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

Level

AnyCoreIntermediateHard

Type

AnyTechnicalMarket viewBrainteaserCaseFit

1. 002Explain the difference between discretionary and systematic trading.Strategy taxonomyIntermediatetechnicalMan GroupGeneralist · London · 2023

   Say this

   A discretionary manager makes the decision on each trade, using a rules-guided but human judgement. A systematic manager makes the decision once, in code, and then the rules trade without intervention. The real difference is where the human judgement sits: in the position or in the process.

   Then walk it

   1. Discretionary: deep work on few positions. A macro PM might run fifteen expressions of four themes. Breadth is low, so the edge has to be depth of insight.
   2. Systematic: shallow work on many positions. A trend or stat arb book may hold thousands of instruments, each with a small expected edge, and the edge is breadth plus discipline.
   3. The fundamental law of active management is the clean way to say it: information ratio is roughly skill times the square root of breadth. Discretionary buys the skill term, systematic buys the breadth term.
   4. Capacity differs. Systematic strategies hit capacity limits in the market microstructure and can be measured; discretionary capacity is limited by how many names one human can genuinely know.
   5. Failure modes differ too. Discretionary fails through anchoring, averaging down and story-telling. Systematic fails through overfitting, regime change and everyone crowding the same signal.
   6. The blurred middle is where most large firms live now: quantamental. Human thesis, systematic screening, portfolio construction and risk done by the machine. Man Group itself runs both AHL on the systematic side and discretionary equity books, which is worth naming if you are sitting there.

   Where candidates lose it

   Framing it as 'humans versus computers'. Discretionary PMs use enormous amounts of quantitative tooling, and systematic researchers make thousands of judgement calls when specifying a model. Say where the judgement sits instead, and mention the fundamental law if you want to sound like you have thought about it rather than read about it.

   Expect next

   • Which has more capacity, and why?
   • How would you know a systematic strategy had stopped working rather than just having a bad month?
   • Which would you rather work in?

   Reported by candidates at Man Group (Generalist, London, 2023). Source: Wall Street Oasis.

2. 008How large is the hedge fund industry?Strategy taxonomyIntermediatephone / first roundMan GroupEquity Hedge · London · 2016

   Say this

   Around 4 to 4.5 trillion dollars of assets under management, across roughly ten thousand funds, with the largest twenty or thirty firms holding a very large share of it. If I had to build it from scratch I would get there from global institutional assets and an allocation percentage.

   Then walk it

   1. Build it up rather than guess. Global professionally managed assets are of the order of 100 trillion dollars. Institutions allocating to hedge funds put roughly 5 percent of portfolios there, which lands you in the right neighbourhood of a few trillion.
   2. Sanity-check from the other end. A top platform manages 60 to 70 billion of investor capital. Thirty firms of that scale is close to 2 trillion, and the long tail of small funds roughly doubles it.
   3. Then say the important caveat: AUM understates market footprint badly, because these funds run leverage. Gross market exposure across the industry is a large multiple of the equity, which is why hedge funds matter more to market plumbing than 4 trillion suggests.
   4. The concentration point is the real insight. Assets have been consolidating into the largest multi-strategy platforms for a decade, because institutional allocators want operational infrastructure they can underwrite.
   5. Compare it to what it is not: the global mutual fund and ETF complex is an order of magnitude larger. Hedge funds are a small slice of assets and a large slice of turnover.
   6. And flag the measurement problem: nobody counts it cleanly. Definitions differ on whether managed accounts, UCITS alternatives and private credit vehicles are included, so the published numbers vary by a trillion depending on the source.

   Where candidates lose it

   Either freezing because you do not know the number, or firing out a figure with no structure. This is an estimation question dressed as a fact question. Show the build-up, land in the right order of magnitude, and then add the leverage caveat, which is the part that shows industry awareness.

   Expect next

   • How much of that sits with the top twenty firms?
   • Has the industry grown or shrunk over the last five years?
   • How would leverage change your answer?

   Reported by candidates at Man Group (Equity Hedge, London, 2016). Source: Wall Street Oasis.

3. 009Pitch me a stock.Stock pitchIntermediateevery roundMan GroupEquity Hedge · London · 2016Apollo Global ManagementInvestments · Remote · 2021

   Say this

   Trade first, then the business, then the variant view, then the catalyst, then the risk and what would make you wrong. Ninety seconds. At a hedge fund the variant view and the catalyst are the only parts that get you hired; everything else is table stakes.

