Hedge Fund Job Search Process – A Clear Roadmap

By July 31, 2016Job Search
Hedge Fund Recruiting Roadmap

The hedge fund job search process is fundamentally different from the path to investment banking.

In college, I’ve always had a clear roadmap for getting to the next stage of my career – whether it’s getting the grades or networking at the info sessions. But all of that changed after I hit the real world. There was no longer a college career center to go. There wasn’t a career counselor that drew me the path to a hedge fund. People figured out the way on their own.

When I first started, I thought hedge fund recruiting would be similar to what I’ve faced in the past – a straight road ahead:

Hedge Fund Recruiting

A couple weeks after I started my hedge fund recruiting process, I quickly realized the process was going to be more like this:

Hedge Fund Recruiting

Where the hell do I start? Am I spending my time right? Should I be talking to recruiters, networking with alums or mass dropping resumes?

If you have the same questions right now, I understand how you feel. When we look at our peers, some seem to find buy side jobs with ease while others are running in a circle of limbo.

I know that you are frustrated with the opaque nature of the hedge fund recruiting process.

What you want is a clear roadmap. A roadmap to ensure that you are doing the right things and spending your time efficiently. That’s what we’ll talk about today.

In this article, you’ll learn:

  • What the typical hedge fund recruiting season looks like, and how to plan for your hedge fund recruiting season.
  • How to split your time among job postings, networking and talking to recruiters.
  • How to maximize your chances of getting interview invites.
  • The best approach to networking to stand out among the pack.
  • Key steps to get yourself into the recruiters’ database.
  • The typical hedge fund interview process.
  • How to approach the case study.
  • Who to submit as your professional references.

That’s a lot of materials to cover! Let’s go over each step in detail to give you a clear picture. It’s a lot of information to take in, but having a clear picture will give you a big edge over the competition.

First, let’s go over the typical recruiting season.

There’s a timeline to recruiting which revolves around the annual bonus. Knowing this timeline maximizes your chance to land the best job opportunity.

Hedge Fund Recruiting Season

Hedge fund recruiting is different between the multi-manager mega funds and the mid – small sized funds.

Best-known mega funds include Citadel, Point72, Millennium, Fortress, Bridgewater, UBS O’Connor, and more. The recruiting season for these funds is similar to the private equity process. All mega funds either have internal recruiting teams or are represented by top-tier headhunters such as Glocap. Mercury, Pinnacle, Heidrick & Struggles, etc. Because of their size, mega funds have a fairly consistent number of openings each summer. Their internal teams or recruiters typically begin reaching out to analysts in investment banking, sell-side research, private equity, and consulting in February to March to fill openings for the next summer. The process used to start at around April to May, but has been pushing forward each year due to the intensifying competition for top talent.

If you are in a well-known group at a large investment banking or consulting firm, you would begin to hear from these funds in February to March. It’s best to begin preparing a couple months before the recruiting season. This mean you would start during the Christmas period to develop talking points for interviews and draft investment pitches.

During this time, you would also start building relationships with professionals at your target funds and get on the recruiters’ radars. We’ll go over below on how to network and reach out to recruiters.

The interview process for mega funds typically consists of 3 rounds and will definitely include a modeling test, case study, or a pitch.

That’s the hedge fund recruiting process for mega funds. Now, let’s talk about the mid – small funds.

If you are not in investment banking, sell-side research, private equity or consulting, don’t worry. Mega funds only represent a fraction of the hedge fund job opportunities at any given time. Unlike investment banking and consulting, the hedge fund industry is highly fragmented composed of thousands of firms in the industry, each with a small team of 4 – 10 professionals. Mid – small sized funds dominate the hedge fund job market.

These funds have lean teams and don’t have good visibility on their hiring needs until the bonus season. For the vast majority of funds, bonuses are paid out in January – March. This is when investment professionals switch firms and when hiring is at its peak.

