We’ve previously outlined a day in the life of someone working in high finance (and someone not), however… we have received requests for similar overviews that provide more depth for specific roles within Wall Street as a whole.
This will detail such a “day in the life” for someone working as a hedge fund associate with an investment banking background. The focus here will be on job responsibilities, as opposed to any particular associated lifestyle habits.
Here is the typical answer to the question: “there is no such thing as a typical day”
While this is somewhat true outside of morning / evening routines, no day is the same as the next. That said, within the course of any given week or month there are a finite number of tasks that you will perform on any given day.
As such, instead of providing a detailed single day (maybe example), this post will outline: 1) Routine / rough outline and 2) Typical Activities
Wake up early (highly recommended) – This will differ depending on which coast you are on and when the market your hedge fund operates in opens, but for an Equity Long / Short associate working in NYC, for example, this is typically around 5:30-6am. For those operating in less liquid markets this could be later, while for those on the west coast this will be much earlier.
Workout: Most people work out either first thing in the morning or immediately after work depending on preferences and how feasible it is to squeeze one in first thing (i.e., if you have to be in the office by 4am then you’re probably going to wait until after the market closes before hitting the gym). Many funds also have gyms and trainers on site, so it’s also possible to do it in the middle of the day if your schedule permits.
The Commute: Some choose to take a short commute to work where you will typically catch up on news / market data / economic indicators on your phone and read/respond to any overnight emails that came through.
Day Outline: Once you get in at the start of the day you setup, check email, get coffee, get breakfast (many funds provide catering for most meals), etc. and begin to plan your day.
Sleep / End of Day: As stated, your hours will vary depending on fund and location, but rest assured you are not going to keep your banking hours – you are paid to think, you are no longer paid to process. With this in mind it’s in the fund’s interest to keep you well rested and healthy. Days don’t tend to be more than 12 hours long, so save the occasional all-nighter for time sensitive material. A lot of your work can also be done from home if logistics permit.
Now that we’ve gone over the outline, from here out, your day could be filled with any number of the following:
1) Working on New investments / Investment Memos: The primary focus of what you are doing at a hedge fund is researching and evaluating investments. Much of your day to day will involve different ways of getting information that you can use in order to do so. Once you’ve done your diligence on a potential new holding and come up with a thesis, you will typically pitch it to your PM either on the fly or in a regular (weekly or monthly) strategy meeting. Sometimes this means an email outlining the most relevant points about the investment, while other times it means a full blown investment memo ranging anywhere from 5-30 pages (depending on the complexity and level of detail necessary to understand the investment). They will typically have the same structure as the case study you beasted when you first got the job, only with more depth and more focus on what is relevant (as opposed to just background information that is easy to pull up on CapIQ or Bloomberg).
2) Source and Structure Deals: For funds where the focus is on less liquid assets or private / semi-private deals, you may need to work on structuring the terms. In addition, large individual investments where your fund or a group including your fund is negotiating with a company directly may be an issue as well. Similar to banking, this involves modeling potential deal scenarios, putting together update presentations, coordinating with lawyers and other funds to negotiate and arrange terms, etc.
3) Working on Investment Updates: For current holdings, you will need to provide updates for any events that may have a large impact on the investment itself. This can include items that may require a full thesis update (ex. legal judgment, big earnings miss, anything that would significantly impact the thesis to necessitate re-evaluating the investment) a short memo (ex. quarterly and annual earnings updates, smaller news items that still affect thesis somewhat), or just an email (ex. earnings previews, market moves).
4) Work on Marketing Materials: Depending on the size and resources of your fund you may put together marketing materials to pitch to potential new investors, as well as materials sent to existing clients such as quarterly letters, annual meetings, performance updates, and other presentations and analyses about the fund’s performance (vs. benchmarks, alpha / beta, sharpe ratio, etc.) and strategy (see Howard Marks).
5) Backoffice Support: Similar to marketing materials, your involvement here will depend on your fund, but you may also need to coordinate the activities of the fund as it pertains to backoffice functions such as compliance and accounting.
Calls / Meetings:
1) Strategy Meetings: Most funds have weekly or monthly strategy meetings led by the PM in which fund performance is reviewed, investment updates are provided, and potential new ideas are discussed (this is usually when you present your investment memo). However, meetings are often held for special situations and time sensitive issues which can’t wait until the monthly meeting. More regular update meetings may also be common (i.e., Monday Morning Meetings).
2) Conference Calls (i.e., earnings calls, investor days, etc.): This is typically for any current holdings. However… This can also be done for potential investments on your “Watch List” – i.e., companies that you are keeping an eye on or developing a thesis for in your downtime. It can also be for ideas you’ve diligenced in the past. But your firm passed. You continue to track it in the case that they become available at a more attractive price, etc.
