Background -
Attended a top non-ivy undergrad with a degree in mathematics and economics. Prior to leaving for a multi-strat hedge fund (think Bluecrest, Millennium, Balasny, etc.), I was a macro derivatives trader on the sellside. The vast majority of my daily work was focused on idea generation, backtesting and quantifying risk/reward on prop positions with the rest 20% market marking related.
Given my current role on the buyside, my product scope includes futures, bonds, CDX index swaps, CDX index swaptions, IRS, Swaptions, ED$ options and more exotic derivatives as well. The objective is pretty much generating as much uncorrelated alpha as humanely (or machinely) possible while maximizing Sharpe, etc.
Nontraditional Route -
Instead of a traditional campus recruiting process, I started my networking process late at the start of my senior year by cold calling every alumni and any contact I could find on the internet. I regularly flew to Manhattan on my own dime after lining up multiple coffee sessions and persistently followed up. Eventually, this translated to one superday where an analyst position was created for me on a derivatives desk.
Feel free to ask me whatever you'd like, or PM me if you're more comfortable doing that instead.
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Do you see yourself working long term in HF? What tips/advice would you like to share for those who are aiming to have a good career progression?
Long term, I definitely see myself staying at the HF. It is probably the most meritocratic career path that I personally have seen in finance— you have a hard % payout of your PnL so limited politics versus what you get on the sell side.
Usually, the caliber of people also tend to be significantly higher given the barrier to entry so you work with some extremely intelligent individuals whom you can learn from.
The best advice I have for folks is probably have an obsessive passion for whatever you are doing — you have to be motivated internally rather than by the comp, prestige, etc. This is probably why I never considered IB a career path given the amount of manual work involved.
How to deal with stress and rejection?
Comps?
Most people perceive stress to be a negative thing but a stressful environment usually leads to innovation as well as to a higher level of performance overall. And you will eventually realize (or accept) that regardless of where you are in life, stress is inevitable and there are just different levels of stress. I have seen plenty of guys making $1mm a year be more stressed out by money than a min. wage work supporting a kid. So ultimately, best thing to do is embrace stress as a partner along your journey and enjoy the ride.
On the topic of rejection, I encourage everyone read The Subtle Art of Not Giving a F*ck.
Comp is extremely variable in the HF world and is often a reflection of how much capital the PM is allocated. A PM running $100mm book earning 7% should be earning between 700k to 1.5m depending on the payout percentage on the contract. Keep in mind that the vast majority the comp is all variable depending on the returns, given that bases usually max out around 250k. So across the board, you will have PMs who could just be taking home base salary (bad year/bad luck) to guys taking home $50m or so.
To be honest, nearly everyone in the derivatives space often come from math, comp sci, operations research or some sort of STEM background these days. It is a very different and niche skillset required versus IB where you are editing pitches and excel models. I’d argue that the skillset is only transferable to data science/tech whereas the things you learn in IB can be more broadly used across other industries.
In terms of reading, I recall my analyst years where I spent 3-4 hrs after work everyday reading white papers, sellside research, and learning the math behind option theories. The breadth of resources on the internet is unlimited so I still constantly continue to learn on a daily basis.
1. I'm sincerely hope people continue to think that way
2. I would approach it from a top down approach - think from understanding central bank policy to political infrastructures, etc.
3. The opportunity in LIBOR transition has already occurred in the SOFR/OIS basis. Depending on who you ask, I would imagine most would consider it as a nuisance; others would argue otherwise given that it probably created a ton of consulting and regulatory jobs
4. Keep in mind the monkey printing exo flows may learn to hedge accreters/berms but will unlikely develop the skillset to forecast formosa pipeline. Some of the best traders have never worked on the sellside.
5. There is no structured recruiting like PE. Past performance, while never an indication of future performances, are often seen as the token to succeed in landing at a hf
6. Converging skillset, asset class focus and synergy to maximize pnl
7. Best methodology is simply having different allocations so conflicting ideas aren't that big of a problem
8. Different firms have different policies
9. See my post above about stress - just part of life at this point. I probably work out 5-6 times a week and try to use outdoor activities as a way to reset the brain so to speak.
1st 6 months you learn how things work...learn thru osmosis..research every term you don't understand...read all research produced by your firm and other firms research you can get your hands on, read it all and understand it all...research any terms or conclusions you don't understand. Learn how people make decisions....often takes all their background knowledge learned over years of working. During those 1st 6 months your only value add is dumb work that must be done. Print and distribute, get coffee...book trades, send confirms, check that everything matches. After your 1st 6 months you should be able to backup people and not be an idiot. After a year you should start getting some small responsibility. Are you professional? Do you understand the difference of when you are / aren't supposed to act like a normal guy cool dude, and when you have to be like a lawyer 100% serious. On the trading floor, when it comes down to executing a trade, there is zero room for error...but after years of doing it over and over senior people get relaxed because it is 2nd nature to them....but its not 2nd nature to you so don't be misguided...you are being interviewed every day....and for the1st few years....if the team thinks your brain isn't as big and great as they initially thought...you can still get fired. I've seen a lot of junior people mistake the relaxed nature of senior people who are experts at their craft for being "relaxed" and make mistakes of grammar when talking about a trade....its not the same thing...traders might seem relaxed, but at the same time ZERO mistakes are allowed.
Relaxed perfection.