Those who are aspiring for an investment team’s Analyst position in this $3 trillion industry should be prepared for the most intensive and demanding rounds of interview. It’s the buy-side dream land that is coveted by most Finance professionals, and the interview is the rough last step to get into the land.

1. Hedge Fund Interview – Overview

Picky Hedge fund recruiters, in order to screen the best investing enthusiasts,  typically conduct 3 rounds of interview:

Hedge Fund Interview Questions

Phone Interview

Phone interview is the first screening round where the fund has a quick check on your competency, and if you’re seriously passionate for the job.

You’d be asked mostly resume-based questions about your previous professional experience, your interest in investing, and your understanding of the fund. Time pressure, rather than the difficulty level, is the challenge of this interview round. The need to present your personal story and industry/market knowledge in a very succinct way requires your thorough preparation.

Apart from general fit questions, you’re recommended to have at least 2 90-second Investment ideas, and updated current market understanding  under your belt, in case they ask you about any investment pitch.

On-site Interview

The real test is here. You’ll be facing a marathon interview super-day, ranging between 4 and 10 interview sections, in order to be thoroughly assessed personally and professionally. Your endurance and work stamina are another factor to be tested. 

It could be said that this round of interview is mostly about your stock pitches: be prepared with at least 1 long and 1 short in every single interview. Delivering a sound pitch is 70% the key to succeeding the interview.

A wide range of questions and a stock pitch example would be introduced in the full list below.

Later stage Interview

At some big funds, you have to make some extra trips to the office to meet everyone, as a way for the fund to determine one last time whether you’re a match with the team.

2. What do Hedge Fund recruiters look for in an Interview?

What qualities do recruiters want to see in a candidate through answering questions after questions? How would you picture yourself as an ideal Hedge Fund analyst? Here we list out some qualities that a potential hedge fund analyst should possess:

1. You have mastered the basic technical skills

You can demonstrate your solid foundation in company research, financial valuation, and stock pitching. HF analysts are expected to deal well with modeling, valuation, forecasting, and presenting investment ideas in a clear, succinct way. 

Interviewers would assess these technical skills by questions involving intermediate Accounting/Finance/Valuation knowledge, and by analysis points in your Stock pitches.

2. You KNOW how to invest:

If you apply for a hedge fund, you must have spent years reading investment books, monitoring the market, and having your own track records. Elaborate on the best way to deploy capital state in your opinion, and your view on market efficiency or inefficiency. Show them that you have developed a concrete Investment Philosophy that both compliments your strengths and suits the funds’ strategies and risk aversion. 

Hedge funds definitely want to hire people with clear opinions on investment ideas, and can clearly explain the rationale behind. Show them what you’ve got, with confidence (but not arrogance).

3. You’re truly passionate with their particular fund:

You need to show them you’ve rigorously researched their AUM, investment time horizon, style, strategy, types of holdings, etc. Is it equity, credit, global macro? Do their strategies fall into fundamental, trading oriented, deep value, distressed, growth, or quant? Knowing about their investing style would help you tailor your investment thesis accordingly, and show that you’re a true enthusiast for the fund!

4. You’re a collaborative team player, a good fit for their team

Attitude and personality are important as ever. Hedge funds don’t look for talents – they seek talents who they can easily work with. Humble manner, confident and coherent communication, someone who’s professional but also easy to get along and cooperate with. Be open to comments and feedback during the interviews.

3. Hedge Fund Interview Preparation

3.1. Reflect

The preparation for this career advancement started years long before you actually submit your resume, probably ever since you read your first investment book. And so forth the large part of this interview preparation process is about reflecting on your previous experience, your track record (if you’ve invested on your own), and all the things you’ve learned about the financial market.

  • Incorporating your personal stories into even common questions like “What are your strengths & weaknesses?”, or “Why do you want to work here?” would leave an impression on the interviewers, and also speak volumes about your long-held passion for investment.

e.g. (Weakness: … -> don’t want to work in IB anymore -> switch to HF to directly take charge of a real amount of capital)

Hedge Fund Interview Questions

  • Specifically dig deep into your past investment decisions / economics trends / any noticeable market movements to start forming your own investment philosophy. Having a unique viewpoint on investment is appreciated at hedge funds. It doesn’t have to go against the widely accepted market fashion, but hedge funds don’t want analysts who just simply follow the trends. The process of forming your idea is more important than whether that idea is right or wrong.

