Hedge funds
What is covered
One of the most common exits from investment banking is into hedge funds. While the hours can be just as demanding, if not more intense during volatile markets and earnings season, the appeal lies in the direct link between performance and impact. Hedge fund professionals are responsible for making real investment decisions, where strong ideas can immediately influence returns. At the largest platforms in the world, capital is deployed at massive scale, allowing funds to move markets and take meaningful positions across asset classes. This is a fast-paced, performance-driven environment where success is measured daily, and the opportunity to develop strong investment judgment and build a track record can make the pressure worth it.
What do hedge fund analysts do?
A hedge fund is an investment management firm that pools capital from institutional investors and high-net-worth individuals and invests that capital across public and private markets with the objective of generating absolute returns. Unlike traditional asset managers that are often benchmark-constrained, hedge funds typically have broad flexibility in the strategies they use, the asset classes they trade, and the risk they take.
Hedge funds may invest in equities, fixed income, derivatives, commodities, currencies, and other instruments, and they often use leverage, short selling, and complex financial structures to express investment views. The core goal of a hedge fund is to generate positive returns regardless of market direction by exploiting inefficiencies, mispricings, or macroeconomic trends.
Hedge funds are generally organized around investment strategies rather than industries. Common strategies include long-short equity, event-driven investing, global macro, credit and distressed investing, relative value and arbitrage, quantitative and systematic trading, and multi-strategy platforms. While the strategies differ in execution, all hedge funds share the same core functions: idea generation, research and analysis, portfolio construction, risk management, trading and execution, and investor capital management.
Investment Strategies
Long-short equity
This is one of the most common hedge fund strategies and involves buying stocks expected to increase in value while simultaneously selling short stocks expected to decline. The goal is to generate returns from both winners and losers while managing overall market exposure. Managers focus on company fundamentals, valuation, earnings momentum, and catalysts, and they actively adjust position sizing and net exposure to control risk.
Event-driven investing
Event-driven investing focuses on corporate events that can create pricing inefficiencies, such as mergers and acquisitions, spin-offs, restructurings, bankruptcies, or activist campaigns. Managers analyze the probability of an event closing and the potential payoff if it does, positioning capital to benefit from deal spreads, re-ratings, or changes in corporate structure once the event is resolved.
Global macro strategies
Global macro strategies take positions based on large-scale economic trends and policy developments. These funds trade across asset classes such as currencies, interest rates, commodities, equities, and sovereign debt. Investment decisions are driven by views on inflation, growth, central bank policy, geopolitical events, and global capital flows rather than individual companies.
Credit and distressed
Credit and distressed strategies focus on debt instruments, including corporate bonds, leveraged loans, and distressed securities of companies under financial stress. Managers evaluate credit risk, recovery values, capital structures, and restructuring outcomes. Returns are generated through interest income, price appreciation as credit conditions improve, or value realization during restructurings or reorganizations.
Relative value and arbitrage
Relative value and arbitrage strategies seek to profit from pricing discrepancies between related securities. This can include trading different parts of a company’s capital structure, pairs of similar securities, or instruments with mathematically linked pricing. The strategy typically relies on the expectation that spreads will normalize over time, often using leverage to enhance returns.
Quantitative and systematic
Quantitative and systematic strategies use mathematical models, algorithms, and large datasets to identify patterns and execute trades. These funds rely less on discretionary judgment and more on statistical relationships, factor exposures, and automated execution. Risk management is embedded into the models, and strategies are continuously tested and refined based on data.
Multi-strategy
Multi-strategy funds combine several investment approaches within one platform, allocating capital dynamically across different teams or portfolio managers. Each team typically runs a specific strategy with defined risk limits, and overall capital is shifted toward strategies or managers performing well. The objective is to diversify sources of return and reduce dependence on any single strategy or market condition.
Hedge fund hierarchy
The hierarchy within a hedge fund is flatter than in many other finance roles, but there is still a clear progression of responsibility. Titles and structures vary widely by firm, but most hedge funds include interns or junior analysts, analysts or research associates, senior analysts or portfolio managers, and firm partners or chief investment officers. Because teams are small, responsibility increases quickly, and performance has a direct impact on compensation and job security.
Analyst
Analysts or research associates are responsible for generating and developing investment ideas. They build financial models, analyze company fundamentals, evaluate catalysts, study competitive dynamics, and monitor macroeconomic or industry trends depending on the fund’s strategy. Analysts present investment theses to senior team members and often maintain coverage of specific sectors, companies, or asset classes. At many funds, analysts are expected to be opinionated and accountable for their ideas, as poor performance can lead to rapid exits from the firm.
Senior analyst
A Senior Analyst at a hedge fund is expected to operate with a high degree of independence and accountability. They generate investment ideas end-to-end, covering research, thesis development, risk analysis, and ongoing monitoring. Senior Analysts typically manage their own coverage universe and are judged primarily on the consistency and quality of their ideas rather than volume. While they may not have full capital authority, they often influence position sizing and may manage a small risk budget as a step toward greater responsibility.
Analyst (2-4 years in role)
Portfolio Manager
(3-5 years in role)
Partner
(5-10+ years in role)
Senior analyst (2-3 years in role)
Portfolio manager
A Portfolio Manager (PM) is responsible for making final investment decisions and managing capital and risk. PMs determine position sizes, portfolio exposure, and trade timing, while overseeing analysts and shaping overall strategy. Their performance is measured almost entirely by risk-adjusted returns and drawdown control, and their continued role depends on sustained profitability over time.
Partners
Partners, managing partners, or chief investment officers are responsible for setting the overall investment philosophy, overseeing risk at the firm level, managing investor relationships, and raising capital. They may also run portfolios directly, particularly at smaller or founder-led funds. Senior leadership compensation is closely tied to fund performance and asset growth.
Salary ranges (USD)
Hedge Fund Compensation Ranges (U.S. Averages)
Total Annual Compensation = Base Salary + Bonus
Compensation Range
Intern (Summer) $15K – $30K
Analyst / Research Associate $150K – $350K+
Senior Analyst $250K – $600K+
Portfolio Manager $500K – $5M+
Partner / CIO $1M – $20M+
These compensation ranges reflect typical outcomes and can vary significantly year to year based on fund performance, market conditions, and risk taken. Hedge fund careers are often described as high-reward but high-pressure, with strong upside tied directly to investment results and limited tolerance for underperformance.