Hedge Fund Internships: Mysteries resolved

Hedge funds do not usually come on top of mind of finance students when it comes to summer internships. For one, hedge fund internship is not a common stepping stone for students aiming at investment banking, private equity, and even hedge funds after graduation – they would opt for internships at small PE firms, boutique banks, and Big4 firms in their early years instead. That is yet to mention the lack of contacts and information of small and local funds, whereas large funds in big cities don’t usually hire undergraduates.

Consequently, lots of the questions are left unanswerable: Is it available to people not having connections? How valuable is it for one’s future finance path? What is the scope of work like? And what is the step-by-step guide to get one?… Let us clear out all these confusions in this article.

1. Who should go for a Hedge Fund Internship?

Hedge fund internships could be an option for undergraduates in their junior and senior years majoring in Finance – Economics, or Computer Science, Maths aiming at a quant role, while less common but still a viable job for recent graduates and MBA professionals.

1.1. Undergraduates

For students with Finance backgrounds, hedge fund internships are most helpful for transitioning to a full-time offer in the buy-side (hedge fund, private equity, asset management) right out of college. This is extremely rare, I don’t want to romanticize this fact. But I’ve seen people with HF internships, great connections, and a well-performed personal portfolio landing at hedge funds out of undergrad. Funds have started to run graduate training programs too, making hedge fund analysts a more common graduate job recently.

HF internships provide you with a great deal of versatility

Those who target full-time positions in investment banking might find hedge funds not as relevant. but this is not at all true. Since hedge funds are the number one exit opportunity for investment bankers, recruiters would assume you’re familiar with working with IB people through your HF internship, hence a higher admission chance into IB. After all, HF internships provide you a great deal of versatility, since they establish credibility with investments and understanding the markets – things required in almost every Wall Street job.

For Quant students (Computer Science/Maths…) who want to land in the Finance world, hedge fund internship is a good leverage for better top HF/prop firms later on. Those whose backgrounds are tilting towards software development, or purely maths and computer science but would imagine themselves building strategies and pricing models to generate alpha for quant funds after college, your undergrad internships should involve buy-side experience at least in your junior years. A hedge fund internship then would prove you’re not ending up pigeonholed within the tech/academia industry.

1.2. Recent Graduates

Though being the utmost coveted graduate jobs for finance students, junior positions at big investment banks are notoriously bringing almost no work values for top graduates, hence the gradual shift to hedge fund graduate jobs.

A hedge fund internship, especially at small local funds, will give you hands-on experience in market analysing and actual investment decisions. The lack of structure of small hedge funds leave great room for you to improve the system, generate ideas, or develop new models. In other words, you would have a greater chance to make impacts, compared to doing all the Excel, Powerpoint, and administrative grunt work at well-established investment banks.

However, the biggest challenge for fresh graduates in finding hedge fund internship opportunities is to do aggressive networking. Hedge fund job postings are renowned for being secretive and the hierarchy is unstructured. It’s even more uncommon to hire graduate interns, so extra informational interviews and resume drops are needed before leaving college.

1.3. Pre-MBA and MBA Summer Interns

Pre-MBA internships serve as a profile boost for career switchers, so that they are more competitive when applying for on-campus summer internships. In this case, the fact that these professionals have no relevant experience can weigh them down in applying for hedge funds, thus they have to create leverage for themselves. A stellar resume, a compelling cover letter, up-to-date stock pitches and equity research notes that demonstrate your investing knowledge.

MBA summer interns are more of a typical path for hedge fund aspirers. The recruitment is more structured and cyclical; and hiring has picked up drastically amongst top hedge funds at Wharton, Columbia, or Booth. To get a full-time offer at places like Citadel, PIMCO, Fidelity, Putnam, etc., landing first at a top 5 MBA program seems to be a viable path.

2. Which Hedge Fund is ideal for Internships?

Choosing the right hedge fund to intern for depends largely on your expectations for this job. Real investing experience, huge paycheck, big brand names,… what are your top priorities for now? My suggestion would be to consider all, so that you can wisely use your time and leverage for better positions in the buy-side in the future.

