Back to Basics: why HF?
Have got wait-listed twice with L/S funds because of the why HF answer. For one of them I actually proceeded and am still in the process.
My genuine reasons want to be in HF:
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I love shorts, much more than longs. Mainly because of calling out bluffs and even frauds. That is exciting work to me.
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It's very straightforward in terms of your performance. Your stocks average 30%+ or -50% over a 1-year or 2-year horizon. You are either good or bad within that limited time frame.
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It's less bullshit than banking, that's for sure.
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Money is not that much better compared to entry-level banking, but see 3.
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If I get lucky, might get to PM within years, or at least become a solid senior analyst.
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I love reading, much of it finance and economics related.
I don't talk about 4 or 5 in interviews.
my god I hope that's not the answer you go with in interviews - I'm in lowly corporate banking and even I know that's not a great answer - especially when you're interviewing for a role that pays 500k+ and is considered elite.
You should be talking about what you love about the process of research and investing (or trading/execution if that's more where your role would fit), how macro/micro economics play a role, you should be able to convey your strengths and capabilities in fresh ideation and fortitudes in synthesizing complex arrays of data and information and turning it into actionable insights. It also helps if you can illustrate your interest in investing by speaking to personal stories/examples of your personal investing experiences (e.g. school club/PA if it's genuinely impressive returns or lessons or stories).
GL
Oh, it by no means pays that much. more like $150K, not higher than banking analysts, comparable? Not a big fund.
I sometimes get confused over one thing: do people want genuine motivation answers in an interview?
I know the answer is it depends on the interviewer. My interview style tends to be giving the honest answer, sometimes with polish. I thought that was the right way to go with HFs.
^ This.
"Why HF?" can be loosely translated to "do you know what this job entails?". The interviewer just wants to make sure that you know the type of work you will be doing and the skills needed to succeed at the job.
Lmao at points 1) and 2).
It's all about framing the answers. Your genuine reasons are the same as the ones who own mansions and yachts, but it's safer to be professional and not be too much of a straight shooter because you haven't proven you can eat what you kill.
Look, your first one is really bad. That’s like the I just watched a finance movie and now I think I know what to look for in a short. Not how it works. I mean ya sure you can stumble across a real legit short that has some some nefarious angle to their biz but it’s not common at all. A good short could be a company that serially underperforms their peers, has had a period of outsized outperformance not backed by fundamentals, is disproportionately impacted by a change in their cost input/revenue mix, has an unexpected regulatory headwind, etc. Sometimes it’s as simple as they’re not as good relative to your long and therefore fund the trade.
Huh I thought you only short after clicking through spreadsheets of thousands of mortgages
I would also go the other way of the above commentators the question is split into two parts really:Why do you want to work at L/S?I answered this one talking about my understanding of the job, noting the performance and how the hedging part allows you to remove a lot of the risk and focus on one key point.Why do you want to work at a HF?I saw this question as why would you be good at working at a hedge fund. I don't think they're looking for a "I can model really well" but more along the learning route, at the end of the day that's what you get the opportunity to do is learn about companies, the markets, how you work, how to model something etc.Dickthesellsider commented above, I recommend his Instagram account his Q&A he does is SO useful and can honestly say it helped me succeed in my interview, so thank you for your help.
Glad to be of value!
Worked at a primarily short firm, they're very niche and most other L/S uses shorts as a hedge AFAIK. Remember, the best case scenario for a short seller is a 100% return - short interest, so being capable of looking at longs is also important. Similarly, looking at companies such as Nikola doesn't require deep financial analysis since everyone basically knowns its a fraud.
The "hard" part was the catalyst. Very obviously a fraud but most didn't have balls to short it because every other shitty thing was also going up atm.
So true. Catalyst is key.
Fraud, yes, but without catalyst, it's AT BEST a dead stock. AT WORST it can go up 300% more so your short exposure is going up unintentionally, becoming a huge risk management issue. Same goes for shorting stocks with open-ended optionality, sketchy management can always move into / acquire into a rando adjacent market as a TAM expansion story to burn the shorts.
As mentioned your answers really suck. None of those talk about the environment, pressure and ability to do the this job day-in, day-out. Sounds like you think you are joining a unicorn startup rather than a hedge fund, this job is a marathon and daily grind. If you love to read go be an academic.
The environment, the challenge, the quality of coworkers etc...As dickthesellsider mentioned you can talk like this when you own the mansions not day1.
Is all communication at hedge funds that toxic?
Yes.
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