Hedge funds utilize advanced research and a variety of financial strategies to assist investors in growing their success. If you’re highly proficient in mathematics and you have an interest in the stock market, and you have a charismatic personality, working for a hedge fund can not only be a personally rewarding career path, but it can also be quite lucrative. 

Interested in learning about what working for a hedge fund entails and how to pursue this type of career path? For an overview of what working in this industry is like, including the pros and cons, the necessary credentials, and jobs that are available with hedge funds, keep on reading. 

What is a Hedge Fund? 

You’ve obviously heard the term “hedge fund” before and have a basic understanding of what it is (otherwise you wouldn’t be looking for information about working with one), you may not have a firm understanding about what a hedge fund is. 

A hedge fund can be defined as an alternative route to individual investing. Rather than buying or selling stocks on their own, investors may decide to utilize these funds in order to optimize their own financial gains. Using a pooled investment strategy and financial expertise, as well as a hedging system, hedge funds seek to improve return on investment and manage risks. 

Hedge funds employ a variety of professionals that specialize in finance. Examples of the professionals that hedge funds work with include traders, analysts, portfolio managers, and researchers. These individuals are highly proficient in their specialized areas, and they work with one another to select stocks to invest in and short. Hedge funds invest in stocks by purchasing shares when shorting stocks hedge funds borrow purchase shares assuming that the price of those shares will decrease. Hedge funds aim to offset possible losses and safeguard their investors from market uncertainty by buying, selling, and shorting stocks. 

It’s important to note that hedge funds are different from private equity (PE) firms, as PE firms typically buy and sell large stakes in companies or entire companies. Another key difference between hedge funds and PE firms is that the majority of a hedge fund’s holdings are illiquid. 

Pros and Cons of Working for a Hedge Fund

As with any job in any industry, there are pros and cons of working with a hedge fund. Understanding these advantages and disadvantages can help you determine whether pursuing a career in this industry would be worth your while. 

Pros

• Affords you the opportunity to apply your passion for public markets, and to follow companies and other securities, as opposed to working on deals. 
• Allows you to apply your mathematical, crucial thinking, and reasoning skills. 
• The satisfaction of helping companies increase their return on investment and manage risk. 
• It can be a very personally rewarding career path. 
• It can be a very lucrative career. 

Cons

• Working with a hedge fund can be very demanding. 
• The competition is high and landing a job can be challenging. 
• It can be very stressful. 

Career Outlook

The career outlook for hedge fund professionals is good. In a Strategic Consulting survey, which surveyed more than 240 investors who represent more than 20 percent of capital in the industry, every investor surveyed indicated that they intended on increasing allocations. Moreover, at the time of writing, the sentiment of investors toward hedge funds is the highest it has been since 2014. 

For hedge funds, the first quarter of 2020 was very difficult (as it was for most industries) as a result of the corona crisis. As markets bounced back, however, performance improved significantly during the remaining three quarters of the year. During the recovery period, the capture rate for the average hedge fund was 56 percent. By the fourth quarter of 2020, assets that were managed by hedge funds totaled $3.6 trillion. 

The yearly income for hedge fund professionals is a major draw. Those who work at the right fund and who perform well can earn a mid-six-figure income, and even $1 million or more, which includes junior-level employees. 

How to Land a Job in Hedge Funds

Hedge funds seek to employ the most proficient professionals and the competition can be stiff. As such, landing your first job in the hedge fund industry can be challenging; however, with a great deal of determination, perseverance, in-depth knowledge, a strong competitive nature, and the right networking skills, landing a career in hedge funds is possible. 

Whether you’re seeking an entry-level position or you want to move up the chain, here are some tips that you can use to secure a job with a hedge fund. 

Analyze the Hedge Fund Industry 

In order to land a job with a hedge fund – and to succeed in the industry once you have landed a job – an in-depth understanding of hedge funds is an absolute must. Establish daily habits that will allow you to develop your knowledge and in-sight; for example, subscribe to free hedge fund newsletters, read articles and books related to hedge funds, and perhaps even join a local hedge fund association. 

Get a Mentor

A mentor can be one of the greatest assets for landing a job with a hedge fund. Not only will a mentor be able to show you the ropes, provide you with extremely helpful information, and teach you invaluable skills, but they will also be able to develop a network. Do note that it will take time and dedication to find and develop a relationship with a mentor; however, doing so can be one of your biggest assets. 

Land an Internship 

Once you’re confident in your knowledge about hedge funds and you’ve secured a possible mentor, start researching internships. A part-time internship can expose you to a wealth of knowledge and skills related to hedge funds, which you can use to secure a job, and then apply toward and use to increase your success – once you do land a job. 

Apply for Hedge Fund Jobs

Ask your mentors and any contacts you’ve made through your internship if they can direct you toward any openings with hedge funds. Write-up a robust, detailed resume, submit your resume with as many positions as possible, and prepare to showcase why you would be an asset for a firm on any interviews that you are called for.