What background do most hedge fund managers have?

What do you guys think the most common background is among most hedge fund managers? (i.e started as traders, analyst, quants etc.)

 
nutsaboutWS:
There's many paths. I think the most common are:

Investment Banking (M&A preferred) --> HF Research Analyst --> Portfolio Manager --> Fund Manager

Equity Research --> HF Research Analyst --> PM --> FM

S&T (Traders preferred obviously) --> Junior/Assist Trader at HF --> Trader --> Head Trader --> Fund Manager

Now, skill wise, I think the best HF managers are traders and ex investment bankers.

Hope this helps.

Other than $$$, just from reading around it seems to depend on the fund itself and what its strategies are.

 

its locust not grasshopper... This label was given to an activist fund not a PE firm. That's actually a big difference as Germany displays a very healthy PE market but has no inside HF market (all German focused funds i.e. GPs are based in CH or UK). By value the German PE market is number three in Europe (if we sum BeneLux and France) by volume there are actually more deals than in the other regions. This can be easily explained by a healthy venture industry as well as the Mittelstand i.e. a mid-market based economy. Not many "large cap" deals in Germany.

Anyways: I don't think I fully understand your question.

You are an investment banker and want to set up your own fund via an online trading platform to utilize your relationships with private companies? This will not work per se, nor does this make any sense.

Let me know what you want to do and I tell you how to legally structure it and what to watch out for.

 

Not this again.

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 

Guys,

Thank you all for your kind replies. Really appreciate your insightfulness to my question. Whether it is locust or grasshopper. I think, you got it. Franz Münterfering titled all sorts of financial investors who suck the blood from the German companies out in exchange for cutting jobs. This is how the initial discussion started. The case study for Grohe was JIT there (if this is what you meant with activisim).

However, I am keen to find out more about your legal advices.

Thank!

Ersin

 
  1. Be wealthy. Not rich, wealthy.
  2. Know a large number of equally wealthy people
  3. Have said wealthy people give you their money without any questions asked and no proven track record
  4. Invest it

There you go. Now you have your own hedge fund in 4 easy steps.

Commercial Real Estate Developer
 

First of all change your username and dont sign your posts with your real name. Secondly as mentioned the first step is to invest your own money. What do you want to invest into (most likely you have only enough to trade public securities at this point)? Then you try it out, develop a strategy and keep doing this. Once you have done this successfully for a while you think about the next steps (none of which are relevant unfortunately for you at this point).

You are asking all the wrong questions for now. Having a network and some money unfortunately doesnt warrant you starting an investment firm at this point. The best usage of your network is to learn about specific industries you are interested in in which you may invest into (through your trading account). Building an opinion about an investment idea is pretty key and you already have a huge information disadvantage vs. any professional investor on the back of limited resource access.

As I mentioned, take some money, speak to friends who know certain industry verticals, do some analysis and buy public securities in that sector. Watch, learn and repeat.

"too good to be true" See my WSO Blog
 

Do you guys seriously think that in this age, he can raise outside money by showing his "track record" with his online broker?

OP: no idea what you meant by "large cap investment banking and private equity exposure"; but given it's solid experience, this is what I would suggest: apply to a top MBA/MFIN (in Europe it would be LBS, Insead, Oxford Said etc.), and try to leverage the school network to get into a top bank or asset management firm, and work your way up there to a senior position in charge of running serious risk. This would probably take much longer than 10 years and it is likely that you'll never get there in the first place; but without a serious and credible track record, forget about raising any money. Partners at Centerbridge and Blackstone, and MDs at the top BB desks aren't gonna wait for some guy getting tired of his Big4 job (lol)...

 

In my experience, the really good ones all have a weird background. I think that, like elite athletes or musicians, there's a special talent. The b team is composed mainly of people that worked their way up in the industry, but the A team guys I have met are often really strange guys that kind of fell into the role by meeting another weirdo HF manager that said "hey this is actually a cool job, do you want to work for me?" Think Simons coming from code breaking, Soros the philosopher, Michael Farmer of Red Kite has a divinity PHD I think... I guess if you come from a background different form everyone, you think differently, and then that works out in markets..