For mid – small funds, start your recruiting preparation before the bonus season. In the fall, begin doing homework on your target funds and build relationships to learn about their culture and process. Get your resume ready, develop talking points for your interviews, and get your investment pitches ready to go. When bonus season comes, recruiting happens fast. Because of your networking and preparation, you’ll be at the top-of-mind at your targeted funds.

That’s the typical hiring cycle. Now that we are set on the timeline, let’s talk about the hedge fund recruiting roadmap:

Hedge Fund Recruiting Roadmap

Let’s go over each step in detail.

Hedge Fund Job Sourcing – How to Spend Your Time

To maximize your chances of getting an interview, you should focus on these 3 job sources: drop resumes to job postings, network to build relationships, and get yourself in front of recruiters. Resume drops get you immediate interview invites. Networking put you in line for upcoming openings at your target funds. Recruiter outreach gets you on recruiters’ radar for their future hiring engagements.

But don’t allocate an equal amount of time to each activity.

Instead, follow the 40 / 40 / 20 rule. Spend 40% of your time on resume drops, 40% on networking, and 20% on recruiter outreach.

A common mistake people make is over-allocating time to emailing recruiters. Recruiters work for their hedge fund clients, not us. Each recruiter only has a handful of active engagements going on at any given time. They spend 100% of their time on searching for candidates to fill these roles. If you are not a fit, they won’t respond. They don’t represent us job applicants.

On the other hand, spent 80% of your time simultaneously dropping resumes to job postings and networking. Let’s go over how to do that.

Hedge Fund Job Postings

Finding quality hedge fund job postings is very time-consuming. Efficiency is key here. Read the article 7 Best Sources to Find Hedge Fund Jobs to maximize your time effort.

Bloomberg is the best source for mid – small sized fund opportunities. LinkedIn tilts toward large fund opportunities because the posting fee is higher. The CFA society websites are for traditional asset management roles and don’t have many hedge fund opportunities.

To make your resume drops efficient, use email templates. Have a short 1 – 2 paragraph email template in your email app for easy copying and pasting. Just insert the fund’s name and role for each opportunity to minimize time spent sending emails.

Prepare multiple versions of your resume. Hedge funds look for analysts who can either be generalists or specialists that cover an industry, geography, or asset class. Prepare a different resume for each type of role. Target your resume to your hedge fund audience.

Always attach a cover letter, even if it’s for a small fund. Your resume only lists your skills and accomplishments, while a cover letter can describe your personal qualities to the reader. There are essential personal qualities to convey on your cover letter, which I cover in the article 5 Investment Analyst Qualities That Hedge Fund Interviewers Look For.

And always attach a short investment pitch, 2 – 3 pages long. It gives the fund an impression of your passion for investing and commitment to join the industry.

Hedge Fund Networking

Networking takes a lot of time and patience. But it’s the most important aspect of your recruiting process.

Networking has 2 purposes: to complement your resume drops and to build connections at your target funds.

To get an edge on your job applications, find a contact at the fund for every job you apply to. Each job posting gets hundreds of applications, while a hedge fund with a lean team is resource-constrained. It would sort through resumes very quickly based on experience and credentials, and can miss out on potential candidates who deserve a deeper dive.

To get the deeper dive you deserve, find a contact at the fund after each resume drop. Alum connections are the most effective. Use your school alum database and search by the fund name to see if there are results.

LinkedIn is the second most effective source for contacts. I recommend getting a LinkedIn Premium account, which will give you additional search features and put your resumes at the top of the pile for every job you apply to.

Email each contact with your resume attached. Directly express your interest in the role and ask for am information call. Similar to job postings, use email templates for your networking emails to speed up the process and minimize spelling mistakes.

The other purpose of networking is to find funds that directly fit your area of expertise. These are your target funds. If you are a healthcare expert or have an insight into Asian economic policies, then it’s much more efficient to reach out to funds that need your talent. These funds might not have a job opening at the moment, but they will down the road. You’ll be on their shortlist when spots open up.

