A hedge fund manages a pool of money for large investors. First started in 1949 by Alfred Winslow Jones, hedge fund was inspired while writing an article in 'Fortune' magazine about current investment and managing money. Jones himself raised $ 100,000, including $ 40,000 out of his own pocket, and set forth to try to minimize the risk in holding long-term stock positions by short-selling other stocks. This investment innovation of Jones is now referred to as the classic long/short equities model. Jones also used the concept of leverage in an effort to enhance returns.
Hedge fund job
The attraction of a hedge fund job is in its returns. The fund compensates for managing investments by taking a management fee, usually hefty, typically 2% of assets under management per year. In addition, a percentage of returns over a benchmark are paid for performance as well. The carry is almost 20%. For instance, a hedge fund with $2 billion under management and a 2/20 compensation scheme would simply generate a whooping $40 million in management fees plus whatever is made on the carry.
Hedge fund jobs are in great demand. Infact many MBA graduates as well as experienced financial professionals look for possible ways to enter into the hedge fund industry. There are individual and specific recruiters for hedge fund jobs. Those looking for placement in areas of quantitative analysis, risk management, and sales and marketing can instantly search and receive latest tailor-made jobs in the hedge fund community.
Placement reports in few schools in Chicago, Columbia, Harvard Business School and Stanford indicate that there was MBA hiring into hedge funds in 2007 and 2008 but declined for the classes in 2009/ 2010. Still there are plenty of opportunities to be had in hedge fund.
Hedge fund career
Many consider a hedge fund job as most desirable. This is all the more so, in the finance field. This is mainly due to the fact that a senior fund manager can afford to garner a whooping share of the compensation depending upon the size of the budget.
There are many hedge fund jobs available, other than the ones in the finance quarter. They are software developer, risk manager and in various administrative roles. The gamut of hedge fund jobs also includes working as a junior trader, strategist, analyst, quant, software developer, risk manager and other administrative options.
Hedge fund managers routinely engage themselves in short selling - betting that a security will decline in value. For instance, a long/short equity fund will try to be market neutral and instead of making an excess return, there would be shorting stocks headed down and those headed up going long. The excess return is called 'alpha'. The managers also facilitate borrowing against assets in the fund in order to buy more securities.
In hedge fund jobs, the incumbent is close to money so much so that he/she can estimate the take home. This is the kind of job where one can easily and directly measure the profit depending upon performance. The larger the number, the bigger the compensation.
Present scenario in hedge funds
In keeping with the global recession, hedge fund also underwent unusual turbulence in late 2009. Many hedge funds had to be shut down. But all is not lost and there is hope yet with new hedge funds trying to shoot out again. Hedge funds are here to stay and probably will rise to newer heights before long. Opportunities for alpha are already out and there is no better time than the present to exploit these opportunities.
Locating hedge fund jobs
There are certain websites including commoditycareers.com, HedgeFundMessageBoard.com, which can be great online resources for hedge fund jobs. In addition, there are plenty of Hedge Fund Employment guides and Hedge Fund Jobs guides available online. HedgeFundCertificate.com is run by a firm which trains and issues certificates for obtaining hedge fund jobs.
Books like Hedge Me provide insight into the career path options that hedge funds offer and the compensation and major firms in the industry. Alternatively, hedgefundsbook.com also throws light to fund managers on hedge funds. Those interested can join Hedge fund groups on Linkedin.com and improve on hedge fund or investment resume.
There are few fund professionals who have scored big in hedge funds even without any formal graduation from high school. This job entails trading or selling for a hedge fund. Although there are no hard and fast experience requirements, the candidate should be hungry, humble and smart.
Planning for hedge fund job
It may be an entry-level position or a mid-career shift to work as a hedge fund manager, this plan could help an aspiring candidate get off a lucrative start. Nevertheless, it should be understood that landing on hedge fund job is not a cakewalk and it requires a lot of determination and networking stamina.
- Cultivate qualities such as self-discipline, networking, knowledge of the industry, and passion to really work for a hedge fund. Develop an interest to learn about history of hedge funds, how this US born investment innovation became a $1 trillion industry.
- To become a student of the hedge fund industry, one should create daily habits that work towards that goal. Subscription to free hedge fund newsletters, reading atleast two to three chapters daily on hedge funds and joining a local hedge fund association or club should help. It is essential to learn the basics about the industry such as the major players, essential terms and strategies that are employed etc.
- Use of the 'three-circles strategy': Jim Collins, the author of the book 'Good to Great' found that companies that made leap from being good companies to truly great companies employed the 'three-circles strategy.' This strategy involves drawing three circles, one indicating options they are passionate about, second including options that took advantage of their experience and the third only those ideas which could be highly profitable. Options that fell within the intersection of these three circles were only considered.
- Internship should be the next step. Even if employed in a full-time job elsewhere, conducting research for a hedge fund atleast for five to ten hours a week should be enough to expose you to how hedge und creates ideas or operates as a business. While on-site work opportunity is the best, if a hedge fund internship is available remotely, let not go of this gain.
- After sufficiently qualifying oneself, having read articles, books and newsletters on hedge funds and completed a few internships and developing mentoring relationships, it should be the right time now to figure out where exactly one does fit into the industry. The kind of jobs one like and the type or responsibility one is seeking must be decided. This is the time that calls for more definite actions towards deciding what role one would fill within the hedge fund industry.
- Each hedge fund could be different and distinct in itself but there are a set of typical characteristic features and skills that every hedge fund employers looks for. Some of them are:
- Quantitative experience and abilities.
- An MBA or quant focused PhD education is highly preferred
- Expertise in public relations, asset gathering ability and information gathering techniques.
- Large wire house experience
- Ability to personally bring in money to the firm and make money for the firm
- A stomach for high bonus structure
- And above all, a passion for work and inherent signs of loyalty and humbleness.
- Cold-calling companies and firms can help find unadvertised job openings in hedge fund. This can be from online Chamber of Commerce listings, industry directories or associations. Networking through the Hedge Fund Group and Hedge Fund Association, Hedge World Service Provider Directory should produce fruitful results.
- There are also great career opportunities to work for someone in a very experienced prime brokerage, risk management or hedge fund administration. There is opportunity to get exposed to hedge fund managers who might decide to hire for specialized expertise or relationships.