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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1. 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.

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.