Entry-level hedge funds jobs are among the best paid in finance with an average entry-level analyst earning six figures in some cases. For those looking to break into the industry, hedge fund firms hire more than just analysts in entry-level positions. This article discusses functional roles in hedge funds and alternate entry-level positions.
Broad job categories in hedge fund firms include investing, trading, risk management, marketing, accounting, legal and compliance, and general support (for example IT, human resources, and administration). Barring the last two job categories, all of the other functional roles fall in finance and can be used an an entry point to working in a financial role in a hedge fund.
- Working for a hedge fund is the goal of many investment-oriented college students, where they can start earning six figures even in their first year on the job.
- Hedge funds are complex businesses with several distinct operational segments from investments and trading to accounting and support.
- Here we give an overview of some of these segments to see which type of hedge fund job you'll want to aim for.
These professionals define the investment strategy by coming up with research-based models and trading strategies, and performing portfolio management tasks. Hedge funds are highly leveraged. This allows money managers, traders, and quants to try a lot of risky trades and strategies.
Entry-level investment professionals start as modelers or researcher with a quant role. Such entry-level hires begin by learning existing trading strategies. Past the entry-level stage, investment professionals begin exploring and developing trading models through research and data mining with the goal of benefitting from profitable arbitrage and trade opportunities. More experience leads to roles in idea generation and may allow the candidate to become a portfolio manager at a senior level.
Traders execute the defined strategies following the fund's investment plan and the overall direction of investment professionals. Entry-level traders usually execute trades for investment professionals. After gaining some experience, traders can suggest modifications to strategy. Entry-level traders for hedge funds start with trading plain-vanilla equity, bond, or futures and gradually move onto complex trades like option combinations, high-frequency trading, arbitrage trading, or automated model based trading.
Risk Management Professionals
Risk managers act as monitors to set limits and oversee any deviations in trading limits which can lead to risk. Hedge funds are high-risk, high-return investments. It is important to keep risk measures in place which are duly followed by various professionals managing the hedge fund. Risk managers perform two main functions:
- they they define the boundaries for investment and trade exposure; and
- they actively monitor the developments to ensure that those boundaries are not breached.
An entry-level position in risk management may be titled risk analyst. They are involved in quantitative calculations (like VaR), DCF analysis, and assessment of risk exposure. After sufficient experience, the role expands further into senior positions which involve defining the risk limits and framework of trading and investing. Risk managers have to collaborate with multiple participants to seek their buy in. It includes traders and investment professionals who need to be convinced about the risk limits without posing challenges to meeting the hedge fund investment goals. Acting as a liaison with legal and regulatory staff also forms an integral part of risk management.
These employees are responsible for managing investor relations, client services, and fundraising activities. Even well-established fund houses and reputable portfolio managers need effective marketing for their investment ventures to succeed. Most hedge funds target HNI investors, and the marketing team is dedicated to managing these investor relations and offering client services to ensure adequate fundraising. Entry-level candidates in hedge fund marketing should have good communication and presentation skills and advanced financial knowledge, as they must act as the face of the hedge fund to clients. Initial responsibilities involve simple note taking during client meetings, conducting client interviews to assess their needs, offering investment solutions, and acting as point of contact for HNI clients. Gradually, the role broadens into fundraising and associated functions like syndication.
The accounting department owns all the critical accounting-related tasks which include calculation of NAV, maintaining books and records for holdings, investors, and figures. Most of the tasks are aided by dedicated computer programs and accounting software. Monitoring and error-checking is an integral part of this job.
This segment builds all of the trading and analytic systems used by the other parts of the hedge fund. Here, IT professionals will build out the trading systems and software platforms that are needed and customized to each particular trading strategy and even to each individual trader. Support staff are on-call when systems break or don't behave as expected.
The Bottom Line
Working at a hedge fund can be very lucrative as salaries are high and the associated perks can also be considerable. But to qualify for a job in this competitive industry requires multifaceted skills, knowledge, and the right temperament. Doing the job well is not sufficient, one needs to improve and progress continuously. Life in a hedge fund involves long working hours, intensive travel, consistent pressure to perform and meet the targets, and excellent communication skills. These requirements often lead to high attrition, including switching to a completely different industry after several years.