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How should you prep for a job interview with a hedge fund?

Answer by Jack Wei, principle at a hedge fund

I’ve interviewed with a number of hedge funds, so hopefully I can provide you a view from the interviewee’s perspective; Nick’s right on from an interviewer’s stance. This is roughly what went into my preparation:

Know yourself: The first question I always got asked was, “Tell me about yourself.” Why are you interested in buy-side? What sort of experience do you have? Why do you want to relocate? What kind of compensation are you looking for?

I think your interest and experience are of utmost importance. Most people, including bankers, want to get their feet in the industry because of the generous compensation, but are surprisingly clueless about how to value stocks. If you are passionate, you should probably brush up during leisure.

Know the fund: The second most common question I get asked is, “What do you know about us?” (Often asked in a very cold tone). What’s their asset under management? Strategies? Sector focus? Who’s their head guy? Who’s their investor base? Performance? Culture? Did someone get sacked two years ago for having their friends in India front-run the firm?

Memorize the content on their Website. Conduct queries on WSJ.com and Google. Pull that fund information on Bloomberg and Factset. More specifically, dig through their 13F filings. I’d typically pull up data from the past four to eight quarters, input them into Excel, and then analyze every security organized by sector, size and position change over time.

If you’re drooling over the job, you should know everything within reach in the public domain. One portfolio manager who interviewed me disclosed they had sold out of a position. I noted it wasn’t public information. When he disagreed and thought I was careless in my research, I looked perplexed. He pondered for a minute, then realized it wasn’t and issued a kind apology.

Prepare stock pitches: I typically over-prepare. My personal rule is five longs, five shorts. I employ a methodical process whereby I flip through the past eight quarters of SEC filings and conference call transcripts. Read every single analyst report in the same time period. Construct financial models for all the names. Conduct a search on WSJ.com. Reach out to investor relations and sell-side if you must. What are the key drivers? Competitors? What’s the upside? Downside? What’s your edge? By the way, have a thesis. Back everything up – they love numbers.

As Nick pointed out, don’t pitch names that have received extensive media coverage. It signals a lack of creativity. It also helps if you can talk about macro events. If you’ve been investing for years, this should be no problem.

Know the companies like you do your best friends. Be able to pitch a stock covering all of the above in one minute. There shouldn’t ever be a time when you don’t know the answer to any question, however obscure.

Create a cheat sheet: Combine the key talking points from 1 to 3 onto a two-sided cheat sheet. Memorize it well. Your delivery should be flawless. No stuttering. No hesitation. From my experience, 10 to 20 hours should do the trick. Of course, the cheat sheet won’t help you seal the deal if your answers for 1to 3 aren’t already rock solid.

Be psychologically prepared: Perhaps I was unlucky in this regard, but every single person who has ever interviewed me has been seemingly heartless. I thought they were callous vampires until I either made them smile or received the offers. I know this is easier said than done when someone managing a billion-dollar portfolio is sitting across the table and gives off the impression that you’re either wasting their time or are too young to know a thing about the capital markets, but don’t get psyched out.

To provide an anecdotal example, the head of a $3 billion fund was staring down at my resume for a good five minutes. He didn’t establish eye contact at all. Moments later, he remarked, “I think it’s deeply irresponsible that your hedge fund let you do this.” My face turned red, and I realized there was a slight miscommunication on my resume (apparently East Coast firms do things a little differently than their West Coast counterparts), so I explained it very calmly. After I went over a condensed pitch, he gave me this look and noted, “You’re very arrogant.” This really made me sweat since it came out of nowhere, so I thought of something on the spot and tossed it back. He then responded with, “You remind me of myself … when I was 25.” Shortly after, he stepped out. I was so crest fallen – did I just take two days off work and travel 3,000 miles to bomb an interview? Surely, I didn’t expect a positive outcome given his demeanor. I got a call back a few weeks later with the offer.

