Many people here on WSO are obsessed with hedge funds and look upon the mutual fund industry with disdain.  However, I have seen a lot of misinformation out there on what mutual funds even do, so I wanted to layout the basics of both hedge funds and mutual funds and what makes them similar and what makes them different.  Also, I want to layout what some of the incentives are for some of the managers of these funds and how those incentives either align or don't with the investors.  I'm not a lawyer, so don't take this as legal advice.  This is just a general outline.

Andy note: Here's the final installment of the 3-part interview series with SirTradesaLot. See Part 1, Part 2.

Bio: He has worked in the finance industry for almost 15 years in a variety of roles at global investment banks and asset managers. A few years ago, he left a senior management position in the equities division of a large asset manager to start a hedge fund/asset management firm with former colleagues.

Becoming the "Boss"...
If you have a goal of managing a team or moving into senior management, there are steps you can take to increase your odds. Many people think that you need to be given a formal leadership position before you can start managing or leading people.  I think most people have that backwards.

So, this question keeps coming up, "if I negotiate with a prospective employer, will I piss them off or ruin my chances?"  I wanted to share the perspective of the person hiring and give you a couple of examples of what happened with people I have hired who were being paid below market wage to begin with.  Some of you will probably think I'm a dick for saying some of this, but this is what really happens.  Generally, your job is to try to get paid as much as possible and the employer's job is to pay you as little as possible.  Getting upset about it won't help.  Recognizing how to tilt the odds in your favor will.  I consider the compensation negotiation a part of the interview and hopefully, you will understand why in the examples below.

Andy note: SirTrades' decided to get deeper into the story so we're making it a trilogy. Enjoy part two below, part 3 is coming up next Wednesday, and make sure to check out part one here (which includes his bio) if you haven't already.

Importance of Gaining Relevant Experience vs. Brand
One of the biggest fears that people have is looking stupid. This causes all sorts of strange behavior.

The first relates to the old adage, "nobody got fired for buying IBM" which was used by purchasing managers many years ago to justify their sub-optimal purchases of computer equipment, but helped the buyer protect their position in the firm. The same mindset is prevalent in the investment business.

Some portfolio managers will buy the same security as most other portfolio managers because they know it will be harder to criticize them if the security depreciates ("hey, everybody else owned it") and easier to criticize them for not owning a winner. These managers are closet indexers and it is the dominant strategy in mutual funds. Unfortunately, doing what everyone else is doing is rarely a winning strategy.

Andy note: BIG thanks to SirTradesaLot for doing a Q&A with me and offering up his advice for the WSO community - "One of my greatest joys is helping young, ambitious people." He has worked in the finance industry for almost 15 years in a variety of roles at global investment banks and asset managers. A few years ago, he left a senior management position in the equities division of a large asset manager to start a hedge fund/asset management firm with former colleagues.

My background