Moving from Fund of Funds to Hedge fund

therealgekko's picture
Rank: King Kong | banana points 1,391

How possible is it to move from a fund of funds after a year or two to a hedge fund? I know obviously IB/ER are the ideal paths, maybe PE as well. But is it possible to move from FoF to a hedge fund with good networking? And I'm not talking about $10B dollar funds. More in the range of $300MM-$2B

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Comments (36)

Nov 8, 2017

I've never seen it, no.

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Nov 8, 2017

What's the best path to get to a hedge fund from a FoF? Maybe do ER first and then move? Any suggestions?

Nov 8, 2017

Anything is possible, even if unlikely or improbable. Doing ER first, even for a year or two, would certainly increase the odds

There are a ton of equity hedge funds out there, with new ones being launched every day

Nov 9, 2017

Yeah gotcha, I was thinking do FoF for a year or so, and pass a few levels of the CFA, start reaching out to sub $1B dollar funds. I've head of people moving from operations to research analyst at hedge funds they work at, so in comparison, just thought that FoF would at least be significantly easier to move to a hedge fund in comparison to that

Best Response
Nov 10, 2017
therealgekko:

Yeah gotcha, I was thinking do FoF for a year or so, and pass a few levels of the CFA, start reaching out to sub $1B dollar funds. I've head of people moving from operations to research analyst at hedge funds they work at, so in comparison, just thought that FoF would at least be significantly easier to move to a hedge fund in comparison to that

More likely scenario would be FoF to sell-side equity research, build relationships with PMs and analysts at HFs, and then move to a HF. HFs have no problem hiring a person in mid/late-20's coming from sell-side Associate level.

    • 2
Nov 10, 2017

Over the last five years, I have done due diligence on over 200 hedge funds (across all sizes, geographies and locations). 99% of people you see working at hedge funds have very similar backgrounds - so when you see someone with a unique background, it catches your attention. Not a single time did I see a person at a hedge fund who previously worked at a fund of funds. There were maybe 3 or 4 situations where I saw someone move from an operations role to an investment role (although one of that was at a FoF).

    • 1
Nov 10, 2017

Can you define unique background?

Nov 10, 2017

Anything other than IB/S&T/PE/MBB.

Nov 10, 2017

Did you see people move from valuations or accounting to hedge fund?

Nov 10, 2017

All the time - but always in a middle or back office role.

Nov 10, 2017

If you don't mind me asking, what are the sizes of the funds you looked at?

Nov 10, 2017

I was at a consulting firm that did diligence on hedge funds for institutional investors - so sizes were across the board. I think the smallest fund I looked at was maybe USD200mn? The fund was run out of Singapore though. At the larger end, I have looked at all the big names (Bridgewater, AQR, DE Shaw, Man, Fortress, Two Sigma etc).

    • 1
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Nov 10, 2017

bump

Nov 10, 2017

-

Nov 10, 2017

Fund-of-funds is not well-suited for long-short equity hedge funds. Totally different skillset: manager selection vs actual investing and fundamental research. Even if you were to attend HBS or Wharton, you would have to compete with those who had actual experience in hedge funds, PE, equity research, or banking.

Nov 10, 2017

It's not impossible but the far better option is to go into banking at the associate level following MBA and move into the hedge fund space after a few years. Fund of fund is very niche and not an overlapping skill set. The above pretty much covered it.

Nov 10, 2017
Booger45:

It's not impossible but the far better option is to go into banking at the associate level following MBA and move into the hedge fund space after a few years. Fund of fund is very niche and not an overlapping skill set. The above pretty much covered it.

this is like the worst advice ever. going into banking post MBA means that your chances of ever getting into a good hedge fund just dropped 70%.

to answer the OP's question - yes it's doable with a top MBA. Fundamental HFs recruit at the usual suspects - HBS, Stanford, Wharton, Chicago and some others as well

Nov 10, 2017

Or join one of the fudamental/value IM programs with one of the big boys and try to lateral after a few years

Nov 10, 2017

Does Hfof experience count against you in MBA admissions? Also, is it reasonably plausible, without relying on exceptions, to network into a sell-side job like ER or IBD to make the transition easier?

Nov 10, 2017

I'm currently working for a FOF and trying to make the switch.. Can someone share their experience? Thanks!

