Entry-level hedge fund jobs are among the highest paying in finance, with entry-level analysts 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 entry-level alternative positions.
Broad job categories at hedge fund firms include investing, trading, risk management, marketing, accounting, legal and compliance, and general support (e.g., IT, human resources and administration). With the exception of the last two job categories, all other functional roles fall under finance and can be used as an entry point to work in a finance role in a hedge fund.
Key points to remember
- 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 operating segments, from investments and trading to accounting and support.
- Here we outline some of these segments to see what type of hedge fund job you want to aim for.
These professionals set the investment strategy by offering 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 many risky trades and strategies.
Entry-level investment professionals start out as modelers or researchers with a quantitative role. These beginner recruits begin by learning existing trading strategies. After the entry-level stage, investment professionals begin to explore and develop trading models through research and data mining with the aim of profiting from arbitrage opportunities and profitable trading. Greater experience leads to roles in idea generation and may allow the candidate to become a portfolio manager at a higher level.
Traders execute the defined strategies by following the fund’s investment plan and the general direction of the investment professionals. Novice traders usually execute trades for investment professionals. After gaining some experience, traders can suggest changes to the strategy. Beginner traders for hedge funds begin by trading simple stocks, bonds or futures and gradually progress to complex trades such as option combinations, high frequency trades, arbitrage trades or trades. based on automated models.
Risk management professionals
Risk managers act as monitors to set limits and monitor any deviations in trading limits that may result in risk. Hedge funds are high risk, high return investments. It is important to maintain in place risk measures duly followed by the various professionals managing the hedge fund. Risk managers fulfill two main functions:
- They define the limits of investment and commercial exposure; and
- They actively monitor developments to ensure that these boundaries are not violated.
An entry-level position in risk management may be titled a risk analyst. They are involved in quantitative calculations (like VaR), DCF analysis and risk exposure assessment. After sufficient experience, the role expands further into management positions, which involve setting risk limits and the framework for trading and investing. Risk managers need to work with multiple participants to get buy-in. It includes traders and investment professionals who need to be convinced of the risk limits without causing problems to achieve the investment objectives of hedge funds. Liaising with legal and regulatory personnel is also an integral part of risk management.
These employees are responsible for managing investor relations, client services and fundraising activities. Even well-established fund companies and reputable portfolio managers need effective marketing for their investment businesses to succeed. Most hedge funds target HNWI investors, and the marketing team is dedicated to managing these investor relationships and providing services to clients to ensure adequate fundraising. Candidates new to 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 include taking simple notes during client meetings, conducting client interviews to assess their needs, proposing investment solutions and serving as a point of contact for HNWI clients. Gradually, the role expanded to fundraising and related functions such as syndication.
The accounting department is responsible for all essential accounting-related tasks, including calculating net asset value and maintaining books and records for holdings, investors and figures. Most of the tasks are facilitated by dedicated computer programs and accounting software. Monitoring and error checking are an integral part of this work.
This segment builds all the trading and analytical systems used by the other parts of the hedge fund. Here, IT professionals will build the trading systems and software platforms necessary and suitable for each particular trading strategy and even each individual trader. Support staff members are on call when systems go down or don’t behave as expected.
Working in a hedge fund can be very lucrative because the salaries are high and the associated benefits can also be considerable. But qualifying for a job in this competitive industry requires versatile skills, knowledge and the right temperament. Doing the job well is not enough; you have to improve and progress continuously. Hedge fund life involves long hours, extensive travel, constant pressure to perform and achieve goals, and excellent communication skills. These requirements often lead to high attrition, including moving to a completely different industry after several years.