Most hedge funds are not known. How could we tell which one is good and worthwhile working for?
If you work for a sell side shop you can talk to the sales person that covers them and get an idea of culture, AUM, what they’re active in, etc… as well as what kind of priority they are.
“Most hedge funds are not known.” Really? Do you have a basis for this statement?
There are thousands of hedge funds in Fairfield county alone. I’ve never heard of most of them. I completely agree with OP. Here are some things you need to ask: 1) How long have you been in business, what are your returns like, and what are you assets under management. 2) What is your fee structure and how far below your high water mark are you (a hedge fund 25% below it’s high water mark has like a 20% chance of lasting one more year). 3) What strategies do you use for trading? 4) How are your trades marked? A marked to market shop is much less risky than a marked to model or manager marked shop. 5) What sort of risk assessment do you do? 6) How many investors do you have and what is the average account size. A fund with 10 investors with 9 $1M accounts and one $100M account is very risky 7) Where did the principals come from? 8) Where did the other key personnel come from? Check the infrastructure. Lots of hedge funds start trading wildly without any infrastructure and then try hard to catch up. Post the hedge fund on AF and let everyone comment.
HFR? Tremont? If a HF is too small to be listed then odds are it’s too small to be looking to hire an analyst (probably just two people in a garage somewhere)…that’s my take on the situation anyway…but yes, there are reasonable-sized funds that you’ve never heard of as well; I’m saying as a rule of thumb that if they’re a complete unknown the odds are they’re not worth your time.
How to research on Hedge fund? Skillionaire, where can I find if a hedge fund is listed or not?
I work for a HF…JDizzle hit the key points…I would just like to echo how important the reputation is of the MD’s…
JoeyDVivre Wrote: ------------------------------------------------------- > Check the infrastructure. Lots of hedge funds > start trading wildly without any infrastructure > and then try hard to catch up. I’d focus on this as I’ve been there. Especially if you’re the “Know how to program but don’t want to make it my career” type. Also try to size up whether or not the managers are good business people in addition to being good traders. (More important for smaller “growing” funds…)
A couple years back (I think 2006) many hedge funds were supposed to file something called a Form ADV. If you can figure a way to sift through the information you’ll be able to find out info. on many of them. There are ways to do it. There are firms that compile form ADV’s. But I’m sure you’ll have to pay for it. (Not sure if all HF’s were supposed to file. I think it might be only those with more than $25M in AUM).
^ yep and many of those didn’t.
Hey JDV, good post – what exactly do you mean by hedge fund “infrastructure”?
I’m interested in hearing Joey say what he’s thinking for himself, but I suspect he means things like administrative and management systems, risk control, compliance operations, performance tracking, HR, customer relations (systems, it’s easy to hire a person to talk to customers, but getting the computer systems and work flow, and knowledge management, to support that is another thing). The PM mindset is often so focused on efficiency (and a particular kind of efficiency - dollar efficiency) to squeeze out that extra basis point or two, that a lot of the support operations sound like wasted expenses, until one suddenly discovers that there are a zillion little things that are taking the key guys’ minds off of how to manage positions because customers are calling, or a hard drive is full of data, or the building lease needs renegotiating, or something like that. When you’re in an organization focused so much on money, I think a lot of people try to save on false economies. One thing that struck me was an interview with Bill Gates (I think in Wired Magazine), where he was asked what was the most surprising thing he learned while building Microsoft. He replied that he originally thought that managing people wasn’t all that tricky and that any reasonably smart guy could do it. They had lots of smart engineers at Microsoft and they figured that any of them could do some management on the side, or just be promoted to it full time if necessary. What they found is that there isn’t much correlation between being a smart engineer or software guy and being a good manager of people, and that things really fall apart if you don’t have someone good on the human side of things, even though the stuff they teach you in management classes seems simple and brainless (it’s not, but it definitely *looks* simple and brainless). So I think there may be a lot of hedge fund shops with pretty smart people/investors who figure that since the hard thing is coming up with the right mathematical model or whatnot for profitable trading, and since they have a lot of money (that they made for themselves or convinced someone to give them), that it proves that they can handle all the other stuff too, since it’s much much simpler. Ooops! Don’t go work for that fund, if you don’t have to.
Great posts from Joey and bchadwick here.
My management skills leave something to be desired (I really hate incompetence and that means I can only do a good job managing really competent people and I don’t seem to be able to make that work completely). I agree with bchadwick’s comments and that’s exactly right. Most hedge funds are set-up by people who have good trading ideas but know nothing about the rest of the operation. A real litmus test question is “How much around here is done in Excel?”. You can’t ask that question applying for a job (probably) but you can in due diligence. Excel is a great package and I use it all the time but it is not an accounting, trading, risk management package and it is a very fragile way of persisting data. It seems that oodles of hedge funds rely on Excel for way too much because they can get something going fast. Bad plan and it’s going to break.
Most hedge fund are secretive and most of them don’t even have dedicated websites. It’s purposely done this way… sort of a secret club/society that only the rich and famous get to be a part of… (not really, but they try to portray this image) Just find out their AUM or ask them for some marketing materials.
JDV hit on most of the good points- how long have they been in business? returns? AUM? composition of investors- fund of funds, MD’s $$, etc. lock up not sure he mentioned- if an investor gets in, can they get out in 6 months, a year, 2 years, etc? as posted above about registering, the regulators have kind of eased off on the rules but for funds that imposed a 2 yr lockup, they didn’t have to register. pedigree of the top folks- mentioned before infrastructure- do you have a guy who has the title CFO/COO/CIO? that might not be good. if you have a small fund and the PM is also acting as the investor relations person, that person is probably failing at one of those roles. RISK! can’t stress it enough- ask them about how they measure risk, control risk, think about risk. if a HF is not seriously obsessing over risk on a real-time basis, you should be concerned. if you have a good HF, they will not only answer this, they’ll probably get all fired up and tell you about their ways of thinking about risk. see if you agree with their metrics. most HF’s don’t show much on a website- it’s mainly for investors and there are rules about “advertising”. you can check (albeit 1 quarter old) on bloomberg 13f filings of the fund- take a look at what they’re in… do you like it? trading- how often do they turnover the fund- strategy- net/gross exposure to the market, domestic/international, strategy stuff like that. with most funds, even if you can’t get tons of info on the fund, you should be able to get it when you interview. you should know the strategy going in and you can most likely research the main people there for background/experience. the biggest funds you’ll be able to research- they run their shops just like big corporations.
Quite a few ADV’s can be found on this website, just type in the name of the firm (assuming they completed one). http://www.adviserinfo.sec.gov
Have you heard about Blue Mountain in NYC?
homie Wrote: ------------------------------------------------------- > Most hedge fund are secretive and most of them > don’t even have dedicated websites. > > It’s purposely done this way… sort of a secret > club/society that only the rich and famous get to > be a part of… (not really, but they try to > portray this image) > > Just find out their AUM or ask them for some > marketing materials. That’s not why they don’t have websites. You don’t have a website because having a website exposes you to all kinds of regulatory risk, starting with the notion that having a website means that you are suggesting that you are a public investment company.