No one says it better than Keith McCullough in his book, The Diary of a Hedge Fund Manager: A lot of hedge fund guys seem to just insinuate their way into the hedge fund world.
Look at the current ranks. There are the ex-Wall Streeters: David Einhorn, John Paulson, Eric Mindich, Leon Cooperman, David Tepper, Dan Och… big banks are where the bulk of hedge fund managers come from.
There are also the bookish brainiacs, who are so smart they could probably succeed at anything, like Jim Simons and David Shaw.
Then there are the ex-hockey players, who stumbled into the biz from the Ivy League: Phil Falcone, Keith McCullough, and Tim Barakett.
And then there are the randos who seem to just want to try it out: Phillip Goldstein and Peter Thiel.*
How did they all end up in hedge funds? We surveyed a few young hedge funders, and one older one to find out… (We didn’t include their names because they’d rather not have their names on record.)
* (That’s unfair. Thiel actually traded derivatives at Credit Suisse before founding PayPal. Goldstein was a civil engineer who sued the SEC and thwarted hedge fund regulation.)
First thing: We actually mean talk to everyone, and don't just send out a mass email.
We spoke to a guy who runs a small hedge fund, two analysts at global macro funds, and an analyst at a fund of funds and they all said the same thing on this matter: network like crazy.
One of our global macro analysts went to 'all of the head hunters' and says, 'they don't really know anything about global macro funds because there are so few of them.'
Of course it can't hurt, so sure, talk to headhunters. Just don't use them in place of talking to everyone you know.
All three of our analysts were lucky: they knew someone who knew someone at a hedge fund.
One of our analysts just used his college's career services department. There was only one alum who ran a hedge fund and it was a one-man shop, but he asked to meet with him anyway.
'I asked him if I could come watch him trade for a day,' he says. 'We got along well but he said there wasn't really anything for me to do there. But he knew someone at a hedge fund in New York and gave me his email.'
Find something or someone you have in common with the fund or the fund manager.
A mutual acquaintance, a shared hometown, in one case an analyst just used the line that at his old job, 'we covered the firm you used to work for.'
Another talked to a friend from school who knew an analyst at the firm he now works for. He mentioned the connection in his intro email. Then the analyst there 'vouched' for him.
The 'elevator pitch.' If you get a PM or the top hedge fund manager on the phone or run into him somewhere, you should have this ready to go.
Some things you should say:
- What you want
- Who you are and what you do at you do at your job
- Tell him ideas you have been working on
Bring something to the table. Think of something to talk about before you get on the phone and sit down for an interview.
'Maybe (probably) it won't be that good of an idea, but they're looking for people who think for themselves. I told the head guy about a few ideas I had been working on.'
'Have something to talk about - a stock idea or a trade idea.'
'I had found an opportunity for arbitrage and I showed it to them. I knew they probably weren't going to use it, but I wanted to show them I knew what I was talking about.'
This piece of advice comes from our hedge fund manager: answer every email quickly.
'Show the guy what it would be like to work with you.'
There's really no excuse to take longer than an hour. You have your blackberry on you, use it.
In the email, be quick and get to the point. Time is money.
Once you get in the office or on the phone, ask questions. One of our analysts tells us,
'I was just genuinely interested in what he did. I asked him how their fund worked, what they traded and how they found their picks.'
We saved these two for last because you should already know this:
Without anything extra effort, your resume is just another piece of paper in a huge stack. The person that will make the final decision to hire you probably won't ever read it.
'I still don't think my boss ever read my resume,' says one of our analysts.
'It's just a prerequisite.'
Just because no one will read it doesn't mean you can send a blank sheet of paper.
Don't be lazy and send the same resume to everyone.
'I found out what each funds' investment strategy was and wrote about what I had done in those areas.'
On what to wear when you interview at a hedge fund:
'The interview is probably the only time you will wear a suit.'
One of our analysts started at his firm as an intern.
Once he was there, he went to a PM and asked him if there was any extra work he could do for him. Of course there was.
'It went from me asking him for work to him coming to me and asking me to do work.'
After a while, he showed everyone his investment ideas.