Ask the Hedge Fund Accountant

NotMitch · #1 03-31-2006, 01:28 PM

So I scanned this forum and have seen some info and questions posted about hedge funds. since these ask the xxxx have worked so well in OOT, I figured I would give this a shot. Please don't ask for information about specific funds for obvious reason, but if you have questions about the structure or operations of hedge funds just ask.

hapaboii · #2 03-31-2006, 03:13 PM

1. How many people typically work at a $1 bln fund? (any strategy) Please include breakdowns of how many people in each dept.(i.e. 3 ops, 4 PMs, 2 traders, 2 IT, 3 analyst, etc)

2. In general, what % of trades are now being implemented algorithmically and where do you see this headed in the future?

Thanks.

junglewarfare · #3 03-31-2006, 04:14 PM

What path did you take to work for a hedge fund?

NotMitch · #4 03-31-2006, 04:16 PM

[ QUOTE ]
1. How many people typically work at a $1 bln fund? (any strategy) Please include breakdowns of how many people in each dept.(i.e. 3 ops, 4 PMs, 2 traders, 2 IT, 3 analyst, etc)

[/ QUOTE ]

Depends, if the fund is run by a large institution some of the people working on the fund will be working on many different things and IT and research is shared company wide. If you are a boutique shop you can get by with a lot fewer people, typical might be 20 people. If you are focused on one strategy I would guess maybe 2 people for IR, 5-6 in ops, 1-2 IT, the rest involved in portfolio stuff. If your strategy is broader, or you run more than one fund I think more people would be involved. It really varies a lot, but my answer is generally not many. It is possible for a 2-4 person team run a nine figure fund.

[ QUOTE ]
2. In general, what % of trades are now being implemented algorithmically and where do you see this headed in the future?

Thanks.

[/ QUOTE ]

Honestly I have no idea, I'm an accounting guy. Over the last few though I have seen more quantitative funds launch where they are trading so heavily it is obviously system driven.

NotMitch · #5 03-31-2006, 04:17 PM

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What path did you take to work for a hedge fund?

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I dont work for a fund, I work for a 3rd party accounting firm that does the books for the funds. I should have made that clear.

MrBlue · #6 03-31-2006, 04:26 PM

I used to work for an admin that did middle/back office work. (There are really only a couple that does that so not hard to figure out which one.) It wasn't unusual to see accountants and ops being plucked from our firm to the hedge funds. Turnover was like 20% a year. The best people are often plucked quickly so if you stuck around for 2 years, you were considered senior!

NotMitch · #7 03-31-2006, 04:35 PM

[ QUOTE ]
I used to work for an admin that did middle/back office work. (There are really only a couple that does that so not hard to figure out which one.) It wasn't unusual to see accountants and ops being plucked from our firm to the hedge funds. Turnover was like 20% a year. The best people are often plucked quickly so if you stuck around for 2 years, you were considered senior!

[/ QUOTE ]

Ive seen the same things happen, but at a slower pace. I've been doing this for 5 years now, so I think my next stop is likely a fund

mwgr5 · #8 03-31-2006, 04:41 PM

Has the failure rate or closing rate of Hedge Funds increased over the years of your experience? Also, do you know of the most common career path that most traders in Hedge funds followed?

MrBlue · #9 03-31-2006, 04:42 PM

I think most people at our firm weren't happy with how they were treated by management so it accelerated the process. Sometimes going to a small start up fund isn't necessarily the best idea. I've seen plenty of failed launches, fund shutdowns, and just general poor risk management.

How about a fund that lost 70mil overnight because they "forgot" to hedge currency? The fund was done after that one mistake.

Now something like Tribeca if you could get your foot in the door, you're set.

NotMitch · #10 03-31-2006, 06:20 PM

[ QUOTE ]
Has the failure rate or closing rate of Hedge Funds increased over the years of your experience? Also, do you know of the most common career path that most traders in Hedge funds followed?

[/ QUOTE ]

Tough question. Funds liquidate all the time, sometimes its because the performance is bad, sometimes because investors redeem and sometimes the manager doesnt want to run a fund anymore. However it seems for every fund that closes 2 start up. I read somewhere the average lifespan of a hedge fund is 3 years. I think that is going to get longer though, more managers are putting in mandatory lock ups (1 or 2 years) on contributions so the capital base is steady.

As for the path to a trader, people I know who were interested in that have started in ops and moved in as an asst trader. I dont know if that is typical.