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Career Insights

11 Most Popular Hedge Fund Strategies

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It’s important to join a hedge fund with an investment strategy that fit you in order to have longevity in this career. Today we’ll go over the most popular hedge fund strategies. Let’s start with an overview of the hedge fund industry.

Hedge funds are private investment vehicles aimed to generate positive absolute returns for institutional clients and high-net-worth individuals.

Hedge funds are usually structured as partnerships. Portfolio managers are typically general partners of the fund with investment decision-making responsibilities. They hire research analysts to cover existing and potential investments, who are typically aligned by asset class (for example, debt vs. equity), industry (financials vs. consumer), and geography (emerging markets vs. U.S.).

The hedge fund industry has grown substantially over the past 2 decades and can no longer be considered a homogeneous asset class. There are estimated 9,000 hedge funds in the U.S. today with $2 trillion in assets under management.

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Detailed Explanation of the Hedge Fund Career Path

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The typical hedge fund career path begins 1 – 2 years post-college. Unlike large banks or asset management firms with comprehensive training programs, hedge funds are small, nimble operations with few resources to teach someone analytical finance from the ground up. Getting into a hedge fund straight out of college is difficult.

The traditional post-college career path to a hedge fund are investment banking and sell-side research. Both are great at giving you a solid foundation in company research and financial valuation, which involves analyzing company and industry trends, modeling and forecasting, valuation, and presenting your ideas in a clear, succinct way.

Besides investment banking and sell-side research, the next most common career path to hedge funds is management consulting. Consultants would get the same fundamental skillset for hedge funds, but with more emphasis on company and industry analysis over financial valuation.

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The Difference Between Working at a Mutual Fund vs. Hedge Fund

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Today we continue the conversation with our investment industry veteran, who began telling us the story of investment banking to the buy side. In Part 2 here, we’ll talk about what it’s like to work at a mutual fund vs. hedge fund. Working at a mutual fund vs. hedge fund has a lot of similarities on the surface. After all, it’s all about investing!

However, as we dig deeper into the comparison, we’ll see that there’s are significant differences in the lifestyle, nature of work, compensation structure, and career trajectory. Some of the answers might surprise you.

Without further ado, let’s get right down to it and continue our conversation. If you haven’t read the first half of the conversation, I recommend you start with Part 1 here.

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Insider Advice on Investment Banking to Hedge Fund

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When I recruited for the buy side as an investment banking analyst, I thought it would be fairly easy. After all, everybody said that investment banking was the best career path to a hedge fund. After going through the process, however, I can say from experience that there’s no easy way to the buy side. Not even for investment banking to hedge fund.

Today, we speak to an industry veteran who has done it all: engineering, investment banking, family office, hedge fund, and mutual fund. Very few people have this level of insight on how to get to the buy side by making multiple career transitions.

Needless to say, a lot of networking and career planning was involved. We’ll talk go over this person’s career in detail: networking, recruiters, nature of work, the difference between investment banking and hedge fund, and whether it was worth it.

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Do I have the right background for hedge funds?

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Self-confidence can be elusive, especially when you are trying to break into investing, one of the toughest careers to get into. Give yourself credit, though. Just making that career decision alone speaks volumes about you. Remember the moment that you put your foot down on having a hedge fund career? That was already a major vote of confidence in yourself. Yet, why do so many of us doubt ourselves as we dive deeper into the hedge fund job search? Why do we have constant insecurities about whether we have the right background for hedge funds?

This self-doubt is pervasive. It affects everybody who has ever thought about making a transition to asset management. I mean everybody, from the ex-Goldman Harvard Business School grads to the liberal arts college seniors.

The self-doubt comes in an alphabet soup of “if only” thoughts…

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