Background: MSF, ~2years MM IBD There seems to be a dearth of information about FoF on this site, so happy to answer questions people might have about transitioning from other parts of finance, what the work is like, or whatever else might be interesting to folks. Cheers!
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How safe do you feel your job is? A lot of talk of passive investing and a few hedge funds shutting down makes me worry. Plus, HFs in general are supposedly** notorious for not thinking twice before firing someone.
Having come from banking; did you consider PE, VC...how/why did you decide on HF?
In general, I'd say that HFs and FoF are here to stay (in a reduced form) for the long term - I view job stability as a function of the pedigree of the fund. I'm lucky that my firm has a very stable capital base and is generally considered to be one of the best FoFs in the game.
I'd be lying if I said I didn't gun pretty hard at PE/VC, so it's not like I rejected the idea out of hand. At the risk of engaging in some ex-post bullshitting - the wider breadth of what you see in HF land and the lack of 'deal' style work flows works a lot better for me generally. In particular, at a FOF, I get exposed to every market there is (one of my funds is even a PE style co-investment), which really helps mitigate the sense of intellectual boredom I sometimes felt in IB.
See above - exit opps are there, but I'd be lying if it's easy to get into a HF/PE job from a FoF.
So, there are a lot of transferable skills you can develop if you want - for example, if your firm does co-investments, you're still going to have to work closely with the fund on the underwriting, and so you'll get a lot of exposure that way. There's also the portfolio management and hedging skills (we do a lot of ours in house), which can be helpful if you want to go into a liquid markets role later on.
That said, it's certainly more qualitative than an entry level role at an IB/PE/HF shop would be. While this is certainly a negative in (some) recruiter's eyes, I'd make the following points: 1) technical skills are easier to learn on your own and 2) all finance jobs become more qualitative as you move up the ladder.
Sure - as is usually the case with 'Day in the Life' type posts, I'll caveat this by saying that my day is pretty fluid etc. etc. I'll keep it pretty high level but feel free if you want a more granular explanation on anything.
8:00-8:30 --> get into office 8:30-9:30 --> read WSJ, journal of portfolio management, Bridgewater's daily observations etc. etc. 9:30-10:30 --> excel type work (could be an internal research project / updating one of the return models for the fund's I'm staffed on) 10:30-12:00 --> meeting with new manager, debrief with PM to talk through the trade examples and decide if follow-up is warranted 12:00-1:00 --> lunch, typically read something online or flip through a pitchbook to decide if a meeting is worth while 1:00-4:00 --> draft a memo on the meeting from the morning (these typically are 1/3 recounting what was actually discussed, 1/3 commentary on the views expressed by the manager, 1/3 an explanation of why we are/are not interested in moving forward) 4:00-7:00 --> catch up on any of my projects / deliverable for the funds I'm on.
1)What kind of skill set makes one more likely to succeed in HF FoF versus at a HF: I'd say the key difference (although HFs are a big category, so this is certainly not always true) is a strong understanding of portfolio theory (this is important for senior HF folks, but not at the junior level) and top decile writing skills.
2) Are there any characteristics that you can generalize in analysts between FoF and at a straight HF? So, first off, HF analysts tend to have specialized skills, are higly quantitative/technical, and generally prize $$ over work life balance. At good FoF (i.e. where the juniors chose to work at a FoF / FoF wasn't their last resort), I say that analyst generally show tremendous intellectual curiosity and prefer to focus their analysis more at the strategic/macro level.
3) Starting from scratch, are there any other recommendations you would make for building a skill set to break into FoF besides the reading recommendations above? I'd say the best things you can do are build a solid foundation of financial/skills (you don't need to be able to build a fully functional lbo model in 1.5 hours, but you should be able to do it with 4-5), expose yourself to more esoteric areas of finance (you should be familiar with the various types of options / derivatives), and starting reading newspapers/finance magazines with a focus on HFs. Also, working in some sort of high finance role prior is advised (although not always required).
We do some emerging stuff, but only where we can get REALLY comfortable with the quality of the ops and business generally (emerging managers have a higher level of 'sketchiness', in general).
Positives: Integrity (we do super in depth background checks), willingness to customize to meet our mandate, an understanding of why their product is a good fit for our portfolio (e.g. do they understand what we're doing) and (this is the biggest one) --> do they understand WHY they make money? If a manager can't articulate why the make money and why/what state of the world they'll lose money, they're probably pretty delusional.
Negatives: the reverse of all that stuff, lack of transparency, bad back/middle office, being difficult to work with.