List Of The Best Hedge Funds To Work For (2023) - Buyside Hustle (2024)

Before breaking into the hedge fund industry, I always thought that everybody who worked at a hedge fund was super successful, smart and very rich. Given how I grew up in a small town far away from New York City, the hedge fund industry was very mysterious to me. Luckily for you there is more information available online these days then there was when I was a young investment banker trying to break into the buyside.

I have interviewed dozens upon dozens of different hedge funds, but it wasn’t until I worked at three different hedge funds after my life as an investment banking analyst when I realized that not all hedge funds are the same.

I worked at a:

• Large multi-manager hedge fund with tens of billions in AUM
• Startup hedge fund with $50MM in AUM
• Distressed / deep value hedge fund with $1Bn+ in AUM

Despite all being “hedge funds,” my experiences at each of these funds was completely different.

Different types of hedge funds

What all hedge funds have in common is that they manage money for investors in the hopes of generating a good return year after year. They range from very small (<$10MM in AUM) to very large ($10Bn+ in AUM), can invest in many different types of asset classes and securities (stocks, bonds/debt, structured credit, options, illiquid investments). The majority of hedge funds primarily invest in stocks, but there are other funds that invest in many different types of asset classes depending on the strategy.

The main types of hedge funds are:

• Equity long-short (fundamental and quantitative) – placings bets on specific stocks that go up (going long) and betting against stocks that go down (going short). Fundamental hedge funds focus on the inherent performance of a company’s financials and its future prospects while quantitative hedge funds pay attention to a variety of patterns and statistical analysis.
• Macro – Macro funds take a top-down view on various economies around the world and make macro bets using a variety of securities and asset classes. Bridgewater is one of the most famous macro funds.
• Credit long-short – similar to equity long-short, but instead of investing in stocks, you invest in credit. 1^st lien debt, secured debt, high yield bonds, etc.
• Distressed debt funds – focus on companies that need to potentially go through a restructuring sometime in the future. Point of the job is to find good companies that aren’t going away, but have too much leverage.

There are so many different types of hedge funds out there, so it may be hard to figure out what type of hedge fund is best for you. You may be thinking, “man I just want to break into the industry, I am willing to work anywhere.” But be careful with this mentality. Working at a hedge fund may sound impressive, but all a hedge fund does is manage money for investors. You will need to find a good fund with a good, scalable investment strategy to be successful in the long-run.

Qualities of a top hedge fund

There are four key factors to look for when separating the top hedge funds from the mediocre ones:

1. Size
2. Track record of good performance
3. Background of founders
4. Strategy
5. Stability of capital

Size

You never want to join a hedge fund that does not have enough assets under management to fund its operations. Ideally you want to work at a fund that has at least $250MM under management. The larger the hedge fund, the more potential money it can make and the more you will get paid.

Track record of good performance

There are so many sub $200MM hedge funds that had one good year of performance because of one bet and they were able to quickly raise more capital. You need to understand the role of luck in investing. I once joined a startup hedge fund that was up 70% for the year when I joined. The fund closed down just two months after. It was a one hit wonder and the rest of the portfolio was not successful.

Background of founders

Goes along with having a good track record of performance. Do the founders have a history of making successful investments? Do they come from well establish funds previously? Do they have experience managing a set pool of capital on their own? At the end of the day, the founders are the ones with their name on the door and determine what to invest in.

Strategy

Sometimes new hedge funds make their money by identifying a niche investment opportunity and capitalizing on it. But once the fund starts managing more and more money, they will outgrow their opportunity set. Make sure the founders have shown that their strategy is scalable (or at least show that they have the work ethic to find new opportunities down the road)

Stability of capital

Usually as funds get larger, they attract stickier investors (endowments, pension funds, large family offices). When funds are sub $250MM, it is hard to attract these types of investors and you usually have a bunch of individuals and small family offices. These types of investors are more likely to jump shift when performance goes bad.

