Vault Career Guide to Hedge Funds

224 Pages·2007·3.251 MB·English

by  Aditi A. Davare, Holly Goodrich, Michael Martinez

The media’s watching Vault!
Here’s a sampling of our coverage.
“For those hoping to climb the ladder of success, [Vault’s] insights
are priceless.”
– Money magazine
“The best place on the web to prepare for a job search.”
– Fortune
“[Vault guides] make for excellent starting points for job hunters
and should be purchased by academic libraries for their career
sections [and] university career centers.”
– Library Journal
“The granddaddy of worker sites.”
– US News and World Report
“A killer app.”
– New York Times
One of Forbes’ 33 “Favorite Sites”
– Forbes
“To get the unvarnished scoop, check out Vault.”
– Smart Money Magazine
“Vault has a wealth of information about major employers and job-
searching strategies as well as comments from workers about their
experiences at specific companies.”
– The Washington Post
“A key reference for those who want to know what it takes to get
hired by a law firm and what to expect once they get there.”
– New York Law Journal
“Vault [provides] the skinny on working conditions at all kinds of
companies from current and former employees.”
– USA Today

HEDG
FUND
VAULT CAREER GUIDE TO
HEDGE FUNDS
CARE
© 2007 Vault, Inc.

HEDG
FUND
VAULT CAREER GUIDE TO
HEDGE FUNDS
ADITI A. DAVARE, HOLLY GOODRICH,
MICHAEL MARTINEZ
AND THE STAFF OF VAULT
© 2007 Vault, Inc.
Copyright © 2007 by Vault Inc. All rights reserved.
All information in this book is subject to change without notice. Vault makes no claims as to
the accuracy and reliability of the information contained within and disclaims all warranties.
No part of this book may be reproduced or transmitted in any form or by any means,
electronic or mechanical, for any purpose, without the express written permission of Vault Inc.
Vault, the Vault logo, and “the most trusted name in career informationTM” are trademarks of
Vault Inc.
For information about permission to reproduce selections from this book, contact Vault Inc.,
150 West 22nd St, New York, New York 10011, [phone].
Library of Congress CIP Data is available.
ISBN 10: 1-58131-534-1
ISBN 13: 978-1-58131-534-9
Printed in the United States of America
ACKNOWLEDGMENTS
Vault’s acknowledgments: Thanks to everyone who had a hand in
making this book possible. We are also extremely grateful to Vault’s
entire staff for all their help in the editorial, production and marketing
processes. Vault also would like to acknowledge the support of our
investors, clients, employees, family, and friends. Thank you!

Table of Contents
INTRODUCTION 1
What is a Hedge Fund? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Basic Hedge Fund Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . .3
THE SCOOP 9
Chapter 1: Why Hedge Funds are Different 11
Distinguishing Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Hedge Funds vs. Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Chapter 2: Hedge Funds 101 25
History of Hedge Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Structure of Hedge Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Who Invests in Hedge Funds? . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Marketing and Hedge Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
How Hedge Fund Managers Make Money . . . . . . . . . . . . . . . . . .31
Chapter 3: Hedge Fund Strategies 33
Valuation Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Fixed Income Arbitrage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Convertible Arbitrage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Statistical Arbitrage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Equity Market Neutral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Long/Short Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Distressed Securities (High Yield) . . . . . . . . . . . . . . . . . . . . . . . .39
Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Private Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Visit the Vault Finance Career Channel at www.vault.com/finance — with
insider firm profiles, message boards, the Vault Finance Job Board and more. LCIABRRAEERRY ix