3.2. Latest news catch up

Hedge Fund Interview QuestionsIt’s very likely that you’ll bump into questions like “Where do you catch up the news everyday?”, or “What’s on the front page of the Wall Street Journal today?”. As part of daily responsibility, investors have to closely follow today’s market situation, and adjust their prediction on future market climate upon current numbers. 

It’s a must that you’re familiar with daily market highlights – they’re the one thing hedge fund analysts stick their eyes to days and nights, with a hope of generating new investment ideas from market inefficiency. Having knowledge upon various industries, especially ones targeted by the fund, would definitely give you an edge.

3.3. Prepare investment ideas

The very first step of preparing your stock pitch is to research the fund. After all, your idea is to be hypothetically enacted in their fund, so it has to align with the fund’s style and strategy. Pitching a stock to a credit focused fund and you’ll turn yourself into an idiot.

Each of your 10 to 15-minute idea has to be backed up with neat and tidy documents:

  • A 3 to 5-page write-up, could be alternated with a 10 to 15-slide Powerpoint presentation
  • A 3 statement financial model with comps analysis
  • A scenario analysis if it’s an event driven idea
  • References 

Confused on how to form investment ideas and write up pitch deliverables? Get the best self-study materials for Hedge fund Interviews!

4. Hedge Fund Interview Questions

Here comes the main part – questions actually been asked in Hedge fund interviews.

4.1 Fit – Behavioral questions

a. Personal questions

  • Walk through your resume.
  • Why do you want to work at our fund?
  • Why Hedge Fund, over Private Equity?
  • What motivates you?
  • How did you become interested in Hedge funds?
  • What are your proudest accomplishments? What was your most challenging professional experience?
  • Who has influenced you the most?
  • What is one word that describes you the best?
  • How would you characterize yourself in a group dynamic? What was said on your reviews? What are your strengths and weaknesses?
  • What investment books have you read?
  • Which qualities do you think a great Hedge fund analyst should possess?

b. Professional questions

  • What are your 5-10 year (long-term) career plans?
  • Highlight your quantitative accomplishments.
  • Describe a time that you failed. Why did you fail, and what did you learn?
  • Describe a time that you teamwork successfully, and what did you learn from that experience?
  • What is your favorite investment idea?
  • What have you done at your current firm to prepare you for this role?
  • Can you list out some of your investing experience? (Investing club activities, personal track record, mock portfolio…)

4.2. Technical questions

a. Accounting

  • What happens to free cash flow if net working capital increases?
  • How is it possible for a company to show positive net income but go bankrupt?
  • Why are increases in accounts receivable a cash reduction on the cash flow statement?
  • What is goodwill? How does it affect net income?
  • You’ve purchased a new piece of equipment for the factory. How does this affect the 3 financial statements?
  • How does depreciation affect the cash balance, and each of the 3 financial statements?
  • How is a levered beta different from an unlevered data? What’s the process of finding both?
  • What’s the difference between intrinsic and book value?
  • EBITDA vs EBIT? What to use as a proxy for cash flow?

b. Investing

  • If you had $100,000 to invest, where would you put it?
  • Do you have a Personal Account? Explain why’d you invest in a stock?
  • Can you give me one long – one shot idea?
  • How do you screen for stocks? What is your holding period?
  • What is the Federal Funds Rate?
  • What does the yield curve look like and what does it mean?
  • Can you list out some Investing dimensions?
  • What is the meaning of “delta”, “alpha”?

c. Market topics

  • What is the average Price/Earnings PE ratio for the S&P 500 Index?
  • What makes a good financial model?
  • Describe a few impacts of low interest rates on stock or fixed income markets
  • What’s your outlook on interest rates?
  • Describe a noticeable event in the past and how could you use the market inefficiency to make returns?
  • Is there anything you’d like to update on the current market?
  • Describe the impact of purchasing a manufacturing conveyor belt on the 3 financial statements
  • What is the DJIA at today? NASDAQ? S&P500? Long Bond? Fed funds rate?
  • Is the market yearning towards bond, equity, foreign exchange, or commodities…? 
  • How do you predict the interest rates in 12 months from now?
  • What were some market highlights in the past 3 months?
  • What newspaper do you read daily? What’s on the front page of it today?
  • What industry, stock and bond do you follow?
  • What numbers of a firm would you choose to look at to determine if it’s doing well?
  • What’s the difference between a put and a call option?
  • What determines the premium you place on growth stocks relative to their peers?
  • You have three companies in three different industries: retail, tech, and pharma. What would you look for in their 10-Ks beyond financials?