   Then walk it

   1. Open with the position, not the company. 'Long X at 62, target 85, roughly 35 percent upside over twelve to eighteen months, and I would size it at 4 percent of the book.' Sizing in the opening line is what separates a fund pitch from a research note.
   2. Two sentences on the business. What it sells, to whom, and the one operating metric that drives the P&L.
   3. The variant view, quantified. 'Consensus has 9 percent revenue growth next year. I think it is 14, because the two contracts announced in April are not in the sell-side models yet and they are worth 5 points of growth.' Name the number consensus has and the number you have.
   4. The catalyst and the clock. What makes the market agree, and when. A quarterly print, a capacity ramp, a contract renewal, an index event, a capital markets day. Without a dated catalyst it is an opinion, not a position.
   5. The bear case with a price on it. 'If the contracts slip a year I lose about 15 percent.' Then the asymmetry: 35 up against 15 down justifies the position even at even odds.
   6. Close with the falsifier and the hedge. The one disclosure you would watch, and how you would express it, whether outright long or paired against a competitor to strip out the sector move.

   Where candidates lose it

   Pitching a mega-cap with a thesis from the financial press. If the reason is in the newspaper it is in the price. Also, never pitch without a number for the bear case and a sizing view. A hedge fund interviewer is testing whether you think in positions, not in recommendations.

   Expect next

   • How would you hedge it?
   • What is the bear case, and what does the stock do in it?
   • Who is on the other side of this trade and why are they wrong?

   Reported by candidates at Man Group (Equity Hedge, London, 2016); Apollo Global Management (Investments, Remote, 2021). Source: Wall Street Oasis.

4. 031How do you understand portfolio risk?Portfolio constructionIntermediatetechnicalMan GroupInvestment Management · Boston · 2022

   Say this

   As three separate questions, not one number. How much do I expect to lose in a normal month, what happens in a bad one, and what am I unknowingly concentrated in? Volatility answers the first, stress tests answer the second, and factor decomposition answers the third.

   Then walk it

   1. Layer one, the normal case: volatility, VaR and contribution to risk per position. Useful for sizing and for spotting that one position is carrying a third of the risk.
   2. Layer two, the bad case: stress tests and scenarios. Rerun the book through 2008, March 2020, the 2021 momentum unwind, a 100 basis point rate shock. This is where you learn the hedges stop working.
   3. Layer three, the hidden case: factor and thematic decomposition. What is the book's net exposure to growth, to momentum, to oil, to the dollar, to one supply chain? Most surprises are a concentration nobody had named.
   4. Then liquidity risk, which sits underneath all of it. Days to exit at 20 percent of volume, and what the book looks like if you have to raise 20 percent of cash in a week. Illiquidity converts a paper loss into a realised one.
   5. And correlation instability, which is the one that actually hurts. Correlations rise in stress, so a diversified book is less diversified precisely when it matters. I would assume correlations go to one in the tail rather than trusting the historical matrix.
   6. The limitation to volunteer: every number here is backward looking and conditional on a covariance matrix estimated from a period that may not resemble the next one. That is why hard limits and drawdown stops exist alongside the models, rather than instead of them.

   Where candidates lose it

   Answering only with VaR or only with volatility. A single risk number is the wrong shape of answer to this question. Name the three layers, then add liquidity and correlation instability, and say explicitly that the models are backward looking. That last admission is what a risk-focused interviewer is listening for.

   Expect next

   • What does VaR miss?
   • How would you stress test a long-short equity book?
   • How do you think about transaction cost?

   Reported by candidates at Man Group (Investment Management, Boston, 2022). Source: Wall Street Oasis.

5. 039How do you think about transaction cost?Risk and drawdownIntermediatetechnicalMan GroupInvestment Management · Boston · 2022

   Say this

   In three buckets: the explicit costs, the spread, and market impact. The first two are small and easy to measure; impact is the big one and it scales with size, so for any strategy with turnover, cost is not a friction on the return, it is a constraint on the strategy.

   Then walk it

   1. Explicit: commissions, exchange fees, taxes such as stamp duty in the UK or STT in India. A few basis points, predictable, and in India securities transaction tax genuinely changes which strategies are viable.
   2. Spread: you cross half the bid-ask to trade immediately. In a liquid large cap that is one or two basis points; in a mid cap it can be 30.
   3. Impact: your own order moves the price. The standard working model is that impact grows roughly with the square root of the order size as a fraction of daily volume, so trading 10 percent of ADV costs far more than twice trading 5 percent.
   4. Then the cost nobody puts on the invoice: opportunity cost and delay. Trading slowly reduces impact and increases the risk the price runs away from you. That trade-off is exactly what an execution algorithm is solving, and implementation shortfall against the arrival price is the right way to measure the whole thing.
   5. The practical consequence is that cost has to be inside the signal, not after it. If a signal has 20 basis points of gross edge and 15 of round-trip cost, it should be traded slowly, netted against other signals, or not traded at all.
   6. One number to make it real: a book turning over 200 percent a year at 15 basis points round trip pays 60 basis points annually. That is the difference between a good year and an average one, and it is why netting flows across pods is a genuine advantage of a large platform.