3) Diligence Calls: While your own personal network can be helpful for diligence, more specific insight is needed for individual investments you are evaluating. This is where other sources of information, such as expert networks, come in. Most funds use a service like GLG to arrange informational calls related to investments they are looking at seriously. These calls are with industry experts, former employees, employees of competitors, or anyone who may be knowledgeable about the space you are looking at. These calls can be anywhere from 30mins to an hour long. Other sources of information can include finding people on LinkedIn (yes, seriously), your own personal network, talking to sell-side analysts and rating agencies. In short? Anyone who can provide you with relevant information.
4) Calls / Meetings with Management: There are clear benefits to talking to management teams on a one on one basis (if you can). This give you time to ask them about their strategy and anything else they may be able to disclose regarding their thinking and the company itself.
5) Talking to Other Funds: This is where effective networking comes into play. If you are looking at an attractive investment then in all likelihood you are not going to be the only one looking at it. Whether from business school, undergrad, your IBD analyst class, or anywhere else, it helps to have a large network of people at other funds to talk to. You can speak directly with multiple people on various topics such as 1) current holdings that they are also knowledgeable about 2) new investments you are evaluating that they are either looking at, already hold, or have held in the past and 3) what new ideas they are thinking about – many hedge funds want to remain secretive lest someone else capitalize before they do, but there are often cases where it wouldn’t hurt if XYZ fund knows what you are looking at if it means they can give you insight (and vice versa).
Other Fun Stuff:
1) Reading: In addition to calls and meetings, the biggest part of analyzing the investment will involve reading as much as you can about it. In particular, you are looking for things that other may overlook (i.e., always check the footnotes). This can include filings, research reports, news articles, industry reports, emails, etc – anything you can get your hands on that will help give you a better investment decision. You also want to stay on top of any industry news / market data / economic indicators relevant to the fund as a whole – specific holdings, or anything that may present a new investment opportunity to look into.
2) Dealing with Lawyers: If you’ve ever uploaded a dataroom before (you have if you have worked in banking) then you will know what this entails… Those 300-page legal documents have to be read by someone and while lawyers will handle much of this work, specific issues may arise and you may be responsible for this. This is more relevant if you are on the fixed income side, as almost any investment you will evaluate will necessitate reading over an associated credit agreement in order to 1) know the credit terms (rate, length, covenants, etc.) and 2) peculiarities. There are also cases where you are investing in industries (airlines come to mind) or situations where a legal decision is a significant factor.
3) Modeling: There is a saying that in investment banking, modeling is the most interesting part of the job, while at a hedge fund it’s the least interesting part. This is true. Modeling itself is often a methodical process once you have the basics down. You are more interested in what the model tells you and how it relates to your thesis than how good of an excel ninja you can prove yourself to be at this point.
Some notes to clarify… Modeling at a hedge fund is more similar to equity research than it is to banking – while you do create a new model for each new investment it can be put into a simple template if you are consistently looking at the same kind of company. If you are at a more generalist fund then this will be less common, but still relevant depending on how many asset classes are under your purview. Further, much of the modeling you do is updating existing models based on new information (earnings announcements, relevant news, legal decisions, changes in the market, etc.). You may also need to model the fund’s portfolio itself in order to provide performance updates and inform marketing and LP materials.
4) Creative Research: On top of reading and diligence calls, which are to be expected for pretty much every opportunity you are looking at, other investments may involve doing more creative research. This can include the following: 1) diligence trips to the company you are evaluating to “kick the tires”, 2) meeting with management, 3) calling every Walgreens in the tri-state area to analyze their inventory on a particular SKU etc. There are many ways that you can go about obtaining material public information. We could try to list them all here or you could read Bill Ackman’s HLF presentation to get an idea of what we mean. (See page 270 for a particularly interesting example)
5) Conferences: Most of the bulge brackets will hold annual or semi-annual conferences for just about every industry and asset class they handle. These are often in NYC, but can also be in places where the weather is more “agreeable” such as Arizona, Florida, Nevada, California and others.
The conferences are held by banks in order to strengthen their relationships with their clients. They organize information sessions and company presentations where you can obtain information on the Company directly from management. The conferences also serve as an opportunity to network with other investors and pick their brains for ideas (similar to the calls mentioned above).
To reiterate, how frequently (if at all) you do any of the above will depend entirely on your particular fund, with some obviously being more “typical” than others. However, this should provide a basic overview of what its like working at a hedge fund…
Well what are you waiting for? Start blasting those emails we know you don’t want to stay in investment banking for long!