Life of a Hedge Fund Analyst

Have you ever wondered why hedge fund analyst is one of the dream jobs of many people? Here are some main details of this career we want to discuss in this article.

1. What does a Hedge Fund Analyst do?

To be an analyst at a hedge fund, you need to have a strong passion for investigating the stock and bond markets and creating new ideas either on the direction of the market or individual securities. Analysts’ main job will focus on individual company/security research and generating investment ideas. You will have to maintain the financial models for current and prospective firms of the fund. In addition, your job is to perform valuation techniques and data mining. Junior analyst assist senior analysts and portfolio managers in the overall portfolio management process. Besides, an analyst has to prepare proposal, marketing materials, client presentations and client reporting; make on-site calls to investment managers; and write due diligence reports.

Hedge fund analyst’ working hour is much different from the 90-100 hour of an investment banker working hours some are acquainted with. Hedge fund analysts working hours is similar to the market hours: getting into work around 7 a.m. and leaving around 6 p.m. Generally, hedge fund analysts are not required to work weekends or holidays. Of course there are still some exceptions, an example here is at SAC, analysts hold weekend phone conversations with their portfolio manager to suggest new ideas and positions within the fund.

2. The Salary of a Hedge Fund Analyst

Analyst compensation varies very much by fund and performance. The compensation doesn’t follow any fixed benchmark. However, in general, a junior analyst with little-to-no prior experience will earn a $90,000-$120,000 base with a bonus that is double the base amount. It is much harder to lay out the average entry level pay for the hedge fund industry than it is for investment banking, private equity, and others. 

Hedge fund compensation is heavily relies on the performance of the fund: If the fund makes money, employees are well-compensated, but if the firm loses money, employees receive nothing.

It is not strange to hear of hedge fund analysts in their mid- to late-twenties making well into the half million-dollar range per year or more. It is easy to see that  a career in a hedge fund is challenging but rewarding. As you get promoted and earn a managerial position, you get strong grasp on different investment products and strategies and you are paid per your performance, unlike that of mutual funds where the performance is compared with economic performance.

3. An Analyst Career Path

When hedge funds are commonly much less structured, less formal, and have fewer layers and titles, a hedge fund career path is quite different from those of investment banking or private equity industry. In general, a career path for an analyst usually goes the direction of 2-3 years as a junior analyst, the next 1-3 years as senior analyst, and then a portfolio manager.

The most junior-level analyst position for a hedge fund based in New York City will require an undergraduate degree and a minimum of one year of  experience in investment banking. A junior analyst would have the chance to get promoted to a more senior role of analyzing companies to issue buy or sell recommendations to the portfolio manager. A senior analyst would be a member of the investment committee for the fund and would report directly to the portfolio manager. Moving up the ladder is strictly at the discretion of the portfolio managers.

4. Hedge Fund Analyst Responsibilities

The more your career at the hedge fund grows, the more responsibilities you have to take, which means you will need to have deeper and deeper knowledge of hedge funds from day to day. In the first couple of years as an analyst, you are required to conduct fundamental research projects and work with the Sector Head, which includes attending management meetings, attending industry conferences conducting field research and building financial models. You are required to gain expertise over a sector, which involves developing proprietary tools for research, creating sector surveys, and reading macroeconomic research and sell-side equity.A level of engagement is also a requirement for a hedge fund analyst, which means the ability to steer senior-level investment ideas, create your own network of management teams and buy-side analysts, take the initiative to work independently and analyze investments.

As you move upward in the career ladder, responsibilities include generating own investment fund ideas, find ways to improve sector performance, add value to other others, lead the investment team, be accountable towards investment plans, actively participate in senior team meeting, remain thoroughly updated with stocks and other performances that impact your investment fund.