Hedge fund applications

[villnius]

@Stockton\_Malone

Thanks Minerva, these comments were helpful.

Does anyone have experience/heard of a friend switching from an admin to a hedge fund ops role, to research at a hedge fund? I can find an ops role but I’m not sure how difficult this move would be internally.

I would guess once you’re in an ops role you are labeled as such, and internal transfers are rare.

At this point I am going to choose one or two mid-cap companies I am interested in and do some in depth analysis based on company filings. I can start developing a portfolio from the ground up using a simulation for a month or so and then jump over to real money…then keep track of my P&L from day one.

Once I have a better idea of which industries I really enjoy researching, and have cleaned up my research and investment process, I will work on my sales pitch.

This seems like the best approach vs working on the sell side and then moving to buy side. I can also move to a hedge fund ops role while I start my portfolio.

I went from Ops (Loooong ago) to Hedge Fund Admin, to Research/Trading at a Retail Money Manager to my present role in Research/Strategy at a HF. Took me >10 years to get where I want to be. I work long hours and have a rediculous commute, but love what I do and am highly compensated. So yes, you can do it.

THAT BEING SAID…

Slow your roll. The opportunities are there if you can position yourself to take advantage of them, but just because you know how to play football doesn’t mean you are qualified to coach the Steelers. You will NOT be a PM anytime soon. Anyone willing to give someone an allocation of capital/risk with no track record is an idiot. Don’t take it personal, but this is about results and you have none to show for. That being said it would be a stretch to even be on the Research side of a HF as you again have no experience. Sure, you may luck out and get an opportunity to shine in an interview, but this is a long shot. I would aim for an Ops role at a fund that is active in the space you are interested in. During the interview I would make it known your intentions of moving on to research and that is an opportunity you hope would exist in the future. Also pick their brains to see how much interaction you would have with research/trading/etc… Ops isn’t ALWAYS a death sentence, but it would be nice to get a feel if it is BEFORE you accept the offer just for the sole purpose of working for a fund. Also know, even if you sit next to Research Guys, Traders, PMs, and work directly with them, there is still the possibility they have no intention of moving you up. From my experience, everyone knows everyone. Desk jobs aren’t published on job boards as everyone usually knows someone to fill any need we may have. Once you land an ops role, KILL IT. If you’re a 9-5 button pusher who can’t wait to get home to see your girlfriend, then you will be treated like one. If you prove yourself a hustler who goes the extra mile, does stuff without asking, gets to the bottom of why issues happen and not just solves them it will be noticed. From my personal experience we have interally transitioned 4 Ops guys onto the desk in our fund. It takes time and hard work, but it CAN happen if you put in the work.

My .02 on funds to target: Smaller, younger shops that you can grow with. They will probably only have a few investment guys and as the fund grows, the need for guys to be on the desk will grow with it. That is your time to shine. Sure, there is risk involved in a newer shop with a short track record and smaller AUM, but the reward of being one of the foundation guys of a firm after 10 years can be huge. Avoid the big name firms with hundreds if not >1000 employees. These are run departmentalized a lot like big banks, and Ops here is more likely to be a death sentence.

Work hard, be humble, and keep at it.

[Stockton_Malone]

thanks villnius, this is right in line with what i was thinking. I have no interest in working at a SAC/Millenium/Citadel/Bridgewater…I like the idea of a smaller fund despite the risks that come with it–as long as I keep my fixed costs low I can handle the fund blowing up and leaving me jobless. I also don’t my next job to be in a dead end ops role, so your advice of checking in the interview on interaction with front office looks good.

by the way, are you actually lithuanian? I saw a thread you wrote a while back on how hedge funds leverage their book by utilizing repos and your description was spot on…I really appreciate your feedback as it’s very similar to the path I’d like to take over the next couple of years–tough work for sure but I’m glad it worked out for you in the end. Congrats on the research role, it sounds like it was well deserved.

mk, I see the consensus is to go into the sell side but I’d rather not go this route. I think it makes more sense to head into a smaller hedge fund ops role that either sits near the front office or is small enough that everyone knows each other so I can prove myself. I am confident that my work ethic and knowledge in financial products/programming/people skills will help me in a smaller shop…it will probably take a few years but I really think my background can leverage me into a research role in the next several years.

[numi]

Breaking Into Wall Street is great for modeling prep, and I highly recommend it.

For other hedge fund application preparation, I recommend the articles in my signature as an excellent starting point.

[Stockton_Malone]

Thanks numi, I actually read the articles in your signature a few weeks ago and they were very helpful.

I’ll look into BIWS in the next few days…and I will also start focusing on networking to hopefully get my foot into the door of a small shop.

[Griingo]

@Stockton\_Malone

I wanted to go the hedge fund route because mutual funds have plenty of restrictions on trading-in some cases, from my understanding, you can’t trade FX forwards which would restrict your hedging abilities…same goes for more complex derivatives–if you can’t trade a forward, you won’t be able to trade a CDS either. And shorting seems out of the question. What if the economy dips 60%? You can only sell at a loss. If there is a large amount of mutual funds without restrictions, then I would be interested.

I’m not sure if there’s some 40’s act regulations about this or something but in my experience from a european perspective this isn’t an issue. fx forwards for hedging are usually permitted, granted for plain vanilla long only equity mandates people usually don’t hedge. Perhaps the US is different but where I’m based, buy side firms are changing from plain vanilla one asset class funds to funds with broader mandates that borrow a lot of the methods from hedge funds and naturally allow more complex derivatives. Look into DGFs as the buyside will be easier to break into and build up experience before moving to a hedgy.

@Stockton\_Malone

I believe the equity markets are overvalued and will fall significantly in the next year or so. I want a fund that has the experience shorting so they don’t start when it counts most–obviously I would start at a hedge fund that focuses on a different strategy, but long/short net short would fit my view of what the market will do in the next year or two

Why not broaden your search to funds that have the capability to short rather than a strict short only with long technology?

@Stockton\_Malone

3. It’s definitely hard to know what working at a hedge fund would actually be like, there must be an incredible amount of stress involved. But that’s something you have to experience first hand and that’s why I’d like to make the jump.

Nothing can explain the stress of being responsible for huge sums of money,

As others have noted, you will need to recalibrate your expectations as going from back office to a hedge fund pm will be a lengthy a steep uphill struggle where you will need to play it perfectly to position yourself to make multiple moves and a large amount of luck will be needed.

[Stockton_Malone]

It sounds like mutual funds are not actually restricted from hedging with derivatives, and it is entirely dependent on what type of strategy is agreed upon with investors when the fund is created.

If this is true, then either a mutual fund or a hedge fund structure interest me.

gringo_bob, I agree on your L/S point. Especially after reading the responses in this thread–it sounds like there’s a higher chance of getting struck by lightning than getting your foot in the door of a hedge fund as a research analyst.

I wonder if this is largely due to technology job loss in the finance sector? Most traders have been substituted for computer algorithms, most back office jobs have been cut by improved programming techniques as well.

OR, it could be due to the market becoming more and more efficient as algorithms sort out the exact worth of each stock and more individuals settle for index funds.

OR, perhaps it has always been this competitive within hedge funds…but I do not think this is the case.

[nikg]

Start your own fund a.k.a day trading you do good in few years with every investing decision explained on paper 60-40% success rate and you re in. Got milk?