 

In the 50 + age set it is fairly common. Its common in tech too. Gates, jobs, zuck didn't follow a traditional path (Griffin is most like zuck/gates background).

Remember 60 years ago being a trader was a job for plumbers and the idiots in the class. The respectable people didn't enter trading. Its why you hear stories of housewives showing up at the exchanges and making 20 million a year a couple years later.

 

This is a stupid question. You can technically be a HF manager with 10k and a Bloomberg terminal in your bedroom.

There isn't one "track." Just go somewhere where you get good experience and are able to develop a strong network. You can do that at many places and in a variety of ways.

 

Tell that to Bobby fucking Axelrod

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."
 
Best Response

In my experience you can sort of break the community down into conventional and unconventional. 'CaptainJapan 's response touches on this.

If you're asking about the most common background, that's easy: the sell-side, or some big super institutionalized buy-side firm. It also depends highly on the strategy: macro PM's usually come from S&T/econ research, quant PM's come from quant roles, equity guys come from IB or PE or another L/S fund, etc etc. Vanilla equity guys usually typify conventionality imo: target undergrad, then sell-side grunt at a prestigious name, then top tier MBA, then either more IBD, or PE or HF's, then have a not great, but not bad cap raise to start a decently-sized fund, then run book while collecting tidy fees and getting fucked by the market then close down later (i.e. Mindich recently, who incidentally is a total fucking tool), but it's all good because 2/20ish on a few hundred MM or $1MMM is a solid chunk of change. So to recap, if you're just another motherfucker who wants go to Vail and the Hamptons and doesn't love this business: Princeton --> Morgan Stanley --> HBS --> work for another guy's shitty L/S fund --> start your own shitty "long short equity hedge fund focused on generating superior risk-adjusted excess returns by identifying companies trading below intrinsic value with attractive short to medium term catalysts" --> underperform – it's fine, no one can blame you for it. Just BTFD/closet index and pick up 200 bips for free every year – then you can chill with all the other miserable fucks who regret their careers :) Not bad, right?

Or, you can have an unconventional background – they tend to work out well. I don't think that's necessarily because of their unconventional background though. It's more because if you don't check the superficial factors (shiny degree, BB experience, Hermes tie), you have to check the meaningful factors, so people with unconventional backgrounds who get into the biz do so because they're real fuckin' good at running book – they have a higher threshold for proving themselves. Whereas cookie cutter guys can get into the industry just because they look like 'finance guys.' But it's true that original, unconventional characters aren't a huge part of the industry. HF people are definitely better than the sell-side in terms of creativity, etc, but I'd say >80% of the industry still fits into the (admittedly overly-critical) portrayal above. For the rest, by definition there is no 'typical background.' These are the interesting guys. (I'll add the caveat to all of this that I have met many, many wonderfully independent and thoughtful guys who on paper look like the finance drone above).

Forgive the long post and rant, I'm away on an awful vacation and forced myself to not follow markets, so here I am.

 

If normal equity research: L/S pretty much exclusively. But the guys who write rates, FX, etc strategy research for banks sometimes get labelled er too, and you don't really see them going to L/S: they go to macro. But, not to throw shade at those guys (I spend >1hr reading sell-side shit everyday), there's usually a reason they're strats and not traders... so limited hf prospects outside of pure research, which can still obviously be lucrative, just not on level of risk taking

 
brooksfit:

Economics, finance theory, portfolio theory, investment management, fundamental analysis, modeling, etc. should be taken but are no where close to the information you need.

Taking those classes is like knowing some of the rules in basketball, like out of bounds and what a free throw is. But you're a long way from being Michael Jordan.

I know, but you need to know the rules before your fisrt match, so that's what I want. I know that you can only learn many things playing the game

 

Wrong question. You should ask what background the BEST hedge fund managers have, not most. Most might as well be mediocre and inferior to passive investing, which is why many hedge funds are actually doing poorly. If you want to aim high, then aim high.

Never discuss with idiots, first they drag you at their level, then they beat you with experience.
 

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