<p>Hi everyone, I've heard that hedge funds such as D.E. Shaw do not hire MBAs, but mostly undergraduates. I am not interesting in investment banking (too many hours) and I've heard that the hours at hedge funds are much less, although I've also heard that the people who work there are ridiculously smart. Anyways, I was just curious and was wondering what path would an undergraduate from a top school (HYPSM-level) have to take to have the best chance of possibly getting an internship at a hedge fund and then maybe later a job after graduating? (Basically, majors, courseload difficulty etc). For example, would it be better to major in Math and Computer Science, as compared to Economics or Business? Or are undergraduate-entry jobs at hedge funds mostly reserved for students that are Putnam/IMO/USACO winners? Thanks in advance!</p>
<p>Hope this helps some...</p>
<p><a href="http://www.ibankingoasis.com/node/3186%5B/url%5D">http://www.ibankingoasis.com/node/3186</a></p>
<p>Are you looking into ORFE @ Princeton? That program sounds pretty sweet.</p>
<p>Understand that there are tons of different hedge funds. There are few hedge/trading firms at DE Shaw's level so this response is geared towards those select few firms:</p>
<p>Your should major in something quantitative (hard sciences, engineering, economics etc) in order to get the necessary background. D.E. Shaw's selectivity (and application pool) is at the same level as the firm I intern at. What you need to understand about these places is that they are focused on finding ridiculously smart people. (Examples incolude multiple kids from MIT with 5.0s interviewed, people with multiple IMO medals etc). These interviews are less focused on what you know about markets/trading than about evaluating your capabilities. You will not find many "Tell us about something thats going on in the markets" (as you would at ibanking interviews) there. </p>
<p>Also the undergraduates directly compete for jobs with people with masters or PhDs (there isn't an "analyst" class or an "associate" class). This might be different at D.E. Shaw now as they are pretty big now but I wouldn't be surprised if they still treat the applicant pool equally.</p>
<p>Be aware that the acceptance rate for these places are around 1 in 300-500. So I wouldn't be banking on it (pun intended). </p>
<p>If you want more info you can head over to the Art of Problem Solving, Careers in Mathematics forum. The founder of AOPS used to work at D.E. Shaw and they provide some good info.</p>
<p>From the thread that mahras is pointing to:</p>
<p>I actually think that performance on math competitions--Putnam, IMO, USAMO, etc--is a better predictor of Wall Street success than it is a predictor of success as an academic researcher. I think that is especially so if you go for the Wall Street career as soon as possible after the math contest success while those skills are still very sharp. The reason I say that is that a lot of the time on Wall Street, you aren't being asked to undertake a long, involved research program that may take months to complete. Instead, you will be presented with a short term problem--perhaps something happens late in the trading day that you want to have fully analyzed by the start of the next trading day. If you don't complete the analysis quickly any possible opportunity will be seized up by other firms. This time window of hours--rather than days, weeks, or months--is very common on Wall Street and it is also what math contests tend to test--the ability to solve a problem quickly in a few hours. Academic careers require long-term research success which is a very different kind of skill.</p>
<p>While that statement is accurate, the value of good research can't be underestimated. Way I see it, the primary reason math contests matter is because it simply shows raw problem solving ability. Many of the high performers in these contests are also capable of (and, indeed, do) top notch research. Most firms do not rely on second to second decision making but, instead, dedicate their time to research new opportunities to exploit.</p>
<p>Thanks for the replies, nutmeg and mahras! That 1 in 300 statistic and the 5.0 MIT graduates and the IMO medalists are totally scary!</p>
<p>A kid i know with a 4.0 at Columbia was recruited by one of the bigger Hedge Funds in Greenwich if that helps. He hates the stuff and i just doing it to make some quick cash and leave.</p>
<p>do you know how much he is going to be making?</p>
<p>Yes. DE Shaw is one of the top hedge funds out there (have you read their company site? impressive credits), but there are plenty of funds nowadays, and the difficulty lies not so much in getting in as to making sure you are going to a reputable/successful one. I know many portfolio managers choose to go start their own hedge fund, and it isn't uncommon for one to pick up several million and create their own. I don't think breaking into the hedge fund world is nearly as difficult as it used to be, but it is a lot riskier.</p>
<p>Most of those small funds don't hire undergrads as they don't need them and don't want to educate them. As I have noted on my posts I am speaking about the larger, more reputable funds. And yes they are (and have always) been hard to break into. People go into the sell side in order to transition out to the buyside. Its not easy being with the team with the cash right out of undergrad unless you have the credentials.</p>
<p>I would be very impressed if one got a hot quant job as an undergrad. I've never personally heard of this happening.</p>
<p>You are afterall, competing with P.H.D students from top school in phys. and math.</p>
<p>However, if you do attend a top 5 quant program; I would think that you can land a "good" quant job with respectable pay. For example, as a quant working for Barclays capital or Goldman starting off between 120K -- 150K --> this is very realistic and quite a few students accomplish it. I believe the comp. finance prog. at CMU has average salaries posted up.</p>
