10 Steps to a Career in Hedge Funds

Hedge funds are mentioned hundreds of times daily in the media and employ some of the most well-paid business professionals anywhere. Landing your first job in the industry is no cakewalk; building a hedge fund career takes a lot of determination and networking stamina, and the competition for jobs is fierce.

So how do you get noticed, swing an interview and land a job? Whether you are looking for an entry-level position or a mid-career shift to work as a hedge fund manager, this 10-step plan will help you get off to a strong start.

The more sure you are about working for a hedge fund and not being an accountant or working at a mutual fund, ETF or private equity fund, the easier it will be to navigate these steps and land your job.

If you really want to work for a hedge fund, it will show in your self-discipline, networking, knowledge of the industry, passion and actions. You can change your mind later, but if you want to try to work in this industry, go all in and learn as much as you can. Make the decision to change focus, commit to it for three to five years, and see what comes of it.

If working for a hedge fund is your goal, then create daily habits that work toward that goal. Subscribe to free hedge fund newsletters, read books or articles on hedge funds each day, or join a local hedge fund association or club. Learn the basics – what the major terms/definitions are, who the major players are, what differentiates the companies and what strategies managers employ.

Jim Collins published a best-selling book in 2001 called "Good to Great." In his research, he found that the companies that made the leap from being good companies to becoming truly great companies employed what he called the "three-circles strategy."

When facing a tough decision or turning point in their businesses, leaders of these corporations would draw three circles. One included options they were passionate about, one included options that took advantage of their experience, and one included only those ideas which could be highly profitable.

They would then consider only options that fell within the intersection of these three circles. In other words, to be successful in the hedge fund industry and make wise decisions along the way, it might help to consider only positions where you would be passionate about your work, draw off of your education and natural strengths, and have the potential to be highly profitable.

Early on in your exploration within the world of hedge funds, try to identify a couple of potential mentors with whom you could begin to develop a relationship. It takes time to develop mentoring relationships, but many successful people are happy to help others out if they are able to. To impress a mentor, you will need to show commitment, patience, humility and a hunger for learning.

Once you have become more knowledgeable about hedge funds and identified a potential mentor, you should start looking for internships. Even if you are working full time in another position, conducting research for a hedge fund for 5-10 hours a week can be enough to expose you to how that hedge fund creates trading ideas or operates as a business. Try to work on-site if possible, but don't pass up a great learning opportunity if the only way to gain a hedge fund internship is by working remotely.

Now that you have read articles, books and newsletters on hedge funds, completed a few internships, and are developing mentoring relationships, it is time to figure out where you fit into the industry. Define a niche and hone in on that area. 

For example, if you want to be an emerging markets analyst, write a few white papers on emerging markets and focus your job search on companies that specialize in emerging markets funds.

Each hedge fund is different, but across the industry there is a set of typical characteristics and skills that many hedge fund employers look for. Here are some of them:

• Quantitative experience – How much money did you personally bring in or make for the firm you worked for previously?
• Education – Ivy League, MBA, quant-focused Ph.D.
• Something extra, such as PR expertise, asset-gathering ability or an information advantage
• CFA, CAIA or Chartered Hedge Fund Associate (CHA) designations
• High-quality names from your past few hedge fund jobs or large wire house experience
• A stomach for a high commission/bonus compensation structure

One way of finding unadvertised job openings is by cold calling companies and firms from online Chamber of Commerce listings, industry directories or associations. In the hedge fund industry this could be done by networking through the Hedge Fund Group (HFG), Hedge Fund Association (HFA) or your local CFA society. Informational interviews can also be a great way to find job leads or even land positions.

The same approach that can be used in any job search can also apply to hedge funds. In this case, try and set up informational meetings with four prime brokerage firms, two administrators, and 20 hedge fund analysts and portfolio managers. Explain who you are, and ask if you can treat them to coffee to learn more about their business. Use the meeting as a way to learn about the work they do and the challenges of the industry. When the meeting ends, ask for the names of two or three additional individuals who might be able to meet with you and watch your network grow.

While service provider jobs may seem less glorious than working directly for a hedge fund, there are great career opportunities for someone who is very experienced with prime brokerage, risk management or hedge fund administration. These types of positions expose you to a large number of individual hedge fund managers who might decide to hire you away at some point for your specialized expertise or relationships. Prime brokerage jobs in particular can be a training ground for fund-of-funds marketing jobs and third-party marketing careers. 

If you have worked through the previous nine steps, you now hopefully have a rough idea of what type of hedge fund strategy or service provider group you may want to work for. There are very few recruiters who will work with someone who has less than three years of experience working directly within the hedge fund industry. Many professionals successfully use experience from other industries to segue into the world of hedge funds, but recruiters usually will not work with this type of a placement candidate. Your best bets for getting that elusive placement are:

• The informational interview method above
• Connecting with hedge fund professionals who graduated from your school
• Joining the Hedge Fund Group (HFG)
• Earning your CFA, CAIA or CHA designation
• Attending hedge fund conferences to connect with professionals

Most hedge funds want individuals who are hungry, humble and smart. If you keep this in mind while moving through the 10-step plan above, you should have a great chance of getting your first hedge fund job and beginning a successful hedge fund career.