PhD --> Hedge Fund?
Hello all,
Context: I am an Economics PhD student at a T-15 College (Attended a T-20 UG) with extensive experience in Financial Economics, Econometrics, and Macroeconomics. As the PhD program progresses, the emphasis on academia prospects has been somewhat dull, since writing research papers until retirement is not within my interests. However, the allure in private-sector, in specific Hedge Funds (Long/Short, Event Driven) seems compelling. I have been reading on Finance since 16 (~7 years now), and have created profitable strategies with an independent brokerage account (Have won numerous stock-pitch competitions as well). I have also had the privilege to work at an L/S Fund (300MM in AuM) as a Junior in College, which allowed me to have direct exposure with a lean team. I do not plan to drop out of this PhD program.
Question: How difficult would it be to secure internships at notable HFs as a PhD student? How difficult would it be to transition into the private-sector as a HF Analyst after completing my PhD?
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Answer: Depends on how good your stock pitches are, assuming your goal is a fundamental LS shop.
I was able to secure an internship at a smaller L/S HF through cold-calling a pitch as a Junior -- should be fine in terms of that.
Quite honestly, L/S funds are not going to be super receptive to hiring someone at an expense of $100k+/year without prior experience in IB/PE because they'll want to know your modelling skills are developed. I am sure there are some positions at Hedge Funds for graduates but as for who these firms are I don't know.
You may have a better shot at recruiting for a quant fund as with quant recruiting there is a more structured process of PhD --> Hedge Fund that is more established and many of the big players make hires every year.
I'd suggest you focus on macro funds.
Given your Econ PhD, you would be able to put your academic background to greater use and have real niche that others don't.
I'm sure plenty of macro sell side banks would be interested in you too.
Putting together stock pitches and looking at L/S or event funds in my opinion doesn't properly utilize your studies.
Best of luck.
You are going to run into a big challenge trying to join a L/S equities fund immediately out of your PhD. You have to fight the perception that you are too academic / "out-to-lunch" and that you are only well versed in the minutiae of theoretical economics. The unfortunate truth is that, regardless of intellectual horsepower, these funds get hundreds of resumes of people that have been reading about finance since the womb, have won stock pitch competitions, have been trading their personal accounts, etc. The natural concern is that if you spent ~5 years deeply learning about economics, those were ~5 years you didn't spend studying the business landscape and sharpening your equities research skills. (I'm not saying that this is true for your case or not, but this is the assumption funds are going to make.) The other natural concern is also going to be that PhDs can be dogmatic. There is no room for intellectual dogma at a hedge fund.
I think that without a strong referral from your network (really, a close friend or colleague who now works there in an investing role), you're not going to get any looks at these funds right now.
I can think of a few ways for you to break in, although they may be more indirect than you'd like:
1. Pursue quantitative finance, either directly to a HF or indirectly via working at a bank as a desk strat. This is the role that has the most overlap with your academic background. The downside here is that it will be even harder to jump to a discretionary investing role if that's what you really want to do.
2. Try to join a data science group within a fund, be it a single-manager firm or the central data science team at a platform. Do that for a few years to build a real understanding of L/S equities, and then attempt to transition into an investing role, likely as a more data-driven investment analyst. The downside here is that data science problems at these fundamental investing firms are simply not that complicated. You need to be motivated by the subject area, by working with messy data, and by the amount of responsibilities to juggle; you can't be motivated by solving complex problems (as a lot of PhDs are).
3. Network your way into joining a start-up hedge fund as a junior analyst. This is likely your only direct path into picking stocks; I have a hard time seeing scaled funds taking a flier on you when they get so many candidates from more standard backgrounds. The downside here is that you're at a start-up hedge fund which will likely have worse economics. But if I'm being candid I don't think you're in a position to be picky.
Thanks for the comprehensive answer.
As for the third recommendation, would a concentration in Financial Economics assist with recruiting at all? I was under the impression that HFs will allow PhDs with concentrations in relevant areas, but based on the replies, that does not seem to be the case. Can you elaborate on the "worse economics" aspect of start-up HFs? I was at a smaller one over 2019 summer (<300MM AuM), and it seemed to be a decent experience.
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