Jumping into Hedge Funds from an Investment Bank

March 31, 2021

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When you meet a finance graduate and ask their career choice, generally they would come up with choices like investment banking, private equity, or hedge funds. Though all belong to the finance domain, they are entirely different from one another.

So, you can choose as:

Investment Banking
Private Equity
Hedge Funds
Investment banking with exit opportunity to Hedge funds
Investment banking with exit opportunity to private equity

So, investment banking will be a good start to join hedge funds or private equity. Moreover, many hedge fund job listings cite investment banking experience to join the job. Some of the reasons, hedge funds prefer investment banking professionals are briefed here:

Investment banking professionals understand financial modeling and financial statements.
As they have experience in deals, they know why to buy or sell something.

These experiences reduce the learning curve to become a hedge fund professional. Therefore, investment banking professionals are preferred in hedge fund jobs.

If you are looking to join a hedge fund from investment banking, then this article is for you. Take a look at the interview process here.

Table of Contents

Winning the interview at hedge funds

Hedge funds hire on a needed basis making the process extremely volatile. So, maintain a high level of patience to get into hedge funds.

The headhunters are in direct contact with the buy-side firms. So, take the headhunter interview seriously, try to make a good impression, talk about your resume or investment banking job inside and out. As an investment banking professional, be well-prepared to explain the switch to hedge funds.

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Moreover, they may want to know whether you are interested in private equity or hedge funds. Be bold and authentic in your answer. Know why you want to join hedge funds and stick to your guns. They may try to persuade you for PE to see your determination.

After that, once you land your first interview, it is going to be a tough and long process. You may have 4-8 rounds of interviews that would take about multiple weeks. Generally, the first interview would be with HR where they will conduct a personality test. During the second interview, you might meet the project manager who would be asking about your experience, deals, and so on. Go prepared for at least 10 thoughtful and most probably asked questions.

The next round would be the modeling test. It is necessary to showcase your expertise in operating models, building a functional model, or getting a balance sheet. The way you make logical assumptions to the model makes you stay distinct from your competitors. Do your homework about the company and be thorough in the subject to get through the interview.

They may ask you whether you have faced any risk in an investment banking job and how did you face it. Further, they may test your resilience attitude toward challenges and technical bent. In case, you don’t know the answer to any of the questions, be frank to oblige and follow-up later on.

All that said, you may not end up landing a job at your first company. Be prepared to attend many interviews at several companies before joining the company of your choice.

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Becoming a competent hedge fund professional

To call it a day, all that matters is how you create alpha. Investment performance alone can take you to new heights. You can speed up your learning process by being prepared ahead of time with activities. You can opt for financial model training programs, CFA programs, other certification programs, or courses. Your compensation will rise as fast as you add value to investment performance.