Monday, September 03, 2007

One day at a hedge fund in London

I told you guys I had some more tricks up my sleeve when I left the investment bank in August, and now I can share it. Actually, I had two offers for summer internships, and I wanted to do both, so I accepted both. The second offer was from a large hedge fund in London in their event driven group (my loyal readers might remember my posts on hedge fund interviews). I started today and cannot believe how much I have learned in a day. Compared to working in a bank it seems much more creative and intellectually challenging, I will really need to work hard and switch my brain on. I am quite intimidated right now by all I have to learn as fast as possible, but I hope in a few weeks I will know much more.

What did I do today? I came in and immediately sat down with the head of the fund who told me what he wants me to work on over the next few weeks. I need to analyse certain aspects of three companies they currently hold live positions in. The tricky part is that being a "market neutral fund", they never hold a naked position, but instead have a position hedged against all kinds of effects they do not want to have exposure to, and therefore might go long on a stock but then short on some currencies, commodities, other stocks in the same industry or sub-industry of some of the business units etc.. So essentially, even when you cover one company, you actually cover 5 companies, some currencies, markets, interest rates etc.. I was instructed to work only on the first company (which given the basket turns out to be four companies and 5 main currencies) over the next days, and then they will add the other two live positions in the middle of the week, as he said I have to learn covering 3-5 live positions at the same time, as they do.

There was not much time today to cover even that position though, because there was a lot going on on the side. Of course I had to fill in lots of forms on compliance, insider trading etc., learn about the policies, the intranet etc.. But the main distraction came from somewhere else. The CEO of a bank was hosting an investor lunch in the City today and a guy who has a position in that bank needed the investment memorandum. He had another meeting though, and they asked me if I could go to the City, attend the lunch and get the booklet. I confirmed that I do not need to know or say anything and agreed to attend, no problem for me getting a 3-course meal with delicious wine and listening to a CEO! Of course, when I arrived there were 15 old men in suits in the room and me in casual clothes, pretty funny. I got all the info and listened attentively, and then went back to Mayfair happily. In the afternoon a CFO of a small company the fund is invested in came to our offices and the head of the fund also asked me to attend, their stock went down 50% over the last weeks and he said it would be interesting for me to see how the meetings with companies whose stocks are down 50% go. So I attended that as well, and then I was talking to the manager afterwards about how they have been affected by the turmoil over the last weeks, and he explained to me why even "market neutral funds" lose money in downturns.

By the time we were finished, it was 7 pm and everybody had left, so I left as well. Tomorrow I really need to advance on my first task though, because on Wednesday they'll throw in additional tasks for me. I'm absolutely thrilled though by how interesting it is and how much I am learning. After a short holiday, angel angie is getting up early again!


-tvu said...

Lots of fun starting back up. Which are you more interested in? Hudge Fund or Trades?

Chris Pugh said...

Hey, just stumbled across your blog whilst looking for something else - how you enjoying hedgefunds - I have spent my professional career in them - love it.