<p>Also, is anyone else a huge fan of Jim Cramer?? the guy electrifies the room through a tv screen, I’ve been watching his show almost every night for about a year now, he gives some pretty stellar advice (for free!) and I just started one of his books (confessions of a street addict) pretty Inspiring opening story.</p>
<p>:) </p>
<p>No…</p>
<p>Q.What do you call a reckless trader who losses a lot of money? A.Unemployed</p>
<p>Q. What do you call a reckless trader who makes a lot of money? A. Partner</p>
<p>:)…</p>
<p>Google “So you want to be the next Warren Buffett? How’s your writing?”</p>
<p>Buzzers, I kind of like the insulting post you erased better. </p>
<p>How is Tufts? </p>
<p>I think Tufts will be my safety school. ;)</p>
<p>The phrase for trader failure used to be “blowing up”. As in, he blew up … which is why he now spends his days in a bathrobe. I don’t know what’s used in the big houses today.</p>
<p>Different types of hedge funds:</p>
<p>Public: Open to retail investors through brokerage firms. It is designed to hedge volatility through alternate investments other than socks and bonds. </p>
<p>Private: Only open to the ultra wealthy. It is a hedge fund in name only. To keep earning the 20% + annual management fee, traders will take extreme positions in commodities. E.G. a lot of hedge funds are shorting gold and making a fortune. The real expertise lies in when to get out of a position. Is it time to go long gold or to keep shorting it? The good traders already know the answer.</p>
<p>The term 'blew up" is still being used by those in hedge fund today. If your team blew up, that means you won’t have to show up for work there again. The team usually includes a portfolio manager, a couple of analysts and a trader.</p>
<p>I know first hand. Not all hedge funds are alike. Many are run by a single person. His or her persoanlity dominbates the atmosphere and when they have a bad day, you have a bad day. There is no differentiation between that person’s personal life and his professional life. For example, family and neighbors in and out of the office all the time. Special exceptions for friends and family. Finally, when that one person has made their fortune, they fold up the tent and go home. Hopefully by that time you have made enough connections that you can land a new job. So a hedge fund run by a single guy or owner is the ultimate cult of personality. Get used to lots of screaming and yelling and belittling. Finally, most people who work at hedge funds got their job because they know someone (the owner). It should be the ultimate meritocracy and for some people it is, but not for everyone. I guess that as long as you are willing to accept all of these shortcomings. The bottom line is no place is perfect big, small, public or private. Accept the shortcomings and keep promoting yourself and whatever you decide, network like crazy!</p>
<p>Peteri, </p>
<p>I like your post.</p>
<p>
</p>
<p>Hedge funds charge their investors a percentage of their profits, and they provide only periodic liquidity (investors may have to commit for a year). You cannot generalize about how they invest. For example, some do fixed income arbitrage (where you do need to very good at math), others are fundamental stock investors like Warren Buffett whose edge comes from understanding companies better, not higher math, and others are high-frequency trading firms whose edge is technological. There are even hedge funds that specialize in real estate (buying lots of homes and renting them out).</p>
<p>So think about what kind of investing you may be good at. There are good books by Burton Malkiel, Peter Lynch, and Jack Schwager.</p>
<p>I forget where I heard this, but I think a hedge fund manager needs an IQ about 140; think about it, you have to manage everybody’s money, and you sure have to be smart to do that. Also, it would probably help if you learned tensor calculus; a lot of money structures are represented as tensors.</p>
<p>You have to be super rich to work at a hedge fun. To get super rich you have to be the wall street type. Is the terrible lifestyle worth the money? your choice</p>
<p>
