The future of HF
Hello, I am a junior in high school and I am very passionate and interested in finance, specifically Hedge Funds. How drastic do you guys foresee this area to change within the next 10 years, and what changes do you think we will see? I am kind of unsure of the safety of choosing this as a career to pursue, as I am noticing the rise of automation in low level finance jobs.
The hedge fund industry is expected to undergo significant changes over the next decade, driven by several key factors:
Automation and Technology: Automation will continue to reshape the industry, particularly in areas like trading and quantitative strategies. Rule-based positions and low-value-add services are likely to be replaced by automated systems. However, high-value-add roles, such as relationship management and strategic decision-making, are less likely to be impacted. Some long-short equity funds may evolve into quant funds, leveraging advanced algorithms for stock picking.
Shift in Investment Preferences: Institutional investors, such as pension funds, are increasingly favoring low-cost investment vehicles like ETFs and index funds over traditional hedge funds. This trend is driven by the perception that active investing often underperforms passive strategies, especially in bull markets.
Market Environment: A rising rate and inflationary environment could make hedge funds more attractive, as they may benefit from increased market volatility and opportunities for outperformance. Additionally, a shift from growth to value-based strategies could favor hedge funds that excel in these areas.
Competition and Barriers to Entry: The hedge fund space is becoming more competitive, with higher barriers to entry. Top funds are likely to continue attracting talent, but regular equity analysts and those without highly relevant experience may face challenges in advancing their careers.
Liquidity and Alternative Investments: Hedge funds may gain an edge over private equity and other illiquid asset classes during periods of economic downturns, as investors may appreciate the liquidity offered by public markets.
While the industry is evolving, it is not disappearing. Hedge funds that adapt to these changes, embrace technology, and focus on delivering alpha will continue to thrive. If you're passionate about this field, consider building skills in quantitative analysis, programming, and understanding market dynamics to stay competitive in the future landscape.
Sources: Are Hedge Fund Employees Structurally Fed, HF Industry Dying?, Are Hedge Fund Employees Structurally Fed
Contrary to popular belief, you do not choose the HF life, the HF life chooses you
Hope that helps
Stupid question on my side but care to elaborate pls?
If you haven’t gotten the call by senior year of HS it’s over unfortunately
it will be increasingly miserable to be a knowledge worker in any field that is competitive if you are young.
I work on the cutting edge of using ai to automate analyst workflows and would tell you that the cost effectiveness of training ai to do the work is so remarkably good that it seems inconceivable that much of the work will not be automated in a few years. This is a really counter consensus view amongst anyone who does the job because most think they are doing very thoughtful work though I do not think this is so.
A lot of the work is pure theater and so for this reason you will always have a job as a human since this type of performance will always be valued. But it will be harder and harder to audition for these sorts of roles. It’s not so much that your job will be 100% replace it’s that the rate of displacement will be enough such that there is less and less reason to offer good working conditions.
Everything you say makes sense, except your view being counter-consensus. Everyone I know in the industry is afraid about their career prospects because of AI.
I see the global commoditization of knowledge as the real threat to gen Z workers, and AI is one part of that but not the only thing. AI won't replace jobs because most white collar jobs are theater to begin with and exist to justify an executive's pay, but it will make real wages (real measured relative to assets) and working conditions collapse.
I built an automated sector analysis system using machine learning as a passion project, so i find this quite interesting. How far out do you think we are from low level analysts being replaced by these systems that you described?
Every thing i've seen says there is *already* a very noticeable decline in hiring of new entry-level staff in both finance and tech. And that decline appears to be accelerating.
What non technical careers would you think are attractive / reasonably protected from AI disruption (either replacement or poor working conditions)?
If you know how to reliably pick securities (or any asset for that matter) and make money over time, then there will be a job for you. Unfortunately for most of us, only an infinitesimally small number of people possess this trait in relation to the overall population. We can both listen to the same earnings call or read the same 10-K and leave with different takeaways. The question is, how can you make your takeaways better than mine? If you want safety, go be a physician; your PV of lifetime earnings will probably be higher than the average person who has worked at a hedge fund.
this is what fascinates me. i love this stuff so although i may not know much yet, i think i will enjoy doing it.
Bro you sound like you watched too many episodes of Billions. What did he say that gets you so excited and heated up? Have you ever even read a 10-K or listened to back to back to back to back calls during earnings seasons? That shit is boring af. Guy is describing like the most boring parts of an analyst job and you are sitting there jerking off to it lol
dark
I thought you tend to prefer credit/HY public investing career?
hope you've been nice to your AI assistant, they'll be your boss
As an undergrad, I think I have sort of a contrarian view on this (sort of optimistic). If AI models are inferring on the same data, and being used sort of in the same way (summaries, regurgitations) then I think a truly differentiated, proven investor will be in high demand. Someone who can truly develop granular views and unique insights will be in high demand (ex. using AI to model data center buildout and usage of power in some random part of Texas to see whether hyperscalers are behind or ahead of schedule), or building an analysis of broadband buildout and outages across the country, and analyzing how Starlink is changing pricing power/churn in customers.
But a lot of investors sort of think the same way, or are using AI more of a workhorse than anything (which it partly is), where in reality it can provide differentiated insights (with good prompts/nuanced approach).
Also, i feel like we also underestimate the hundreds (if not thousands) of parameters that go into a business and the hundreds of questions you could ask about EACH parameter. Ex. take the difference between SSD and HDD storage. You can ask all sorts of questions on the underlying technology, the cost curve, the tradeoffs with power, how GPU buildouts are related, the manufacturing process, the inputs, and every customer contract.
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