Hedge funds are actively managed investment entities that employ diverse investment strategies, catering primarily to high-net-worth individuals, institutional investors, and accredited investors.
The term "hedge" in “hedge fund” refers to the practice of hedging against investment risks by engaging in inverse-portfolio direction investments and simultaneously buying and shorting assets using investor capital.
Hedge funds are known for taking more substantial risks compared to other investment vehicles, such as mutual funds and pension funds, with the aim of generating significant alpha, often within a relatively short time frame. Their relatively looser regulations affords them the flexibility to employ unconventional and high-risk strategies, including the use of derivative products that may be restricted for institutions.
Many hedge funds now leverage quantitative and algorithmic trading methods to maximize returns and minimize risks. Within the hedge fund space, a diverse array of funds exists, each tailored to specific investment styles designed to meet the unique needs and objectives of their clients.
Hedge fund recruiting can be quite difficult in comparison to other fields, and varies quite a bit.
There are certain larger funds that take undergraduate interns, such as Citadel, Bridgewater, Oaktree, and Point72. These processes are very selective and often incorporate a more holistic approach to their interviews - rather than just a set list of questions like in IB, candidates can be asked anything and everything, from their views on the markets, to just the way they think through problems. In Bridgewater’s case, they’re infamous for debate-heavy group interviews.
Some funds take interns every few years, e.g., Deerfield, Walleye, Hudson Bay Capital.
Some quantitative hedge funds, such as AQR, will seek out engineering and mathematics students from a select range of schools.
Many spots are reserved for candidates with prior experience. This prior experience can depend on the fund’s strategy and desk being applied to (S&T folk often dream of the exit). Certain quantitative hedge funds, such as Renaissance Technologies, will only consider candidates with PhDs in STEM fields. There are sector-focused firms that primarily employ equity research analysts in their coverage, traders with relevant product knowledge, and industry professionals such as engineers, doctors, chemists, and so on. Many places prioritize investment bankers as well.
It is important to perform one’s due diligence in this field, since no hedge funds are identical in their recruitment process.