Hedge Funds: Career Focus

With hedge funds fast becoming an attractive career prospect, the investment banking sector could prove very fruitful as a career choice.

The investment banking sector has long been a favourite destination for MBAs and many of the major players have well-developed intern and full-time hire programmes designed to source and integrate the brightest and best. A relatively new entrant to the asset management industry is now catching the attention of business school graduates - the hedge fund sector. Estimated to be worth £500bn in the UK alone and around US$1 trillion in the US, hedge funds offer an entrepreneurial environment, some of the most imaginative and innovative approaches to international financial markets and telephone number reward packages, where healthy base salaries are often supplemented by bonuses that figure in millions of dollars. So how do you gain admission to this select, but highly attractive club?

The bad news is that most of the front-line work, particularly in the lucrative trading area is still the province of individuals with direct experience either of the sector itself or in a prestigious investment bank and, without this, three letters after your name will not be of much help, no matter which business school has provided them. However there is always more than one way of skinning the proverbial cat, so, at the risk of over-mixing metaphors, if the front door is closed, try using the side entrance. The analysis function, for example, offers opportunities for MBAs with strong maths backgrounds, perhaps even dating back as far as their first degree.

The hedge funds bonanza

Although hedge funds started off as small organisations, often no more than a handful of individuals with good financial services experience and a bright idea, they are now becoming mainstream operations with a need for dedicated and capable infrastructure. This in turn has thrown up a whole new set of entry points to MBAs keen to share in the hedge fund bonanza. As the regulatory environment tightens, MBAs with legal backgrounds may find a way in by selling the combination of a qualification in the law and the general commercial knowledge that a business school can supply. In New York, for example, one of the traditional homes of the hedge fund, a shift to a reliance on in-house lawyers at the expense of external counsel has led to a scramble for individuals with directly relevant experience and a bidding war for the very best. Even small funds are reported to be making offers in the region of US$300,000, while earnings at the very largest players can exceed the US$1 million mark.

"The big story over the last 12 months has been the expansion in back office operational roles."

The infrastructure route

The general need to boost infrastructure has created a widespread demand for operational staff, as funds create their own middle and back offices to establish set-ups almost akin to mini investment banks. The big story over the last 12 months has been the expansion in back office operational roles. A continuous flow of business means that trades have to be settled and that means more bodies to handle the work. For MBAs with the intellect to understand complex trades, products and financial instruments this can provide an attractive short-term compromise which can open the door to more "sexy" roles in trading or sales and marketing later on. And while we are still some way away from dedicated MBA admission schemes, demand in the middle and back offices of larger funds does seem to be stimulating the beginning of a more formal approach to MBA recruitment. For now, it seems that MBAs without direct experience will still continue to find a "war for places" rather than a "war for talent", but as the sector continues to grow and mature, all the signs are of a shift in the balance of power before too long.

Source: QS TopMBA Career Guide