qualities across to your reader.

Interviews:

You should have stories prepared to demonstrate your curiosity, independence, and risk-taking for your interviews. Expand on your resume and cover letter bullet points by having an engaging conversation with your interviewer.

At the same time, this is where you can demonstrate healthy skepticism and emotional stability to the interviewer. When talking about your projects and achievements, walk through your analysis in a logical manner. Give an example of a time where you performed through under pressure. These would demonstrate to your interviewer that you develop your own conclusions and have emotional stability.

However, be natural in your interviews and let your personality shine through. Having emotional stability doesn’t mean that you’re boring. Activist investor Bill Ackman might be a flamboyant person, but his actions reveal consistent rational thought to support his investments. How you convey your ideas and your thoughts will demonstrate emotional stability.

There you go, the 5 traits of a good investment analyst that hedge funds look for, and practical advice on how to get them across to your hedge fund interviewers. Good luck, and keep calm!

What qualities do you think makes a good investment analyst? Leave a comment below and I’ll get right back to you.

 

Takeaways:

  • Great investment analysts demonstrate business curiosity, independence, risk-taking, a healthy dose of skepticism, and emotional stability.
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  • Hedge fund portfolio managers prefer analysts with these qualities because they proactively contribute to the investment team, do so with passion and minimal oversight, and provide good investment recommendations over the long-run.
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  • When you write your resumes and cover letters, use bullet points to convey that you have business curiosity, an entrepreneurial spirit, and a results-driven mindset.
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  • Prepare stories to demonstrate these the qualities to your interviewers, and let your rational thinking and emotional stability show through naturally.

Author Kelvin Jiang, CFA

Kelvin Jiang has a decade of investment experience in public equities, private equity, distressed debt, and leveraged finance. His journey spans across Calamos Investments, Thornburg Investment Management, CHS Capital, and J.P. Morgan. Throughout his career, Kelvin has screened and interviewed candidates extensively for the buy side. Kelvin earned an M.B.A. from the Kellogg School of Management and graduated magna cum laude from Columbia University. He is a CFA Charterholder. In his spare time, Kelvin is an avid commentator on NBA trade rumors and Oscar-worthy performances.

More posts by Kelvin Jiang, CFA

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