The Business Careers Handbook 2020
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SPECIALISATIONS
Hedge funds Working at a hedge fund is highly regarded by the rest of the finance industry. Hedge funds are known to recruit top talent, particularly given the low supply of jobs.
What are hedge funds? While almost anyone can invest in a managed fund, hedge funds are much more exclusive. Hedge funds are privately offered and created for wealthy individuals, who may, for example, have more than a million dollars to invest. And unlike a managed fund, which seeks to match or outperform a benchmark, the objective of a hedge fund is to achieve an absolute return; that is, a positive investment return in every quarter. This difference in investment purpose affects the way in which hedge funds are operated. Hedge fund managers are the so-called ‘cowboys’ of investment management, with greater flexibility and risk taken in their investment strategies. They may, for example, use leverage, ‘short’ a stock if they anticipate falling prices, or ‘hedge’ or counterbalance any risks in their portfolio. Hedge fund managers collect both a management fee as well as a percentage of profits generated. What is the graduate experience like in hedge funds? The hedge fund industry in Australia is relatively small and it can be difficult to land an entrylevel job. Leading players include Regal Funds Management, Tribeca, Bennelong, Watermark and Ellerston. These hedge funds look for candidates who already have a successful track record and understand the basics of investing and trading.
A typical path into a hedge fund is through investment banking or completion of an MBA. If you enter a hedge fund, you will usually start as a research or portfolio manager associate. The tasks are similar to those of a managed fund in that you help your manager and team to pick and track investments. You may also be expected to help communicate the performance of the fund to existing and prospective investors. Hedge funds are typically small in size, as compared to an investment bank. Unlike a managed fund which may have specialist teams dedicated to areas such as research, investor relations or operations, you may wear many hats at a hedge fund. Furthermore, you will work closely with more senior members of the team, as well as have frequent contact with clients and organisations – an excellent opportunity to develop your relationship and communication skills. The structure and workplace of a hedge fund is fairly informal. You will find the team relatively collaborative as the firm’s success depends on the performance of the fund. You’re all in it together! Working for a hedge fund can be a stressful and intense experience; millions of dollars may be at stake because of your recommendations. You can expect to put in long hours with work often spilling into the weekends. If your fund is successful however, you will be rewarded financially.
What are your career prospects in hedge funds? Similar to other results-focused specialisations like private equity or venture capital, advancement at a hedge fund is based on your abilities. If you enjoy working at a hedge fund, you may want to progress to more senior levels or perhaps start your own fund. At the junior levels, you may be encouraged to become a Chartered Financial Analyst (CFA). Support for this (such as study leave) will vary according to the firm. Working at a hedge fund is highly regarded by the rest of the finance industry. Hedge funds are known to recruit top talent, particularly given the low supply of jobs, and as such, any experience here will be helpful to your career overall. Indeed, you will find there are many career paths if you decide to move on to another specialisation. For example, you might choose to move to an investment bank as a trader or securities analyst, or move to private equity or venture capital. Choose this if you have: ■ Excellent quantitative and analytical skills ■ An appetite for calculated risk taking ■ A love of learning and problem solving.
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