<p>So while I agree with the assertion that getting at top notch quant job at a top hedge like DE Shaw is extraordinarily difficult (1/300); given that you attend a top MFE program and do well and network - I would think its very realistic and reasonable to expect a "decent" quant job. Maybe not the best of the best to start off with but something is better than nothing.</p>
<p>Actually there are a quite a few people without PhDs or MAs that are getting quant jobs. I would put my money on the guy with the IMO/Putnam medals than the PhD. In an interview you are being fired with questions that require creative and fast problem solving skills. You aren't given a month to come to a solution. </p>
<p>The two quant desk heads I know of (one at the firm I intern at and another a friend's dad) have no PhD.</p>
<p>My mom was able to speak with the head of the renaissance fund since he has back logs of bofa clients waiting to invest with him. He said he specifically recruits math, engineering and physics majors. He has one or two MBA on his staff i believe, but currently the for mentioned is what he is looking for. Just a thought along with the fact that mutual funds were the cream of the crop 30 years ago..ever think hedge funds will drop in prestige as mutual funds have. Or the fact that these people are being paid millions to earn a decent 10-30% (remarkable actually when funds do this) a year, yet i am already up 56% year to date. where are my millions?</p>
<p>^
you probably didn't have much to begin with :)</p>
<p>but just imagine if i did, 56% is 56%. If you look at my post cost, that will tell you a little something about the limited amount i was playing with.</p>
<p>A fund has a set of problems that you do not have. They have a limited playing field (due to liquidity concerns) which takes away a lot of opportunities. Making 10% off of 1 billion is more remarkable than making 100% off of 10K. There is limited alpha. </p>
<p>Defining risks is also important. I could start an account with 10K and simply write out of money options and collect a steady stream of income. In any given year I have a very good chance of making money. However, once in a while when a disaster strikes I will lose it all and then some. Returns without knowing the risks you assume is useless. </p>
<p>BTW if someone can figure out how to earn 17% while staying within a certain risk threshold for 10+ years they can become very, very rich. Its very hard to find new, profitable ideas/strategies for such a long period of time. </p>
<p>Good job on the 56% though. Hopefully you had 10K+...thats good cash by all means.</p>
<p>oh i have over 10k total over the past two years after playing with penny stocks. But from gambling in the past, i have learned that i need to take out my earnings before i continue or i will eventually loose everything....so my earnings will eventually go into a safer investment after my roth IRA is maxed out</p>
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BTW if someone can figure out how to earn 17% while staying within a certain risk threshold for 10+ years they can become very, very rich. Its very hard to find new, profitable ideas/strategies for such a long period of time
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<p>My mother has achieved 17% or higher for 12 + years, however her risk is something she nor i know how to calculate. I have hit over 20$% for the past couple years...simple strategy as well...and i mainly deal with stocks, i really haven't had the time nor the math capabilities to play with anything more exotic, and i don't believe i have the money to mess around with any fixed securities, but when i do....i have...lets just say, found ways to mimic the strategies of some large investment banks and hedge funds with my limited resources (with respect to fixed securities only). But that wont come for some time. </p>
<p>Have you learned the math behind options/derivatives?....learning? That is my next frontier after i finish another year or so of math classes + studying on my own time.</p>
<p>pasdena do some research on some of the tech funds before the dot-bomb and their returns. one manager, Ryan Jacob, at 29 years old was able to produced a 216% return on a dot-com fund (forget the name).</p>
<p>He then started the Jacob Internet Fund in late 1999. Investors put $300million into his fund. He then proceeded to lose 79.1% in 2000, 56.4% in 2001, and 13% in 2002. That means he went from a 216% gain in one year in his first fund to a 92% loss in his second fund.</p>
<p>In investing, consistency is everything.Ryan Jacob's first year returns were amazing but he quickly burned out. If you look at people like Warren Buffett it is their consistent success that made them investing legends.</p>
<p>there was a kid at Tulane that turned 14k into 1.6 million in his 4 years of college, he then started el centro hedge fund (from "Trader") He started with around 5 million</p>
<p>I admit what i do is luck, it is pretty much like i am gambling on red or black for roulette. However, i have been quite consitant...but what got me thinking is the difference in available alpha with regards to amount invested - as mahras put it, and it would be nice if more was explained</p>
<p>I've also been playing pinks too and getting returns in the 500% range in the last 3 months, however this kind of trading is very different from what hedge funds do. First of all, you can't reduce your risk with pinks by adding short positions to your longs since most brokers won't let you order a short sell on them (just imagine what happens if that .0002 stock you own a million shares of goes to $2, what are you going to do? short cover with the quarters in your piggy bank?). Second of all, even the most pumped pinks never see more than 1 million dollars of volume on a given day. If you bought a million dollars of a penny and tried to sell it all at once, the market makers would get so freaked out that the bid price would drop faster than you can realize it. Even the bravest investors would never put more than a few grand in a non-SEC regulated market. I guess if you want to compare your portfolio's gain to that of a hedge fund, you could call your portfolio a micro hedge fund, lol</p>