Nov 11, 2017

Extremely difficult because the skills that you pickup at a FOF are not really transferable to picking underlying securities. Things that make it possible: you have prior experience on the sellside (banking/research/trading) because this shows you're not starting from scratch. Another plus is if you have a highly technical degree or are a quant (same reason= transferable skills). Other possibilities would be lateraling internally if your firm has a HF or if you're at a big name FOF this can help as well. Short of that your possibilities are grad school (followed by a stint on the sellside most likely), trying for an offcycle role on the sellside (unlikely at junior levels but possible at boutiques) or targeting long only Asset Management. I wouldn't be in a hurry to join a HF unless you have the skills to perform today because they're not really training grounds. Agreed though that getting out of a FOF is better sooner than later.

Nov 11, 2017

My experience is on the PE side but if you want to get into direct and out of FoF it is very hard but doable. Do it as soon as possible before you cannot, and hopefully you have built some contacts in your current role which you can use to open doors in the HF world and get advice, job advice, etc. - Would advise going through contacts in the HFs you guys work with who hopefully have seen you doing your work diligently on their fund. You should have good knowledge of the space so figure where you want to work and just network the fuck out of the space. People will be nice to you as long as you have the fof role :)

In PE you can go from FOF to secondaries, which is more direct-like but kind of a good middle, not sure if there is an equivalent on the HF side...

Nov 11, 2017

Should have added I was referring to the HF side and not the PE side. Have seen more do it on the PE side because those funds often co-invest soyou have some exposure to waht the to what the PE funds do. Haven't heard of any FOHF "co=investing" because of the obvious timing issues, other than macro hdeges as one offs.

Nov 11, 2017

Agree with this, PE FoF to PE is doable, HF FoF to HF is going to be really tough unless you have other concrete skills or experience to bring to the table.

Nov 11, 2017

As long as you can check a lot of the normal boxes (e.g. passionate about investing, invest personal money, strong academics, etc.) I think your best bet would be to shoot for smaller funds who are looking for capital. No need to be dishonest or sneaky about it, but it could be a good way to help them out with capital through your contacts, and you get a job.

Nov 11, 2017

How often would you go from FOF to a covered fund? Or is it more likely to go to a completely unrelated fund?

Get busy living

Nov 11, 2017

Literally almost never. See comments above as to why (different skillsets)

Nov 11, 2017
Vagabond85:

Literally almost never. See comments above as to why (different skillsets)

I figured as much, just wanted to make sure

Get busy living

Nov 11, 2017

I've done FoHF to HF, although by the time I did I'd already summered in both M&A at a BB and at a top tier HF. If it makes any difference, my FoHF was a top tier one (think top 5 in the world).

The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.

Nov 11, 2017

It would be tough to make the leap from small FoF to large macro HF unless you focused on a fairly niche subset (ex: quantitative macro), have adequate knowledge and most importantly, have the right contacts. I'd network with the PMs in the funds that your FoF is invested in and also be open to small to mid size macro funds. Hustle hard and acquire knowledge otherwise you'll undoubtedly make a fool of yourself. What type of macro funds are you interested in?

As for BB research, I believe you're referring to economic research/ strategy opposed to ER. Well, you usually need to have an econ of finance PhD for your conventional economic strategist role, or prior s&t experience for other roles such as experience on an EM debt desk for an emerging markets strategist role. Essentially, these roles rarely hire out of undergrad, but such strategist roles are usually nothing more than PR.

Nov 11, 2017

It would be tough to make the leap from small FoF to large macro HF unless you focused on a fairly niche subset (ex: quantitative macro), have adequate knowledge and most importantly, have the right contacts. I'd network with the PMs in the funds that your FoF is invested in and also be open to small to mid size macro funds. Hustle hard and acquire knowledge otherwise you'll undoubtedly make a fool of yourself. What type of macro funds are you interested in?

As for BB research, I believe you're referring to economic research/ strategy opposed to ER. Well, you usually need to have an econ of finance PhD for your conventional economic strategist role, or prior s&t experience for other roles such as experience on an EM debt desk for an emerging markets strategist role. Essentially, these roles rarely hire out of undergrad, but such strategist roles are usually nothing more than PR.

Nov 11, 2017

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Nov 11, 2017