2.1. Which Hedge Funds ACTUALLY offer Internships?

It was once impossible to get a HF internship, but now all the large funds like Citadel, D.E. Shaw, Two Sigma, Point72, Bridgewater, Jane Street Capital,… offer one. There are even hedge funds holding proper training programs for fresh graduates:

Bluebay Asset Management (traditional fund using fundamental analysis in UK)
D.E. Shaw (quant fund, 10-12-week program for junior students)
Bridgewater (macro fund, familiar for Ivy League, 10-week internship)
Two Sigma (quant fund, typical for CS, engineering, mathematics and physics students)
AQR (quant fund, popular for statisticians)
Winton Capital Management (quant fund in UK, preferably for PhD-level astrophysicists)
Balyasny Asset Management (mixed strategy fund, 12-week program in specific divisions, typically for quant students)

2.2. How’s the Hedge Fund Internships Salary?

Like most of other internship opportunities, hedge fund internships come paid and unpaid. While big established funds typically pay $10-15k (bonus included) for the entire summer, there’s been reported a rate as high as $30 per hour to interns – that’s roughly half the compensation of a full-time entry-level analyst at hedge funds.

Smaller local funds, on the other hand, usually offer unpaid internships only, or would cover an insignificant amount of allowance. While keeping in mind that the objective of doing this internship is not about monetary, you need to assess unpaid internships with caution. Low salary can be a sign of the lack of cash flow or a not so well-performed portfolio at the time.

2.3. Check their AUM, Portfolio Performance, Exit Opportunity

These are the crucial factors that need to be thoroughly researched when you look for small local hedge funds. Smaller funds offer the same relevant experience, and tend to be less competitive; but extra research has to be conducted to ensure their legitimacy. While you can check 13-F to see if they have an AUM and follow market news to update their performance, internship alumni should be another great source of insights. Do some channel checks with their summer class to see if anyone ends up getting a full-time offer. Reach out to them, ask for informational interviews, and network your way to the fund if possible.

In case you apply for prestigious hedge funds, you need not to worry much about these: they’ve got big cap, steady performance, and a great deal of versatility they can bring to your path. But due to the sheer competition, aggressive networking – somewhat up to +100 cold emails and LinkedIn messages monthly – should be done.

3. Finding Hedge Fund Internships

It is less challenging a task to find out hedge funds and contact points in this day and age, where numerous information and databases are available a few clicks away. Below are some methods could be used to find fund names, phone numbers, and email formats:

Through your social circle: start off with your 5F – friends, family, faculty members, foundations (clubs, orgs,…), and fellow peers. This is a basic tip in our Wall Street Networking guidebook that can yield fruitful results. Ask around and see if anyone knows someone at a hedge fund, or at least someone that might know someone at a hedge fund. One connection could lead to a bunch of meaningful connections, and a warm intro could beat cold contacts, so reach out to those around first.
LinkedIn & Job Postings Platforms (Indeed, Glassdoor, SimplyHired, etc.): Internships up here are majorly located in big cities like NYC and London. Other states show up sometimes, so it’s worth browsing around to check if there’s one near you.
Databases: CapitalIQ, EFinancialCareers, HedgeCo.net – these are all great platforms providing not only company names but also news and events updates.
GoogleMap: might be to your surprise, but this tool is actually efficient and especially useful for people targeting at specific locations. Websites and phone numbers are usually provided too.

The output of your research should be a database of funds and contact points, with your priority/preference grading. For the funds you can find, browse their websites, understand their strategies, ask for insider’s information through networking, and compare these criteria to your personal values. Ask yourself the question of “Which fund could I best fit in?”.

Next steps involve reaching out to these contacts. The most common and effective way to reach out is through cold emails, whereas smaller and tiny hedge funds can even be contacted through direct cold calls. However you choose to contact, abide by these rules:

Don’t copy-paste:

Be customized with every email and cold call you make to show your honest interest, that you’ve done sufficient research and you know what you’re talking about. Before hitting “Send”, ask yourself “Can I send this exact same email to anyone else?”. People don’t like mass emails, they want a personal connection strong enough for them to spend their extra precious minutes to read a request from a stranger. Say something unique about them that you want to know more, create a personal connection with them on common grounds that you’ve researched.

