There are many ways to learn about hedge funds and careers in the industry. First, check out the Hedge Fund Basics section at the Managed Funds Association’s Web site, https://www.managedfunds.org/hedge-fund-investors. It offers an easy-to-understand summary of how hedge funds work, a glossary of useful terms, and industry statistics. You should also read industry publications, such as Hedge Week (http://www.hedgeweek.com), to learn about the major players and the latest news. Participate in investment competitions during high school and college to develop your stock-picking skills. The Wharton School at the University of Pennsylvania offers the Knowledge@Wharton High School Investment Competition, a free, global, online investment simulation for students, ages 14–18, and teachers. According to the Wharton Web site, “students learn about teamwork, communication, risk, diversification, company analysis, industry analysis, and investing.” Visit https://kwhs.wharton.upenn.edu for more information.
Analysts not only have to be experts in the valuation of stocks, bonds, options, derivatives, commodities; and currencies, they are also often asked to have specialized knowledge of companies in a particular sector (e.g., health care, technology, financial services) or a geographic area (e.g., Europe, Far East, etc.) To obtain this information, they interact with industry professionals and senior officials at companies under evaluation, conduct phone and in-person interviews, read industry publications and annual reports of companies, and attend investment conferences and shareholder meetings. Analysts also use spreadsheet and statistical modeling software to analyze financial data, identify trends, and develop forecasts. These models take into account sales, costs, expenses, tax rates, depreciation, and other data points in order to determine the value of a company and project future earnings. Once they complete their research, analysts present their buy/sell recommendations to portfolio managers.
Job duties vary by the size of the firm and research department, but most hedge fund analysts conduct extensive research on the companies, regions, and sectors assigned to them using a range of valuation techniques; maintain databases of historical and current financial statements of the companies they cover; run financial models and perform valuation analysis on companies; study economic, business, political, and regulatory trends; research and monitor new and existing investments; design complex financial models; and prepare oral and written reports that summarize their recommendations.