Here’s a shocker: a student enrolled in a joint MBA/JD program at Harvard, armed with an economics degree from MIT and work experience at McKinsey & Co., had trouble getting an interview to intern at a hedge fund.That’s the story an anonymous Harvard graduate student shared with Tradestreaming’s Zack Miller in an audio interview this Monday.*
Surprised? You shouldn’t be. It’s actually slowly turning into the norm, said John Pierson, president and CEO of 10X Capital, a search firm specializing in hedge funds.
Even with such an impressive candidate, gaining entry into the elitist and secretive hedge fund world would be a challenge, Pierson said. Especially so in the unnamed candidate’s case because the internship he coveted was one where he would essentially be working in the role of an analyst – taking positions on strategies and stocks and reporting to a portfolio manager. Such an internship at a hedge fund would in all likelihood lead to full-time employment, Pierson said.
“I think people underestimate how difficult it is for people from non-traditional backgrounds, despite that the industry is known for taking risks… When it comes to hiring they’re surprisingly standardized,” the anonymous student told Miller at Tradestreaming, adding that hedge funds were usually only interested in taking students who had worked at hedge funds or private equity firms.
The unnamed student eventually did get a hedge fund internship, but it took him a lot of effort. The interviewee applied to every hedge fund that recruited at Harvard his first year, but only got two interviews – a number that does not surprise Pierson. The candidate’s scarlet letter was that, aside from a brief 6-month stint at McKinsey’s private equity practice, he had very little experience in finance or investment management.
In the last few years since the 2008 meltdown, gaining entry into a hedge fund has become more and more competitive as general analyst positions dry up and underemployment plagues the industry, Pierson said.
“If you know you want to get into hedge funds, you have to specialize yourself,” he said. Nowadays, hedge funds will usually target MBA students that have already have work experience in a specific industry, and bring them on to analyse the sector they used to work in.
The diversity and breadth of the stories and advice from both Pierson and the interviewee combine to lift the usual veil of mystique that surrounds the process of entering the hedge fund industry.
“It’s all about having ideas, making them known and being able to substantiate your ideas at any moment,” Pierson said about interviewing for and working at a hedge fund. That’s the ability that will get someone hired and allow them to move forward in their career.
Another good skill to have? Athleticism. According to Pierson, “hedge funds love athletes.” But they still prize well-roundedness – so from the Ivy League education to the grades to the passion, those dying to enter the industry should have it all.
One reason for the challenging hiring environment is the economy and the country’s high unemployment rate. Students trying to enter the industry are now competing with mid-career folks. Pierson has had clients that ranged from NASA scientists to Olympic athletes to professional football players, though he declined to comment on whether they were hired or not.
The financial crisis presented another obstacle. Pierson says the biggest problem facing a potential of the industry is underemployment. There are former portfolio managers who had funds close in 2008 that are now settling for senior analyst jobs, which then pushes those at the senior analyst level to take junior analyst roles. This effect trickles down right to a student who may want an internship.
* Business Insider contacted and spoke to Pierson for another view on hedge fund employment after listening to Tradestreaming’s interview. You can listen to the entire interview here.
Hedge funds like it if you have everything: charisma, passion for investing, the grades and the Ivy League education.
But, like Pierson said, they especially love athletes.
So take up a sport, you never know if the experience might be good for casual chatter or make you that more appealing.
'When you pitch a stock, you have to engage them. this is not about showing you've done a lot of work, it's about showing you're passionate about it. So people that take in a 25-page PowerPoint presentation and want to run through them, that's not going to work. When you go in there to pitch a stock, you have 30 seconds to capture their attention,' the interviewee said.
Pierson recommends always having 2 long and 1 short stock ideas researched to lean back on.
Source: Tradestreaming interview
Generalist positions are disappearing, so it's best to decide early what industry you're interested in and pursue it to specialize yourself, Pierson recommended.
For example, if you were interested in analysing the tech sector - one of the hottest industries these days - it would be beneficial to study engineering or obtain a science degree combined with economics at the undergraduate level. Then, working for a computer company or engineering firm before pursuing an MBA would be the ideal path for entering a hedge fund.
Most hedge fund will already have a pool of students they're interested in (those with previous hedge fund or private equity experience) when they come to recruit on campus, so you have to think outside the box. Look for firms that don't recruit on campus, research their history/background and reach out to them.
Usually there will be less competition and you get more of a chance of standing out and showing you're passionate about working for them.
Source: Tradestreaming interview
Pierson recommends making it a list of every single way you can sell yourself, and to convey that to the people you may meet from hedge funds.
But, the trick is to conduct 'guerrilla marketing' in secret - to sell yourself well but also do it discreetly. Try to talk to the hedge funder via e-mail or on the phone, or ask to have one-on-one meetings.
'Once you're in a fund, the last thing you want is for everyone in the industry to know your information,' Pierson reasoned.
Like other industries, job openings at hedge funds are sporadic. Though most students want to have an internship or job offer locked in by January, if they take a risk and wait - there will be openings and also less competition for them.
The interviewee said he heard through the Harvard investment club about a prominent New York hedge fund hiring for an immediate start in May - and knew of many people very well qualified for the job that had already taken positions in banking.
Source: Tradestreaming interview
Business Insider Emails & Alerts
Site highlights each day to your inbox.