Hedge Fund Trader Interview Preparation Guide

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It's a private, unregistered investment pool encompassing all types of investment funds, companies, and private partnerships that can use a variety of investment techniques such as borrowing money through leverage, selling short, and derivatives for directional investing and options.

Sector Head - The person is in-charge of "sectors" working within a fund, such as the healthcare sector or the technology sector.

It's an investment strategy that seeks to exploit pricing inefficiencies between a convertible bond and the underlying stock. Managers will typically long the convertible bond and short the underlying stock.

This type has a lot of Portfolio Managers running independent funds.

All the involved managers are entrusted with the task of implementing various strategies and in the end, a specific fee is paid to the 'platform'. SAC and Citadel are well-known examples of multi-manager platforms.

There are strict limitations on risk; there is extensive leverage use, and more capital is poured to the best performing funds and the underperformers are terminated.

Working at a multi-manager hedge fund is fraught with pressure, which is not always competitive. A significant advantage here is that since the platform takes care of the administrative part, the PMs and the analysts can focus on the investment, singularly.

The pay depends on the platform and its relation with the PM, and the relation between PM and the analyst.

This question varies by individual, but think about examples like the following:

You have a specific interest in the fund manager's strategy. You were always interested in merger arbitrage, fixed income arbitrage, etc.

You don't like to be confined by the stricter rules that mutual funds have to follow and would appreciate the ability to look for short positions and/or use derivatives.

You would like to work in a smaller shop-many mutual funds are huge-and therefore if you like smaller, possibly more challenging, work environments then state this.

Portfolio Manager (PM) - The person is a decision-maker, responsible for a portfolio's growth.

Hedge Fund Manager (HFM) - The person has complete control over the fund.

Analyst - The person who researches and sells ideas to the PM.

The main distinguishing characteristics are that hedge funds use derivatives, can short sell, and have the ability to use leverage.

I was a research analyst, which means I conducted investment research and generated investment ideas for portfolio managers.

I first started covering distressed debt and equity investments all over the world, and then I began spending more time on short selling, also getting into distressed assets.

We only worked with public companies, but some funds cover private companies too.