Again, use your alum connections and LinkedIn Premium to find contacts within your network. Have a “specific ask” in your email. Attach your resume and a sample pitch, and directly express that you have an interest in the fund. Ask for a 30-minute call to go over your interest and experience.

Hedge Fund Recruiters

Use 80% of your time on resume drop and networking, and 20% on recruiter outreach. Directly asking recruiters for job opportunities is a waste of time.

If they have engagements they are working on that fit you, they’ll come to you. What you can do is get on their radar to maximize your exposure.

Recruiters source their candidates from 3 sources:

  • Lists of investment banking / consulting analyst and associates
  • Internal databases
  • LinkedIn search

Focus on getting yourself into as many internal databases as you can. As you come across recruiters on LinkedIn, go to their website and look to see if they have any email sign-up. Glocap is a prime example where you can sign up to get into their internal system and job postings. For independent recruiters, find their email contact and drop them an email with your resume. Mention the type of roles you are interested in.

LinkedIn has become the main pipeline for recruiters’ candidate search. Beef up your LinkedIn profile to get to the top of their search results.

Let’s do a test. Search for the keyword “equity research analyst” in your city on LinkedIn. Which result page do you come up on?

If your name is on page 20, you are in trouble. Recruiters will have contacted over a hundred candidates before they see you.

To improve your LinkedIn profile, put more descriptions in your work experience section. To take it to the next level, insert keywords into your profile which recruiters are likely to search for. For example, if you have covered the energy sector for the past few years, make sure that the keywords “energy analyst” and “oil & gas analyst” are prominently searchable.

Other ways to strengthen your LinkedIn profile is to connect with more people and join more relevant groups on LinkedIn. Second and third-degree connections are favored in LinkedIn’s search results. Having more connections builds more second and third-degree connections with recruiters.

Getting an MBA or CFA

A common question I get is how much do recruiters and hedge funds value having an MBA or CFA. Let’s talk about this.

For hedge funds, an MBA is not necessary and sometimes can hinder your ability to get into the industry.

Hedge fund portfolio managers are focused on generating alpha and love to hire analysts who have the same drive. Hedge funds want young, hungry folks who are driven to make money. Getting an MBA or CFA achieve the opposite: they take time and money.

As a result, some hedge funds look down on analysts with an MBA or CFA. They think that you should’ve spent the time to making money through investing rather than doing coursework.

Traditional asset managers, on the other hand, love CFAs and MBAs. Folks with an MBA or CFA come with solid finance foundation and bring prestige. The reason asset managers care is that their clients care. Their clients are either institutional pension funds, endowments, or individual wealth advisers, who are focused on the credentials of their asset managers in addition to their track record.

So having an MBA or CFA helps with marketing. Comparing the 2, CFA is more important because it’s more desired by institutional clients and wealth advisers.

Hedge Fund Interviews

Through the 3 channels of job sourcing – resume drops, networking, recruiter outreach – you’ll begin getting interview invites. The real test begins here.

Hedge fund interviews typically consist of 3 rounds.

A first-round phone interview, typically with 1 or 2 people from the investment team. For bigger funds, you would typically speak with an analyst or an HR person for the first-round screening interview. For smaller funds, you could be speaking to the portfolio manager for the first-round.

A second-round on-site interview can range from 4 interviews all the way up to 10. The purpose of this interview is to thoroughly assess both your fit with the fund and your technical skills. The reason for the marathon interview super day is two-fold. One, to make sure that you fit with everybody on the investment team. Two, to test your work stamina.

A third-round is the case study. This could be combined with the second-round if the fund is constrained on time or budget. The case study could range from an informal one-on-one Q&A session with the portfolio manager, or a firing-squad style presentation in front of the entire investment committee. The fund could either give you a name to present or, if you are lucky, you could get the opportunity to pick a company you are familiar with.

