Vault Career Guide to Hedge Funds

160 Pages·2004·3.977 MB·English

by  Aditi A. Davare

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VAULT CAREER GUIDE TO
HEDGE FUNDS
©2004VaultInc.

VAULT CAREER GUIDE TO
HEDGE FUNDS
ADITI DAVARE, HOLLY GOODRICH
AND THE STAFF OF VAULT
©2004VaultInc.
Copyright©2004byVaultInc. Allrightsreserved.
Allinformationinthisbookissubjecttochangewithoutnotice. Vaultmakesnoclaimsasto
theaccuracyandreliabilityoftheinformationcontainedwithinanddisclaimsallwarranties.
Nopartofthisbookmaybereproducedortransmittedinanyformorbyanymeans,
electronicormechanical,foranypurpose,withouttheexpresswrittenpermissionofVaultInc.
Vault, the Vault logo, and “the most trusted name in career informationTM” are trademarks of
VaultInc.
Forinformationaboutpermissiontoreproduceselectionsfromthisbook,contactVaultInc.,
150West22ndSt,NewYork,NewYork10011,[phone].
LibraryofCongressCIPDataisavailable.
ISBN 1-58131-302-0
PrintedintheUnitedStatesofAmerica
ACKNOWLEDGMENTS
Aditi Davare’s and Holly Goodrich’s acknowledgments: We would
like to take the time to acknowledge the assistance and support of
MarcyLerner,MichaelDeeg,MonikaDavare,RichardCanfield,Alma
Moore, Dr. Michael Brandl, Michael Tumulty, Dr. Jaana Muurinen-
Goodrich, Dr. Peter Goodrich, Sue Stedman, Mike Fox, Sandy Leeds
andJasonKellmanaswellasourlovingfamilyandfriends.
Vault’s acknowledgments: Thanks to everyone who had a hand in
makingthisbookpossible,especiallyMarcyLerner,KellyShore,Elena
Boldeskou and Tyya Turner. 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,andfriends. Thankyou!

Table of Contents
INTRODUCTION 1
WhatisaHedgeFund ...................................1
BasicHedgeFundTerminology ...........................3
THE SCOOP 7
Chapter 1: Why Hedge Funds are Different 9
DistinguishingCharacteristics.............................9
HedgeFundsvs.MutualFunds...........................14
Chapter 2: Hedge Funds 101 23
HistoryofHedgeFunds ................................23
StructureofHedgeFunds ...............................25
WhoInvestsinHedgeFunds?............................26
MarketingandHedgeFunds .............................27
HowHedgeFundManagersMakeMoney ..................28
Chapter 3: Hedge Fund Strategies 31
ValuationProcess .....................................31
FixedIncomeArbitrage .................................32
ConvertibleArbitrage ..................................33
StatisticalArbitrage ....................................34
EquityMarketNeutral ..................................35
Long/ShortEquity .....................................36
DistressedSecurities(HighYield) ........................37
Event-Driven .........................................38
Sector ...............................................39
GlobalMacro.........................................39
ShortSelling .........................................40
EmergingMarkets .....................................41
MergerArbitrage ......................................41
Value-Driven .........................................42
Multi-Strategy ........................................43
FundofHedgeFunds ..................................43
VisittheVaultFinanceCareerChannelatwww.vault.com/finance— with
insiderfirmprofiles,messageboards,theVaultFinanceJobBoardandmore. ix
VaultCareerGuidetoHedgeFunds
TableofContents
Chapter 4: Headliners and Legends:
Major Hedge Funds 45
Long-TermCapitalManagement .........................45
MajorHedgeFunds ....................................48
Research & Rankings – 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
ON THE JOB 53
Chapter 5: Overview of Hedge Fund
Departments 55
HedgeFundCulture ...................................56
Chapter 6: Portfolio Management 59
LeadingaSpecificFundStrategy .........................59
ManagingtheOverallHedgeFund ........................60
CompensationandIndividualInvestment ...................61
Chapter 7: Research 65
ResearchAssociate/Analyst .............................65
ResearchFundamentals .................................66
CareerPathandCompensation ...........................68
Chapter 8: Operations 71
OperationsSpecialist ...................................71
DirectorofOperations ..................................76
Chapter 9: Accounting 79
Accountant...........................................79
CFO ................................................82
Chapter 10: Trading 85
JuniorTrader .........................................85
HeadTrader ..........................................88
Chapter 11: Risk Management 91
RiskAssociate ........................................91
RiskManager ........................................95
Chapter 12: Investor Relations 97
x ©2004VaultInc.