“Cold Email for Internship”

Create leverage for yourself:

If you’re unfamiliar with the buy-side before this, your inexperience can weigh you down compared to more senior candidates. That’s why you need to match your knowledge and skill set with the fund’s requirements, stressing them in every proof of evidence you can provide:

Write a compelling cover letter
Polish your resume. Use our Toolkit to craft a resume that captivates the screener’s attention in 10 seconds. Hedge funds look for records of excellence and your burning interest in investing – every bullet point in your resume has to show just that!
Attach your research notes in your email, and prepare stock pitches to demonstrate your ability to generate brilliant investing ideas.

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50-page detailed PDF guideline helping you master the strategies for all financial jobs: Investment Banking, Private Equity, Hedge Funds,…
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Email templates, Cold call transcripts, Relationship building and tracking templates

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4. Hedge Fund Internship Interview Process

The smaller and more unstructured the hedge fund is, the more informal the interview can be. Whatever fund you interview with, remember to abide by the concrete rules of business attire, punctuality, and humble attitude.

Sections involved in the interview are to test your suitability with the firm, and your understanding in the market, rather than your deal or client experience:

Fit interview: For small teams of under 30 like most small – mid hedge funds, to find an individual that matches the company culture is crucial. Be comfortable enough to express the earnest version of yourself.

Stock pitch (or pitches of other assets): This is an indispensable part in discretionary funds. At least 2-3 pitches should be ready under your belt. We have a detailed guide and template for standard stock pitch here. Prepare a 30-second version, and a more in-depth full version of your stock pitch so that you can be flexible whatever the question is.

Testings of your technical & market understanding: topics of Accounting, Market sectors, and Investing decisions

Interviews for quant roles would be different, and would be further explained in another article.

Hedge Fund Career Overview

...

Boutique Investment Banks

“Boutique investment banks are eating up bulge bracket banks’ lunch!” How? What exactly are they? Is this a better career...

I've spent years immersed in the finance industry, gaining firsthand experience and expertise in various aspects, including hedge funds, investment banking, private equity, and asset management. I've worked with professionals from renowned institutions and have a deep understanding of the nuances within the financial landscape.

Now, let's delve into the concepts mentioned in the article:

1. Hedge Fund Internship Audience:

1.1. Undergraduates:
- Relevant for those in finance, economics, or computer science/math aiming for quant roles.
- Acts as a stepping stone for buy-side (hedge fund, private equity, asset management) careers.
1.2. Recent Graduates:
- Attractive for those dissatisfied with work values in junior positions at big investment banks.
- Offers hands-on experience and the opportunity to impact decision-making in smaller local funds.
1.3. Pre-MBA and MBA Summer Interns:
- Pre-MBA internships enhance profile for career switchers.
- MBA summer internships are a typical path for hedge fund aspirers, especially at top institutions.

2. Choosing the Right Hedge Fund:

2.1. Hedge Funds Offering Internships:
- Large funds like Citadel, D.E. Shaw, Two Sigma, Point72, Bridgewater, and more.
- Some offer proper training programs for fresh graduates.
2.2. Compensation:
- Paid and unpaid internships.
- Established funds pay around $10-15k for the summer; smaller funds might offer unpaid positions.
2.3. Factors to Consider:
- Assets Under Management (AUM), portfolio performance, and exit opportunities.
- Research small local funds thoroughly and network with internship alumni for insights.

3. Finding Hedge Fund Internships:

3.1. Methods to Identify Funds:
- Social circle (friends, family, faculty, peers), LinkedIn, job posting platforms, databases (CapitalIQ, EFinancialCareers), GoogleMap.
3.2. Cold Outreach:
- Tailor emails and calls to show genuine interest and research.
- Emphasize your skills and knowledge to stand out, utilizing a compelling cover letter, polished resume, and attached research notes.

4. Hedge Fund Internship Interview Process:

4.1. Fit Interview:
- Crucial for small teams to assess cultural fit.
4.2. Stock Pitch:
- Essential for discretionary funds; at least 2-3 pitches should be prepared.
- A detailed guide and template for a standard stock pitch are recommended.
4.3. Technical & Market Understanding:
- Interviews may cover accounting, market sectors, and investing decisions.
4.4. Quant Roles:
- Specialized interviews for quant roles, not covered in this article.

5. Related Articles:

Hedge Fund Career Overview.
Boutique Investment Banks.

This breakdown should provide a comprehensive understanding of the key concepts presented in the article, helping you navigate the landscape of hedge fund internships more effectively.

Hedge Fund Internships: Mysteries resolved | BankingPrep (2024)