Career Advice from a Hedge Fund Manager

First off I want to thank everyone who left comments for me on my last post. I guess I’ll keep up the blogging after all.

A couple of weeks ago I applied for what was basically a part time book keeping job for a one man operation hedge fund. The manager was kind enough to reply and say it wouldn’t be a good fit as I should be looking for a back office position with my background and not a front office. I knew this of course, but thought it would be a good way to get into the business and work my way up. He agreed to meet me for lunch anyways and what follows is some of the career advice he had for me.

This may be a blessing in disguise because if I had decided to quit playing poker when I was 30 I’d be totally dead and completely unemployable by 90% of employers. Before he said this I thought, oh I got my degree it’s no big deal if poker ever falls through I can always go get an entry level job if I have to. WRONG. Nobody wants to hire a 30 or 35 year old guy with no professional work experience. Employers can’t see the potential in you anymore. You’re more expensive, less flexible and just a lot more risky of a hire than the same guy 10 years younger. One of the best things I have going for me entering the job market now is my youth. So let this be a warning to other pros out there, the clock is ticking on your career. If you don’t plan to play poker for the next 30 years, you better be winning a lot now, potentially winning a lot in the near future, or start planning your exit from the game as it could really be damaging to your lifetime earnings potential to stay in the game too long.

I have no skills (in respect to working for a hedge fund). He said going to work for a hedge fund is a place where people go to leverage skills they learned elsewhere. While I disagree with him that I have no useful skills (I have experience gambling and losing money, as well as being much more knowledgeable than your avg joe about the stock market imo as I’ve read the WSJ for 4+ years now) both of which are extremely applicable to working for a hedgefund. Regardless, it was good to hear his perspective and what perspective other people in his position would likely have of me.

His advice was to go take an excel class and market myself as an “Excel GURU” or go read some brokerage trading reports, and then spend a couple of months coming up with my own and marketing it to hedge funds. He also recommended working on getting a CFA. If you’re interested in getting into finance and currently play poker, this is something you can work on and study for part time. Believe me, it’s a lot more productive than browsing 2+2 all day. You could also work on your programming skills as a ton of trading is done completely by software written by guys hired by hedge funds these days.

Move. Seattle isn’t exactly the mecca of the finance world. Chicago, NY and San Francisco is pretty much where it’s all at in the US if you want to work in the industry. This just isn’t something I’m willing to do however.

He had the following two book recommendations.

I read Reminiscences of a Stock Operator a couple years ago and blogged briefly about it here. Upon his recommendation, I promptly went to the library and checked out Stock Market Wizards. The book, which has been revised and rewritten every five years or so with different interviewees, is a series of interviews with the current most successful hedge fund managers on Wall Street. It is definitely worth a read if trading is something you’re interested in. Much like poker players, each money manager has a different approach and trading philosophy, but some common themes do emerge after you read enough of them.

What I was most amazed about was how many of them are one man operations. I guess I just assumed most hedge funds were huge companies with 100s of employees, but what I am slowly learning is there a tons of small operation hedge funds out there just like the guy I had lunch with. In fact, before anyone with any real money would be willing to invest with you, you have to develop a track record of a couple years trading with your own and your friends and family’s money. A lot of the interviewees in the book talked about how they didn’t like to be influenced by other people’s opinions, so they either stopped talking to them or got rid of them or spunoff on their own. The typical successful one has been doing it for 10 years, works long hours and never misses a trading day for any reason. One guy in particular said how he didn’t like working 12 hour days, or doing research on Sunday night before the market opens on Monday, but if he didn’t he knew he wouldn’t be successful. He works hard because he has to. If he didn’t he may lose money, or fall behind everyone else.

In the end I realized trading and working for a hedge fund has a lot of things in common with poker which I hate. It can be extremely isolating and antisocial, it’s stressful, it’s swingy, and you don’t really have that much control whether you win or lose you just have to strive to make the best decisions possible and hope to get lucky. Sure you can make a lot of money doing it, but I came to the conclusion that I don’t think it’s something I wish to do like I thought I did. I don’t think I want it bad enough. Even if I were to succeed do I really want to spend 80 hours a week staring at a computer screen by myself with very little social interaction. Even if you do well, all your clients will still have the “yeah, but what have you done for me lately?” attitude.

One interviewee in the book talked about how he made 50% on his portfolio in early January and just sat on cash for the next three months because he didn’t see any good trading opportunities and obviously it’s less risky to have less market exposure, but his clients start to get antsy and angry with him that he’s not making trades for them. He makes them 50% in three months which is just about as good as you can possibly do and his clients are still unhappy with him. Seems pretty lose lose to me.

I know a lot of poker players out there think trading for a living would be a good fit for them, but before you make that leap make sure you do your research and know what you’re getting into. I’m sure glad I did.