You have to pay your dues when you enter any industry, but starting out at a hedge fund has the reputation for being more difficult than the early stages of most jobs.
The high pay for front office jobs at an entry level in hedge funds continues to be a significant factor in persuading people across to the sector, but what is life really like? Based on conversations with hedge fund professionals (who wished to remain anonymous) and recruiters, this is what you can expect – and what it takes to make it – in the early days of a hedge fund career.
Most junior analysts join a hedge fund with the expectation that their work will be mostly directed at first with the potential to do more interesting work such as idea generation as they learn the industry.
“Most funds, contrary to stereotype, want to give their analysts as much responsibility as they can handle and have them step up as soon as possible," said Kristin Holligan Sartorius, vice president in the investment professional practice at Glocap, an alternative investment recruitment firm.
This is not always the case, however. One senior trader told us: “Some senior guys never give you credit when you do a good job and complain when one minor thing goes wrong,” he says. “Some portfolio managers and principals are great to deal with and some can be difficult assholes, but it’s no different than the diversity of personalities that you encounter in the general population.”
At some hedge funds, junior analysts have to burn the midnight oil, doing research and completing various tasks long after the markets have closed and the senior executives have left for the day. At others, everyone leaves together at a more reasonable hour.
Hedge fund traders are expected to stay late during earnings season, but at least they typically have a more normal schedule than many investment bankers.
“Sometimes banking hours would be a bit longer with more weekend hours, and hedge funds are happy to have [former investment bankers] because they are used to working those long hours, plugging away at all hours of the day or night,” said Katie Cunningham, senior vice president in the hedge fund practice at Glocap.
Hours tend to be a bit better than many of these analysts experienced in investment banking – as a broad generalization, most analysts will be in the office a few hours on either side of the market open and close.
“That said, at some funds, the hours can resemble Investment Banking 2.0, with some funds expecting analysts to be available for very late nights and weekends," Sartorius said.
Entry-level roles for hedge fund professionals pay $90k-$125k, according to recruiters Glocap. Once bonuses are factored in, it’s possible to haul in $295k within your first year, but bear in mind that most hedge funds don’t employ graduates straight out of university. Rather, they typically target candidates with at least a couple of years of industry experience, most likely working for an investment bank. Glocap notes that you should factor in fund performance and firm size when estimating compensation ranges, especially for more senior analysts and portfolio managers.
The difference between the 25th and 75th compensation percentiles for first-year analysts is about $100k, while at 20-25 years of experience the difference is almost $450k, per SumZero – salaries take on wider and wider ranges as hedge fund careers progress over time.
Aside from the generous pay, there are plenty of perks working for a hedge fund. One former operations professional in a hedge fund said that she was offered free transit cards, free car rides home if she stayed in the office later than 8pm and three meals a day paid for as well as a bonus at the end of the year. She also maxed out her 401(k) contributions.
“We ate great meals at good restaurants with really good wine – what more could you want?” Hillary said. “There were lots of perks – traders would give us tickets to sporting events if they weren’t using them.”
There's a few conditions though. She worked long hours without many vacation days and even though she was in operations, she worked at a desk in the trading room, where “intense energy and high-level craziness” with “people yelling at each other, using foul language” was the norm.
Also, it was incredibly male-dominated.
“When I first started, I was one of only 10 women working at the company, and most were secretaries,” Hillary said. “It was a little weird to be in such a minority.”
All of that was expected. Far worse was coming back after going out to get lunch or a coffee, typing in her building code – the correct one – but not being able to get in.
“If your code didn’t work, you knew someone had been fired, but you had to guess who – was it me this time?” she said. “All of the sudden the grim reaper would change the code on the door and you see someone escorted from the building.”
People got fired all the time on the trading side, which was much more volatile and stressful than for operations specialists. Traders had to produce or they were gone in an instant, which is still the case.
Some hedge funds are very focused on mentorship and training, emphasizing learning and career growth. Others want people who are much more plug-and-play, self-starters who can are up to speed or can come up the learning curve quickly and don’t need a lot of hand-holding.
That said, hedge fund firms have had to adapt to attract talented younger workers, complimenting their work, moving to an open office layout, in-house gym memberships, foosball or ping-pong and the kitchen stocked with drinks and snacks.
“I think many of these hedge funds have adjusted and mimicked some of what the tech firms are doing, because they realize they’re competing for the same talent that the Facebooks and Googles are attracting,” Cunningham says. “They’ve had to make adjustments to office environment to attract these people.
As with many industries, the culture is highly variable from fund to fund and that culture is usually set from the top of the organization, trickling down to the juniors, often dictated by the portfolio manager who the junior analyst works for.
The stereotypical crazy, volatile, temperamental hedge fund PMs and bosses tend to be more the exception than the rule, Sartorius said. While they do exist, junior talent today cares a lot about lifestyle, culture, mentorship and meshing well with the people for whom they work.
"Many say their first priority is to find a mentor from whom they can learn and a fund that offers career-track opportunity," Sartorius said. "Some analysts will join funds with PMs who are notoriously difficult to work for when they believe they will receive top training that will benefit them throughout their career – in these cases, these analysts are often willing to 'put in their time' with a tough culture for growth purposes.
"Some funds hire analysts with the intention of a two-to-three-year program, but for those funds that want to hire analysts for a career-track role, they have had to adapt to a shift in junior talent and candidates’ priorities and build a culture that offers a friendly, collaborative, open environment that offers mentorship," she said.
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