It used to be the case that hedge funds didn't hire graduates: they liked to hire seasoned traders from investment banks.
"An often followed career path is to start in an investment bank, may it be as a trader, or research analyst or even as a salesperson, and then move on to a hedge fund," says Lex Van Dam, a former Goldman Sachs trader who now manages a hedge fund and helps graduates into finance careers.
Anthony Keizner, head of the hedge fund practice at New York-based recruitment firm Glocap, agrees. "Most fundamental hedge funds hire their junior analysts out of investment banking programmes," he says. Hedge funds like banking analysts' financial modelling and valuation skills: "This saves the firms having to do technical training on the ‘basics’ of investment analysis, that few hedge funds are set up to deliver."
Most fundamental hedge funds hire their junior analysts out of investment banking programs
However, as hedge funds have grown, the larger ones are increasingly running their own graduate recruitment programs. Citadel, Bridgewater, Man Group, CQS and Brevan Howard are among the hedge funds with graduate recruitment programs and more are appearing every year. The hedge funds that hire straight from universities tend to be more quantitative in focus, says Keizner. These funds are looking for "raw smarts."
In most cases, portfolio managers start their careers as analysts or researchers and only manage their own money once they've proven their ability to generate lucrative investment ideas.
Hedge funds' graduate programs are small compared to investment banks'. Deborah Kester, head of human resources at Man Group, says they tend to hire 4-6 graduates each year and receive 900-1,000 applications after the entry process opens each September. Man Group's two year training program involves rotations around different areas of the business - for example the firm’s sales team and its investment managers, including Man AHL (Man Group's quantitative investment manager), Man GLG (a discretionary fund manager) and Man FRM (a so-called 'fund of hedge funds' which invests in other funds.)