Make sure that the time horizon of investments matches the fund’s structure. You never want to join a fund that is investing in a bunch of illiquid securities, but has quarterly redemptions. There are so many funds that have blown up because they were forced sellers at the bottom of the market (due to redemptions). If you are joining a fund whose strategy is to invest in illiquid securities (small caps, distressed debt, structured credit), then make sure they have private equity style money where the capital is locked up for a set period of time.

Best hedge funds to work for

There are a few different types of funds out there: multimanager, single-manager, activist, macro, quant, and distressed hedge funds.

Best multi-manager hedge funds / macro hedge funds / quant hedge funds

1. Citadel
2. Bridgewater
3. Millennium
4. Point 72
5. Balyasny
6. Surveyor
7. ExodusPoint
8. Brevan Howard
9. Renaissance Capital
10. Two Sigma
11. Alyeska Investment Group
12. Man Group (London)
13. D.E. Shaw & Co.
14. Farallon Capital
15. Pine River Capital

Best activist hedge funds

1. Elliott Management
2. Third Point Partners
3. ValueAct Capital
4. Trian Fund Management
5. Starboard Value
6. Pershing Square Capital
7. Eminence Capital
8. Icahn Enterprises
9. Cevian Capital
10. Senator Investment Group
11. Blue Harbor Group

Best distressed hedge funds

1. Baupost Group
2. Apollo
3. Oaktree Capital
4. Silver Point Capital
5. Aurelius Capital
6. Davidson Kepner
7. Fortress
8. Anchorage Capital
9. Beachpoint
10. GoldenTree Asset Management
11. Avenue Capital
12. Appaloosa
13. Canyon Capital
14. Mudrick Capital
15. Bayside Capital
16. King Street Capital
17. Sculptor Capital (AKA Och-Ziff)

Other top hedge funds

1. Coatue Management
2. Maverick Capital
3. Select Equity
4. Soroban Capital
5. Scopia Capital
6. Glenview Capital
7. Greenlight Capital
8. Tiger Global

Now a lot of these funds, especially the bigger ones, also raise long-term private equity funds as separate vehicles. But these are separate groups within those funds, so don’t expect to overlap much or work on any private equity deals if you are a hedge fund analyst at a shop that does both (i.e. invest in public securities through a hedge fund vehicle and investing in private companies through buyouts). If interested in private equity, here is a list of the best private equity firms to work for.

Skills needed to be a successful hedge fund analyst

Now to be successful at one of these top funds, there is a certain skillset you need to bring to the table. You would think that as long as you get paid a ton of money, you will like what you are doing and be successful at it. That is absolutely not true. Once you have paid off your college debt and have $200-$500K saved in the bank, money will mean less and less to you. There is a point, especially when you are still in your 20s and single, where you make more than you can imagine spending.

You will start question whether what you are doing is actually what you want to be doing longer-term. It’s not just about the money.

Here are the top skills you need to be successful at a hedge fund:

1. Passionate about investing
2. Analytical Mindset
3. Able to work independently
4. Naturally curious
5. Able to handle failure

Passionate about investing

Having a passion for investing is the #1 skill needed to be successful as a hedge fund analyst. You need to love researching and reading about companies, industry trends, to the point where you obsess about what you are investing in and want to learn as much as possible about those companies. Also, you need to understand the importance of compounding money and having your money work for you.

I guarantee you won’t successful at anything unless you are actually interest in the job.

Now passions come and go and develop overtime. Most people in their teens and 20s have absolutely no idea what they are passionate about. That is absolutely okay! I guarantee that whatever you become an expert in, become good at, you will become passionate about. When people start relying on you for your opinions on a particular subject, you start to feel a sense of worth and confidence in yourself.

Analytical mindset

If you are a big extrovert and love being social and developing relationships, then a hedge fund career is probably not best for you. You must be analytical and comfortable figuring things out on your own. So much of the job is just sitting at your desk reading filings, inputting numbers in Excel and calling up sell-side research firms and management teams.