Answer by Nick Lawler, investor

The first thing you need to do is figure out exactly what type of strategy the fund pursues. There are thousands of funds and strategies vary widely. Find out everything you can ahead of time, such as what kind of investments do they make? What is their typical time horizon? What is the background of the founders and what do those funds do?

For most funds, you should prepare several investment ideas including at least one short idea. Shorting is hard and generally requires experience, so funds tend to value skilled short sellers highly.

Your investment idea should show an understanding of the company’s fundamentals, industry dynamics, and the risk/reward of the position you are recommending. Highlight how your recommendation differs from consensus opinion.

You may find it easier to positively impress your interviewer if you discuss companies that are not widely followed. If you are interviewing with a TMT fund, your interviewer will already have an opinion on Apple (AAPL) or Google (GOOG) but maybe they haven’t yet looked at a $1billion market capitalization company based in Latin America (caveat: don’t choose an extremely small company either as the idea won’t be actionable).

The format of your investment pitch is not as important as the content; a few PowerPoint slides or a short written document are both fine. Either way, you should be able to succinctly describe the merits of your idea, the key fundamental attributes of the company, and relevant valuation metrics without reference to any of your supporting documents. Leaving a copy of your ideas is a nice touch.

If you haven’t heard back, follow up with further thoughts on the ideas you pitched or new, actionable ideas you’ve developed.

Idea generation is the coin of the realm. Your goal is to show that you can regularly generate profitable investment ideas.

Answer by Jose Torres, I work at a large hedge fund

Every fund has their own culture and this is probably reflected in the interview process via unique/strange questions, but generally speaking the best way to prepare for hedge fund interviews is to have a few reasonably unique (i.e., not Apple or Microsoft or some mega cap) long and short ideas.

You should have both long and short ideas. Longs are somewhat ‘dime a dozen’ so having a well-crafted, interesting short pitch can go a long way toward distinguishing your candidacy.

I’d also recommend more than one long and short, since you never know when the interviewer will ding an idea right out of the gate with some version of, “I’ve already heard that 10 times this week. How about something else?”

Answer by Marianne Wai-Ying O, investment management

I would like to add that be prepared to show a report you have written on an investment idea or case study on an industry. Effective and succinct communication is really important as portfolio managers and chief investment officers only have very limited time to understand your story.

Share your idea about risk control or hedging either for your own investment idea or in general for the portfolio is a great idea too.

Be very good with Excel (with macro) spreadsheets and hopefully statistics too!

Answer by Nicholas Chavez, predictive analytics & hedge funds

Well, the most important things for you to find out between now and the interview are the following:

1. What is the fund’s strategy? (Quant, Long/Short, Global Macro, etc …)

2. Which instruments are traded to implement fund strategy?

3. What was their return last year net of fees.

If you know these three things, you will be prepared to begin to prepare for your interview.

Then you need to review the mechanics of #2. If they are derivative/option based, then you had darn well better understand the different types of outs and calls as well as have some reasonable understanding of the Greeks (focus on Theta, Alpha and Beta).

Also, most funds of size will have released their performance related to standard deviation of risk and probability.

The above information is for any job at a hedge fund, so its foundational knowledge.  Now realize that there will be questions that are position specific.

Generally, these fall into the following categories and which you fall into will be initially derived from your past work experience and/or your degree if you are interviewing for an internship:

Sales: These positions focus upon gathering additional assets for a fund that is not yet “closed.” Be prepared to talk about relationship building strategies, CRM software and your golf handicap.

Analyst: These are support positions for portfolio managers that generally are 100% focused on research of a market, instrument or derivative.  You should know the underlying research area cold.

Trader/Portfolio Manager: This position is past performance driven. Track record speaks loudest here, and you must be able to identify your role in the asset appreciation. Former analysts can present track record via recommendations.

Back office: This is most like interviewing for a job in industry, though they will examine your ability to perform under pressure.  In all cases, remain calm while showing intelligence and excitement.

Enthusiasm is always welcomed.

This question originally appeared on Quora: How should you prepare for a job interview with a hedge fund?