Broad job categories in hedge fund firms include investing, trading, risk management, marketing, accounting, legal and compliance, and general support (for example IT, human resources, and administration). Barring the last two job categories, all of the other functional roles fall in finance and can be used an an entry point to working in a financial role in a hedge fund.
Investment Professionals define the investment strategy by coming up with research-based models and trading strategies, and performing portfolio management tasks. Hedge funds are highly leveraged. This allows money managers, traders, and quants to try a lot of risky trades and strategies. Entry-level investment professionals start as modelers or researcher with a quant role Such entry-level hires begin by learning existing trading strategies. Past the entry-level stage, investment professionals begin exploring and developing trading models through research and data mining with the goal of benefitting from profitable arbitrage and trade opportunities. More experience leads to roles in idea generation and may allow the candidate to become a portfolio manager at a senior level.
Traders trade on defined strategies following the fund's investment plan and the overall direction of investment professionals. Entry-level traders usually execute trades for investment professionals. After gaining some experience, traders can suggest modifications to strategy. Entry-level traders for hedge funds start with trading plain-vanilla equity, bond, or futures and gradually move onto complex trades like option combinations, high-frequency trading, arbitrage trading, or automated model based trading.
Risk Management Professionals act as monitors to set limits and oversee any deviations in trading limits which can lead to risk. Hedge funds are high-risk, high-return investments. It is important to keep risk measures in place which are duly followed by various professionals managing the hedge fund. Risk managers perform two main functions: 1) they they define the boundaries for investment and trade exposure and 2) they actively monitor the developments to ensure that those boundaries are not breached. An entry-level position in risk management may be titled risk analyst. They are involved in quantitative calculations (like VaR), DCF analysis, and assessment of risk exposure. After sufficient experience, the role expands further into senior positions which involve defining the risk limits and framework of trading and investing. Risk managers have to collaborate with multiple participants to seek their buy in. It includes traders and investment professionals who need to be convinced about the risk limits without posing challenges to meeting the hedge fund investment goals. Acting as a liaison with legal and regulatory staff also forms an integral part of risk management.
Marketing owns responsibilities for managing investor relations, client services, and fundraising activities. Even well-established fund houses and reputable portfolio managers need effective marketing for their investment ventures to succeed. Most hedge funds target HNI investors, and the marketing team is dedicated to managing these investor relations and offering client services to ensure adequate fundraising. Entry-level candidates in hedge fund marketing should have good communication and presentation skills and advanced financial knowledge, as they must act as the face of the hedge fund to clients. Initial responsibilities involve simple note taking during client meetings, conducting client interviews to assess their needs, offering investment solutions, and acting as point of contact for HNI clients. Gradually, the role broadens into fundraising and associated functions like syndication.
Accounting owns all accounting-related tasks which include calculation of NAV, maintaining books and records for holdings, investors, and figures. Most of the tasks are aided by dedicated computer programs and accounting software. Monitoring and error-checking is an integral part of this job.
Source:
www.investopedia.com/
Shobhit Seth
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