Able to work independently

For people coming out of investment banking, this can be a big change and can cause you to not be successful at the job if you came in with different expectations. Investing banking is much more collaborative, project focused where you work closely with deal teams to get work done for a client. You get very close with others in your analyst class as you work late hours together and go out drinking with them on the weekends.

For some reason nobody in this industry talks about how lonely it can get working at a hedge fund. Even if you work at a large multi-manager hedge fund, teams are small, 3-5 people usually. You don’t interact much with people outside of your team. Of course, you develop relationships and shoot ideas with other analysts, but the majority of the job is sitting by yourself reading.

You must have a good ability to work and figure and things independently. Unlike investment banking, nobody is going to hold your hand when you are doing various analyses or check your work. There likely won’t be an associate or vice president checking your work.

Naturally curious

When trying to find whether a stock or another security is a good investment or a good short, you must learn everything there is to know about that company and industry. Nobody is going to give you much direction at a hedge fund; they will likely ask “what do you think of X company/security.” That is all the direction you will be given.

Having a natural curiosity is essential to being a good hedge fund analyst. You must stay on top of every piece of news, filing or research that is related to your company to learn everything there is to know so you can understand both the bull and the bear case. This is especially important at the large multi-manager hedge funds. The shorter the investment style, the more you have to stay on top of every little piece of news that comes out about the companies you are invested in.

Able to handle failure

The most successful people in any industry are the ones that have failed over and over again early on in life and did not give up. They learned from their mistakes and overtime they recognize what works and doesn’t work. What separates the winners from the losers is that the winners never gave up.

If you grew up middle class like myself, you will get intimidated when given the opportunity to invest with tens of millions of dollars. Sure you may not have direct responsibility early on in your hedge fund career, but you have a significant influence on what your portfolio manager invests in.

I can tell you from experience that losing millions of dollars is not fun at all. Unless you simply don’t care or grew up wealthy, It is one of the worst feelings ever. But to be successful at this job, you must be able to learn from your mistakes and have the grit to continue forward

Investing is all about being able to handle failure. Talk to anybody who works in private equity or a hedge fund and they will tell you that they learned more from their worst investments than they did their best.

Differences in salaries and bonuses at hedge funds

Salaries and bonuses at hedge funds are all about:

1. Size of the fund (AUM)
2. Performance in any given year
3. Seniority

These are the only three factors that determine how much you get paid each year.

Size of the fund

Unlike in private equity where salaries and bonuses are pretty standardized, hedge fund compensation is all over the place. Smaller funds with <$500MM in AUM will pay less overall than funds that are $2Bn+ in AUM. With more AUM, the fund generates more management fees, which are used to pay bonuses to employees even if the fund made little to no return for the year.

Performance in any given year

There is a lot more upside at hedge funds than in private equity. If your fund has a big year, then expect everyone at the firm to be compensated well. It is not unheard of that analysts straight out of banking make $500K-$1MM their first year on the buyside. It is not likely, but it does happen.

Seniority

Once you become more senior and start managing a pool of capital for the fund, then your P&L will be tied directly to your performance. If you have a track record of good performance, more and more funds will reach out to you with compelling compensation offers.

More detail on hedge fund salaries and bonuses here.

Steps to land the best hedge fund jobs

Almost everyone who tries to get a job at a hedge fund wants to make a lot of money. The best way to position yourself to break into the industry is to start early in college if possible (join an investing club), read the best investing books, start investing on the side, track these investments, and gain relevant professional experience (i.e. get an investment banking or sell-side research job).

After working in finance for a long time, I realized that if the only reason you want to join this industry is to make money, you will likely not be successful at it. I once quit a $500K / year job at a multi-manager hedge fund because the investment style wasn’t for me. So, make sure you have a deep interest in investing and have those skills listed above to be a successful hedge fund analyst.

Hedge Fund Case Study Examples

The examples below are real written case studies and a full Excel model that were used in actual interviews. If you have to complete a case study at some point during the interview process, reading these examples and the Excel model will make it much easier to ace interviews, especially for those who have never worked at a hedge fund before.

In addition to using these examples, make sure to also read through the Hedge Fund Case Study Guide.