The first round is often like dating, says one PM. “You may not know if the person across the table is right for you, but on the first date you will know if there’s not a chance at all.”
Those who discuss their inability to invest or think about investment ideas—due to time constraints or current employer restrictions on trading—do not make it past the first round. There are too many candidates with similar such restrictions who find the time to think about investment ideas and who trade and track fictional or, “paper,” portfolios.
Nor does a candidate who speaks about investing in stock ideas interesting a year ago or brilliant from hindsight or that are more appropriate to a 401-K plan or pension plan than to a fund that typically looks for interesting, undiscovered, undervalued, or overvalued equities. And as mentioned earlier, a treatise on the beauty of the efficient market or “random walk” theory will get little respect from most hedge fund managers.
In general, candidates often dig their own graves when interviewing by pronouncing a strong interest in or passion for the markets or trading without being able to substantiate it with consistent logic or deep thought. Others discuss how well they have performed in their personal account (PA) as opposed to how they think about investing. An interviewer is looking for talent with consistency of thought and a person who can withstand the market in both good and bad times.
They are looking for someone whose commitment to their fund is long term. So as a note to the young, entrepreneurial investor: It may not be wise to blurt out a desire to work a few years before starting your own fund. This may be true, but it can be disconcerting to a PM who is looking for a long-term prospect. As a reminder, most hedge funds do not expect an analyst to leave after two years for his/her MBA or to start his own fund.
Portfolio managers generally view new hires as apprentices and are looking for candidates who understand what an apprenticeship means and are not looking for neatly delineated career steps, titles, and guarantees or a career launching pad for something else or grander plans elsewhere.
For funds that seek a candidate with a particular style or strategy, a quiet interviewer simply needs to listen for 30 minutes to a candidate speak about investing to determine if he/she is consistent in his/her approach to investing.
In general, consistency of thought throughout the interviewing process is critical, as opposed to opportunistic thinking or investing strategies that could make a PM worried about opportunistic “style-shift.” Particular inconsistencies that interviewers are on the lookout for include those that show shifts throughout the conversation in one's stated preference for asset class, investment style, and investing holding periods.
INTERVIEW RED FLAGS ROUND 1:
-Excerpt from Hedge Me, Edition IV
