Most of the times, your attempt to move into a hedge fund will begin with an informational interview with a HF manager. Informational interviews can turn into real interviews very quickly, and a lot of the things that you talk about in an informational interview are pretty much the same that it would come up in a formal interview. In any case, the key is to be prepared.
- Hedge fund interviews -> Complete guide to help you ace all hedge fund interview questions. Includes 10+ Sample Pitches, 30+ hrs of HF videos, 200+ pages of detailed guidance.
1. Look at the investment record of the fund and think of smart questions to ask. Notice wether they are overweighting any particular position or sector. If the fund has any positions publicly disclosed, try to reverse-engineer them in order to understand their logic. Focus on the general picture and don’t spend too much time trying to figure out every single detail. The point is to be able to use their investment thesis as a comfortable and professional talking point.
2. Prepare a couple of stocks that you think are an interesting investment that fits with the investment style of the particular hedge fund fund. This is both an opportunity to get feedback on your thesis and for them to see your pitching capabilities. Look at value investors club and conferences to get guidance on how to present your ideas. More on this aspect later.
3. Prepare a few good questions to ask on their holding period, why and when they sell, what exactly they look at when they go long/short, do they look at longs and shorts autonomously or in pairs, how do they determine investments sizes, etc.
During the interview:
Start thanking the manager for their time and briefly explaining your background and what you are hoping to learn during your meeting (for example, how do they approach investments, walk through a current investment, critique your investment pitch, career advice, etc.). It is important to have a general draft regarding what you want to talk about in advance, so that you have time to cover all the main stuff. As a rule of thumb, you could spend around 10 minutes in each topic and then add leave another 10 minutes for open topics in the end. The usual 30-45 minute informational interview goes flying, so pick your topics carefully and cut out anything which is not important to you.
Note that the manager who granted you an informational interview probably assumes that you are looking for work, so do not be afraid of asking what they are looking for when hiring people and whether there are any current opportunities at the fund. If you are leaving a good impression and there’s an opening, you may be quickly fast-tracked to a formal interview.
As noted above, to really maximize your chances, you should hace a decent investment pitch ready. This includes:
a) Spreading comparisons. Bring a printout that compares the company you’re pitching with a few peers (4-5 is usually enough) on various metrics: valuation (forward p/e, ev/ebitda, etc.), balance sheet (cash, investments, debt), and spending/profitability (ROE, ROIC, capex, gross, sg&a, and r&d margin). For margins, be sure to explain how you adjusted COGS, SG&A, and R&D for one-time charges to determine normalized spending. Do not choose a company/industry that is too complex or you will spend too much time making adjustments. It does not have to be perfect and it will be a good chance to get professional feedback, since you will sure be asked why you used certain metrics, what you focus on when comparing companies, etc.
b) “Proprietary” research – talk to people. Show the manager that you took the effort of talking to experts/suppliers/customers, visited stores, etc. You should have enough resources at the university: talk to professors if they are experts in certain industries, network with all sorts of people at your school, set up brief phone calls with alums that work in the industry you are researching… Just make sure you show proactiveness.
c) Make sure that you identify the catalysts that may cause the company you’re pitching to change in value. Otherwise, it is not an investment opportunity.
The key to both the actual hedge fund interview and the investment pitch is to show you’re enthusiastic, are capable to perform the job, and will not be a complete liability for the first few weeks. Spreading comparisons, adjusting financials for one-time charges and doing channel checks are very common activities in equity research, so show the manager that you are comfortable doing those things and you may get the chance to do it for his fund.