Q&A: Analyst at a Hedge Fund-of-Funds Platform

Open to questions of any nature from students/recent grads/current professionals interested in hedge fund-of-fund platforms/portfolio analytics/product strategy. 



I am involved in constructing hedge FoF portfolios across the risk/return spectrum (focus mostly on broadly diversified portfolios but have also helped with opportunistic/strategy-focused mandates). My role is a portfolio analytics-heavy role and consists of creating these pro forma portfolios that fit client objectives. I also help write portfolio commentary for a couple of mandates.  

Happy to take any questions, especially related to recruiting/interviewing/networking etc.

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Comments (11)

Most Helpful
  • Analyst 1 in AM - Equities
Aug 20, 2020 - 8:43pm

I am in what seems like a similar career path in more of an LP-type firm, so curious to hear your responses and learn more about your career. 

1. Why did you choose the FOF route instead of traditional investing?

2. What is a typical background of someone at your firm?  

3. Do you feel "stuck" in these types of roles going forward or have you noticed some mobility, perhaps not into HF but any direct investing role? 

4. Do you find the role intellectually stimulating/challenging? 

Aug 21, 2020 - 9:35am

1. After undergrad, I didn't have a clear idea in terms of the asset class/strategy to focus on when pursuing the traditional investment route. I wanted to be in FOF space because I knew I'd great exposure to HF strategies across the spectrum. From a portfolio analytics/construction perspective, I have been able to get exposure to various HF strategies (albeit high level, not in the weeds of their investments as I'm not on the manager investment side) and have built an understanding of what it means to view managers collectively, how they'd interact/supplement each other within a portfolio going forward. FOF route, in my opinion, is a great way to figure out strategies/asset classes you find most interesting. Personally, I more so enjoy what I do right now in terms of addressing client requests and working towards creating a fund that fits their overall plan.

2. Typical background varies depending on the team. For, say, investment side, background can range from being direct traders previously to working at other FOFs. 

3. I have noticed mobility into direct investing roles (esp into direct hedge funds).

4. For sure - I enjoy the analytics side very much, as there's always a new question/request to try to solve for.

Let me know if this is helpful! 

  • Associate 3 in HF - EquityHedge
Aug 20, 2020 - 8:54pm

I asked this in a separate thread but seems fitting here - what sort of risk systems or risk management framework do allocators like yourself find the most impressive (specifically for long short equity and cross cap structure funds)? What are some common characteristics that help new funds raise from allocators - pedigree, performance, anything else they can do to differentiate themselves?

Aug 21, 2020 - 10:06am

I'm not on the manager investment side so can't answer your question from experience but would imagine that some differentiating characteristics for new funds would be having an investment edge/specialty, possibly with sector/asset class specialists who have trading experience. So while performance and pedigree are important, having a good research process / thesis should be equally as important.

  • Associate 1 in Other
Aug 21, 2020 - 10:55am

Where could I learn more about the entire structure and to perhaps gain some insight into construction? In other words, if I wanted to launch a FoHF, where can I read stuff on how to do it? Investor pipeline, regulatory & legal structure and issues etc.

My firm is starting to offer defensive FoHF to retail clients and idk if it makes sense because of regular blow-ups and non-consistent track records (less than 5y). Do you think this could work?

Would you invest in a FoHF? 

Which is your favorite part of the job?

Thank you.

Aug 27, 2020 - 11:40am

The process of setting up a FoHF is definitely complex (I'll try to see if there are any materials online you could reference but can't think of any at the moment). The process certainly depends on whether it'll be a custom fund (one client) or a commingled fund (multiple clients). Commingled would involve setting up multiple vehicles to accommodate different investor types and tax statuses whereas custom funds are usually a single vehicle. The types of legal documents needed also depend on the jurisdiction of the client and type of legal entity, after which a legal team would work on fully incorporating the fund. Once the fund is active, you can then add to the fund the managers that you've sourced and negotiated with separately. I can't speak to the legal process in detail but hope this is somewhat helpful from a broader perspective. 

In regards to your second question around FoHF for retail clients, that could work although the non-consistent track records could be concerning. The key thing to setting up funds like these is definitely the manager sourcing process from the investment side - the relationships you're able to create with underlying managers and the conviction you have in them really determine the success of your fund. 

Yes - decision to invest depends on your investment objectives. FoHFs have great diversification and downside protection features so definitely interesting.  

Favorite part is getting exposure to a variety of managers and their strategies. I also enjoy the problem solving aspect of the role - getting to put together analyses to address a variety of requests.  

Thank you! 

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