In my opinion, outperforming the market more often relates to luck than skill or intelligence. For example, the news story at [Paul</a> Farrell’s commentary: Chimp '99 champ! Makes monkey of Wall Street - SuperStar Funds - MarketWatch](<a href=“http://www.marketwatch.com/story/paul-farrells-commentary-chimp-99-champ-makes-monkey-of-wall-street]Paul”>Paul Farrell's commentary: Chimp '99 champ! Makes monkey of Wall Street - MarketWatch) mentions that the most successful mutual fund manager of 1999 was a chimpanzee named Raven (I believe she was actually in the top 0.3%, rather than #1). Raven beat out thousands of human mutual fund mangers by throwing darts at stock names to select stock picks. The dart board was full of high-beta Internet stocks, which did well in the late 90s. I’ve used a similar technique to successfully win investment contests (high variance to either win big or lose big). Several studies have shown long-term returns across thousands of mutual fund show a similar distribution to what one would expect from random chance, such as the one at <a href=“http://faculty.chicagobooth.edu/john.Cochrane/teaching/35150_advanced_investments/Luck%20versus%20Skilll%20in%20the%20Cross%20Section%20of%20Mutual%20Fund%20Returns.pdf[/url]”>http://faculty.chicagobooth.edu/john.Cochrane/teaching/35150_advanced_investments/Luck%20versus%20Skilll%20in%20the%20Cross%20Section%20of%20Mutual%20Fund%20Returns.pdf</a> . The upper side of the distribution roughly matches random chance, while the degree of negative returns exceeds random chance.</p>
<p>
</p>
<p>This is clearly true over short time intervals, but it is an arguable statement when discussing 5-year or 10-year returns:
[What SAT Scores Say About Your Hedge Fund
By MARK HULBERT
New York Times
September 9, 2007](<a href=“http://www.nytimes.com/2007/09/09/business/yourmoney/09stra.html”>http://www.nytimes.com/2007/09/09/business/yourmoney/09stra.html</a>)
</p>
<p>The study I linked earlier includes measures as long as a 27-year period, well beyond short term. Nevertheless, I see your point about the SAT score correlation. It’s refreshing to see backing up posts with peer-reviewed studies like that. I enjoyed the PDF. It’s also interesting that there was a negative correlation with the experience of the fund manager. Having less than 5 years of experience led to an increased average return. This may relate to less risk taking among more experienced managers or a biased selection of fund involvement & direction.</p>
<p>Ok…I read Hulbert.</p>
<p>Nevermind.</p>
<p>It depends the fund. Some funds have like 1000+ people (SAC Cap, Bwater, Millenium). These funds are from a relative standpoint EASIER (not easy) to get into because they have more open position usually. Other funds are more difficult. Here’s a quick rundown of some well known funds</p>
<p>Note: If math is your weak point, PE may be a better choice since they usually use strategies that aren’t as math intensive (Have you looked at Blackstone?). Also most funds only hire people with prior experience so keep that in mind. Very few hire people out of undergrad (Bridgewater hires a few from HYPS and I believe SAC does too)</p>
<p>SAC Capital: relatively easy but likely not hiring now because of the legal issues. Also, they will likely lay off many employees because of the withdrawals. If they turn into a family office, the # of employees will likely be cut even further. </p>
<p>Millennium: Similar to SAC I would assume since they operate in a similar structure (their is somewhat more autonomy at SAC though)</p>
<p>Bridgewater: relatively easy and they hire out of undergrad. (also they look for unique people that fit their “culture.” Fit is a big deal. Google “Bridgewater principles” for more info.)</p>
<p>D.E. Shaw: a little bit harder but almost exclusively hire people with math/comp. sci skills (unless your in Investor relations or something like that).</p>
<p>Rentech: same as Shaw I would assume</p>
<p>Omega Advisors: don’t know</p>
<p>Tudor: medium I believe but I hear they now mostly hire quants.</p>
<p>Paulson and Co,: hard. This fund is somewhat unique in that its actually many funds with different strategies (i.e. credit, merger arb, gold, event driven, etc.)</p>
<p>Pershing Square, Baupost, Greenlight Capital, Third Point, ESL: VERY DIFFICULT. All these funds run tight ships. Basically think of it this way. Imagine the best students at HYPSM Biz schools. These guys will go into top BB, PE firms, etc. Now imagine all the superstar new hires at these firms. Of those, about 10% will get a job at one of these firms. They only have around 50 employees total and some like Greenlight only have around 30 so they hire very few and can be very selective. </p>
<p>My recommendation is to improve your math skills up to the level of basic calculus and then major in econ or a related field in college. You need to be smart but a lot of it depends on the fund type, its strategy, etc.</p>
<p>Just read “The Buy Side” by Turney Duff. Great book. Couldn’t put it down. Read it in 3 school nights, which, for for a senior neck deep in the college application process says a lot about how well written the book is.</p>