   Where candidates lose it

   Answering with commissions and the spread and missing impact. Impact is the entire subject for anyone running real size, and the square-root rule plus implementation shortfall is the vocabulary that shows you have looked at execution data rather than a textbook. Also mention that cost belongs inside the signal, not subtracted afterwards.

   Expect next

   • How would you measure your own market impact?
   • How does cost change the optimal holding period?
   • What is implementation shortfall?

   Reported by candidates at Man Group (Investment Management, Boston, 2022). Source: Wall Street Oasis.

6. 068What makes up a NAV?Financing, NAV and operationsIntermediatetechnicalMan GroupEquity Hedge · Boston · 2019

   Say this

   Total assets at fair value, minus total liabilities, divided by units outstanding. On a hedge fund the interesting parts are all in the details: how positions are priced, and everything that sits in liabilities, which includes the short book, the financing and the accrued fees.

   Then walk it

   1. Assets: long positions at fair value, cash and cash equivalents, margin and collateral posted at the prime broker, receivables from unsettled trades, dividends and interest receivable, and the positive mark-to-market on derivatives.
   2. Liabilities, which is where hedge funds differ from a mutual fund: the market value of short positions, margin loans and repo borrowings, negative derivative marks, payables on unsettled trades, dividends payable on shorts, accrued borrow fees, plus accrued management and performance fees and fund expenses.
   3. So the accruals are a real part of the number. An accrued performance fee is a liability that reduces NAV even though it has not been paid, which is why NAV can be quoted gross and net of fees and the difference matters.
   4. Pricing policy is the substance of the answer. Exchange-traded positions at the official close, over-the-counter instruments from broker quotes or a model, and illiquid positions by a documented valuation policy. The hierarchy is level one, two and three, and the percentage in each tells you how much of the NAV is opinion.
   5. Governance is the other half. An independent administrator strikes the NAV, the prime broker's records are reconciled against it, a pricing committee approves level three marks, and the auditor tests them annually. The manager should not be the sole source of a price.
   6. One practical detail worth having: NAV is usually struck monthly for subscriptions and redemptions but estimated daily for risk, and the two can differ. Investors transact on the official NAV, so the gap between the daily estimate and the final struck number is itself a control worth monitoring.

   Where candidates lose it

   Giving the mutual fund answer, assets minus liabilities, and missing that the short book and the financing sit in liabilities. Also missing the accrued performance fee. The question in a hedge fund interview is really about pricing policy and who strikes the number, so say level one, two and three, and say the administrator's role.

   Expect next

   • Who should strike the NAV and why not the manager?
   • How would you value a level three position?
   • What is the difference between gross and net NAV?

   Reported by candidates at Man Group (Equity Hedge, Boston, 2019). Source: Wall Street Oasis.

7. 093Do you see yourself doing this for the rest of your career?Career and fitIntermediatesuperdayMan GroupEquity Hedge · Boston · 2019

   Say this

   Yes, and I would make it credible by describing what specifically would sustain me for twenty years rather than saying I love markets. Investment teams are small and hire slowly, so this is a real screen. The honest reason is that the work does not change and the feedback never stops, which suits me.

   Then walk it

   1. Answer directly first. Hedging reads as someone passing through, and in a small team a departure is expensive.
   2. Then the reason that survives the novelty wearing off. The daily work at year twenty is the same as at year one: read the disclosure, form a view, be wrong sometimes, and accumulate knowledge of an industry that compounds. That accumulation is the actual attraction.
   3. Then the scoreboard point. Very few careers tell you plainly whether you were right. For someone who wants that, nothing substitutes, and it does not get less interesting with time.
   4. Then acknowledge the hard parts so it does not sound naive: long stretches where the process is right and the P&L is not, public wrongness, and the risk that a seat disappears in a drawdown. Saying this shows you have considered the downside of a long career here, not just the upside.
   5. Then connect it to the firm's horizon specifically. At a house that runs multi-decade systematic programmes alongside discretionary books, the honest version is that you want to build deep expertise in one process rather than rotate every two years.
   6. One thing to avoid: do not volunteer an ambition to start your own fund. It may be true and it may even be admired later, but in a hiring conversation it answers the question with a no.

   Where candidates lose it

   Saying you eventually want to launch your own fund, or hedging with 'I will see where it takes me'. Both signal a short tenure. The credible version names the specific, unglamorous part of the job you expect to still like in twenty years, and admits the hard parts rather than glossing them.

   Expect next

   • What would make you leave?
   • What is the hardest part of this job?
   • Where do you want to be in ten years?

   Reported by candidates at Man Group (Equity Hedge, Boston, 2019). 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.