Baruch alum offers hedge fund advice
Published: Monday, October 15, 2007
Updated: Sunday, February 15, 2009 02:02
I recently obtained an exciting opportunity to interview Oleg Langbort, a successful recent Baruch alum, at Bryant Park. I hope the following article would be insightful for those of you who are interested in pursuing careers in hedge funds.
Would you please give us an overview about your background?
I graduated from Baruch in May 2006. By that time I already had five internships on the buy side. I interned at Smith Barney, UBS, Lehman Brothers' Neuberger Berman and Citigroup Asset Management, which was acquired by Legg Mason halfway during my internship. After performing extensive research, I chose to start my career in investment management. After following JPMorgan Asset Management for several years, I was keen in getting a full-time position there. I received an offer and requested to start early, part-time in February 2006. After interviewing with various groups, I was hired as the first person from an analyst class at the Alternative Asset Management department since the group was started in 1995. That was exciting to me, and I ended up working 30-35 hours per week in my last semester. Upon graduation, I started the full-time program in June. I stayed there until February of this year, after receiving an offer at Optimal Investment Services, the firm where I work now.
What are the differences between working for a hedge fund and a traditional mutual fund?
I believe that this comparison is often misunderstood as there are quite a few nuances. Hedge funds are considered an asset class of their own, investable only by very wealthy individuals. There are certain requirements. Accredited investors and qualified purchasers must possess several millions of liquid and investable assets and make substantial yearly disposable income. A lot of hedge funds don't disclose performance more than once a month. They charge performance fees in addition to management fees, which mutual funds typically do not have. Hedge funds are also more aggressive as they take significant leverage and are almost completely free in what to do with the money. Although there are specific mandates, they usually can invest in any kind of asset classes such as PIPEs (Private Investment in Public Equity), weather futures, carbon credits and are not limited to geographical exposure. In contrast, mutual funds are restricted in terms of what they are allowed to do with client's assets. To sum it up, investors are willing to give up liquidity in hedge funds in seeking to gain better risk/return rather than traditional asset managers like mutual funds.
What is the culture of the hedge fund industry?
The hedge fund industry culture is unbelievably competitive. Most analysts and portfolio managers have either a CFA, an MBA or sometimes both. They typically have Ivy League undergraduate backgrounds, too. As difficult as it is getting into sell or buy side at traditional banking firms, it is still easier than getting into hedge funds. Traditional firms have formal training programs and provide employees a lot of room to learn. Meanwhile, hedge funds do not allow much slack for error, or flat learning curves. The expectations are very high as it corresponds with the high salary they pay. Hedge funds prefer to keep the investment team small and very experienced, compensating them substantially, as opposed to having many mediocre analysts. Therefore, it's very performance-oriented and driven by individual track records as opposed to other investment banks.
What qualities and qualifications do hedge funds look for in an analyst?
The must-have attribute is passion for the job. There is no way that you can survive working more than 60, 70 or 80 hours a week with constant pressure if that's not something you really want to do. There's no money in the world that can make you happy at the job. If you want to be an analyst, depending on the asset class you're covering, typically hedge funds hire people from sell-side research, private equity or investment banking background. Moreover, you have to be good in financial modeling on Excel and know statistical packages. If you are covering equities, you need to know how to reconstruct the companies' financial statements and also know the sector and industry inside out. Hedge funds hire people who are great with numbers, dedicated and can deliver differentiating research which will lead to an edge over competition.
There is a recent New York Times article that talked about the emerging trend of talented young people going straight into hedge funds instead of pursuing an MBA. What is your take on this?
I don't know the exact percentage of analysts going to hedge funds without having a CFA, CPA or MBA, but I suspect it to be low. If one wants to cover equities, I think a CFA is very important and certainly helpful. Meanwhile, if one wants to become a portfolio manager one day, an MBA is critical since it provides you with broader skill, sets in various areas such as marketing, management, finance and accounting. Speaking about age, it is not so important if you can make a lot of money for the fund. But that seems to be one in a million. One example of a very successful hedge fund manager who was a college dropout is Kenneth Griffin of Citadel. This example shows that if you are truly passionate and talented, you might not need an MBA, or even an undergrad in this case. The main concerns of going to MBA are the high price tag and also the opportunity cost of putting your career on hold for two years. I think the value of MBA is longer-term since making a person a better thinker is something that can't be gauged with money. In the end, it all depends on what you want to do and whether or not MBA makes economic sense. As great as it is being a Baruch undergrad, I think by getting in to a top 10 B-school would certainly help if you aspire to work in a top Wall Street firm.
Do you have any advice for students who are interested in pursuing a career in the hedge fund industry?