Recent interview experiences have killed my confidence. I used to think that I was a good interviewer but either interviews have gotten much more difficult or I’m not in the right field.
Anyway, I have an upcoming interview for an Investment Analyst position. The firm makes a lot of different investments but it tends to do more manager selection than anything else (i.e. fund of funds).
I’m interviewing with COO who was one of the founders of the firm. What can I expect? I know fit is important since it’s a small company but how would you prepare?
Throw in there that you love tactical asset allocation and you feel actively managed funds is ideal due to markets being inefficient. The Sortino and Treynor Ratio proves that active management can work when you look at downward deviations and beta risk versus the Sharpe Ratio which looks only at standard deviation total risk.
You should also be able to answer questions such as how you would evaluate a potential fund manager, what questions you’d ask, who are some prominent investors you’d look up to, and what investment styles make the most sense to you.
Focus on Manager Due Diligence. If you are talking about mutual funds - focus on the research process/team/manager tenure/track record.
Make sure to say you don’t choose managers just based on track record - its like driving looking in the rear view mirror - however it is useful to see if the proof is in the pudding.
Ask if they allocate based on their own macro outlook - that is, do they choose fixed income managers with fewer treasury holdings because they want more corporate exposure, or do they prefer small cap managers to be overweight certain sectors because the firm itself has positive outlooks on sectors.
Would the due diligence look the same for investing in venture capital funds and equity hedge funds? This is my first time interviewing for a fund of fund type analyst role.
I have never worked at a fund of funds but have numerous friends who do, and also have had to field questions from FoF/endowments/people in manager selection roles because I’m an investment professional at a hedge fund. I think these are good books to read for hedge fund investors (especially those in LP-facing roles) and are even more highly recommended for people in manager selection.
Thanks, I’ll try to check out those books even though I may not have enough time prior to the interview. Do you mind briefly sharing some questions that you got from FoF people looking to invest in your fund?
There is plenty of stuff online. If you’re serious about the job, you will do a ton of Google searches to get smart. Luck favors the prepared mind. When funds pitch to potential investors, there’s typically a marketing presentation involved and the format follows something like this:
(1) Who are you, and what is your team’s background / your background
(2) Why are you looking to raise capital
(3) What is your investment process and what makes it unique
(4) How do you manage risk, size positions, etc.? What is your tolerance for upside/downside?
(5) What are the terms of investment (fees, lock-up, redemption, and other such terms)
(6) Walk me through 1-2 successful investments
(7) Walk me through 1-2 investment mistakes
Other questions will flow naturally from the conversation, but the bulk of the talk will revolve around understanding our investment process, and what makes it repeatable and unique.
+1 to not just focus on track record. The idea behind manager due diligence is to get comfortable with the strategy and the PM. In the end you want to know “is this guy going to work hard for my clients money?”. You may also say want to add the importance of operational due diligence instead of just investment due diligence. The organizational aspects of the firm/fund are just as important especially after events like Madoff.