Hedge Funds interview preparation

Questions

100

Traced to a firm

39

Firms

16

Updated

September 2026

Asked at

All firmsMan Group10Balyasny Asset Management7Bridgewater Associates3DED.E. Shaw3Apollo Global Management2KKR2Oaktree Capital Management2Point722SCSquarepoint Capital2ACAQR Capital Management1BGBaupost Group1Coatue Management1HPS Investment Partners1Northern Trust1Viking Global Investors1Wolverine Trading1

Topic

All topicsStrategy taxonomy8Stock pitch10Short selling6Portfolio construction8Risk and drawdown8Performance and alpha7Event-driven and merger arb8Distressed and credit5Fund structure and economics7Financing, NAV and operations6Compliance and research process5Quant and systematic6India and Category III AIFs5Career and fit11

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AnyTechnicalMarket viewBrainteaserCaseFit

1. 067I would like you to evaluate my LP stake in a fund. How much would you be willing to pay for it?Fund structure and economicsHardsuperdayBGBaupost GroupEquity Hedge · Boston · 2018

   Say this

   I would start from reported NAV, then adjust it for three things: whether the marks are believable, what the liquidity terms let me do with it, and what fees I inherit. For a hedge fund LP interest that usually means paying a discount to NAV, and the size of the discount is the whole answer.

   Then walk it

   1. First ask what I am actually buying. A limited partnership interest in the fund, with its capital account, its high water mark, its lock-up status and its place in any side pocket. Not a portfolio of securities.
   2. Then interrogate the NAV. What percentage of the book is level one, exchange-priced and verifiable, versus level two and level three marked by the manager? I would take reported NAV on the liquid sleeve and haircut the hard-to-value sleeve materially, 20 to 40 percent depending on who marks it and whether the auditor tested it.
   3. Then the liquidity terms, which determine the discount as much as the assets. Am I locked for two more years, is there a gate, is a side pocket attached? Discount for the time I cannot get out, at my own required return. Two years locked at a 12 percent required return is roughly 20 percent of value before anything else.
   4. Then the fees I inherit. The seller's high water mark is a real asset to me: if the fund is below it, I get performance-fee-free return until it recovers, which is worth paying for. If the fund is at a peak, I inherit a full fee load.
   5. Then the qualitative discount: is the manager's team intact, is the strategy still in capacity, and why is the seller selling? Motivated sellers are the reason this market exists, and an LP selling because they know something is a genuine risk.
   6. Then say a number and defend it, because refusing to is the real failure. Something like: 'For a fund with 70 percent liquid marks, a one-year remaining lock and no side pocket, I would start around 85 to 90 percent of NAV, and I would go to 70 if a quarter of the book is level three.' Then name the one piece of information that would move the bid most, which is almost always the valuation policy on the illiquid sleeve.

   Where candidates lose it

   Answering NAV. If NAV were the answer there would be no secondary market. The analytical content is the mark quality, the liquidity discount and the inherited high water mark. And the interviewer here is explicitly testing whether you will commit to a price under uncertainty, so produce a number with a range and the reasoning behind it rather than more questions.

   Expect next

   • Why is the seller selling?
   • How much would you pay if a third of the book is level three?
   • How does an inherited high water mark change your bid?

   Reported by candidates at Baupost Group (Equity Hedge, Boston, 2018). Source: Wall Street Oasis.

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.