Hedge Fund Case Study

If you make it to the third-round case study, it means that the interview process is down to 2 – 3 finalists. You are almost there!

Tackling the hedge fund case study is a topic that needs its own discussion. Let’s address the essentials here.

A bare-bone case study needs to have the following:

Company – A brief description of the company’s business model and attractiveness. Talk about its industry position, product portfolio, points of differentiation, business segment, geographical exposure, competitors, customers, and suppliers.

Investment Thesis – Why is this company worth investing in? Typically, there are 3 major aspects to driving a stock’s upside: the company’s quality, upcoming catalysts, and valuation. Is it a high-quality business that will generate superior returns over competitors in the long-run? Does it have upcoming catalysts that likely lead to an earnings beat? Is the company undervalued compared to peers? Use these questions as starting points to form an investment thesis. Furthermore, focus on how your assumptions are different from others’. What do you see in the company’s quality, catalysts, and valuation that sell-side analysts don’t see?

Valuation – Regardless of whether valuation is the main point of your thesis, present your model and explain your assumptions. This demonstrates your superior financial forecast skills. You need to show that the company is either undervalued for a value pitch, or is reasonably valued for a quality-at-reasonable-price pitch.

Risks – What can go wrong that negates your investment thesis ? Every investment is a calculated risk, and for every potential upside, there’s a possible downside. Talk about these risks one by one to show that you’ve considered them.

A couple more points on the case study. If you can pick the company, try to pick a mid-cap business. A mid-cap company is not as well-known to your interviewers, which gives you an edge in presenting the thesis. For example, if you pitch Apple to a group of tech investors, you better be damn sure that you are the most knowledgeable person on Apple in the room. Hedge funds also have heard the Apple pitch hundreds of times, and a mid-cap pitch will be more exciting to them.

Pitch a stock consistent with the fund’s strategy. Pitch a thesis based on the company’s valuation a value fund. Don’t pitch a short thesis to a long-only fund.

Hedge Fund References

If you beat the competition and get the offer, congratulations! You’ve come a long way.

The offer is contingent on a background check and speaking to your references. Most hedge funds at this point will also ask you for at least 2 professional references to vouch for you.

What will the hedge fund ask? Questions to verify your skillset, work ethic, and ability to work in a team.

In most cases, you won’t be able to use your current manager as a reference. Of the 2 references, I recommend picking a senior person who you either indirectly report to or has left your firm. A senior person can speak to your skills and work ethic with authority.

If you don’t have another person for a second senior reference, pick a peer either at your current firm or has left. The person will be particularly helpful to speak to your leadership skills and ability to work in a team.

Wrap Up

That was a lot of information to get through! A lot of it will come to you in practice, and I recommend bookmarking this article to revisit certain topics during your hedge fund recruiting process. This article packs many practical tips that will become relevant at each stage.

I’m sure you’ll have many follow-up questions about your hedge fund recruiting process. Ask a question in the comment section below and I’ll get right back to you.

Keep your head up, don’t give up, and good luck!

Takeaways

  • The hedge fund recruiting season revolves around the annual bonus payout. For most funds, bonuses are paid in January – March. Begin preparing your resume and investment pitches before this period, and starting networking in the fall of the previous year.
  • The 3 channels to source hedge fund jobs are direct resume drops, networking, and recruiter outreach. Spend 80% of your time on resume drops and networking, and 20% on recruiter outreach.
  • Use email templates to maximize your efficiency and minimize spelling mistakes.
  • Complement your networking with resume drops. Research target funds that fit you. Use your school alum network and LinkedIn to set up informational calls.
  • Beef up your LinkedIn profile to boost your exposure to recruiters.
  • Prepare for a 3-round interview process with 6 – 15 interviews.
  • A bare-bone case study needs to have the following sections: company description, investment thesis, valuation, and risks.
  • Provide at least 2 references, with at least 1 person who’s senior to you.

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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