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. 001Walk me through the main hedge fund strategies and what each one is actually betting on.Strategy taxonomyCorephone / first roundMulti-manager platformsFund of funds

   Say this

   Group them by what the return actually comes from, not by asset class. Long-short equity bets on relative company fundamentals, global macro bets on the direction of rates, currencies and commodities, event-driven bets on a corporate action completing, relative value bets on two related prices converging, and stat arb bets on thousands of small statistical edges.

   Then walk it

   1. Long-short equity: long the good business, short the bad one in the same industry. The bet is stock selection, and the sector or market move is meant to cancel out.
   2. Global macro: top-down positions in rates, FX, sovereign credit and commodities, usually expressed in futures and swaps. Discretionary macro is a small number of large, thematic bets; the hit rate is low and the winners are big.
   3. Event-driven: the return depends on an event happening. Merger arb, spin-offs, index inclusions, activist situations, capital structure arbitrage. Timing risk is the main risk, not valuation risk.
   4. Relative value and fixed income arb: long one instrument, short a closely related one, earn the spread as it converges. Individually low risk, so it gets levered, which is where the danger sits.
   5. Distressed: buy the debt of a broken company and get paid through the restructuring, often ending up owning the equity. Long horizon, illiquid, legally intensive.
   6. Stat arb and quant equity: systematic, high breadth, thousands of positions, each with a tiny expected edge. Multi-strategy sits on top of all of these, allocating capital across pods and managing the correlation between them centrally.

   Where candidates lose it

   Listing strategies by instrument instead of by risk. Saying 'equity funds, bond funds, commodity funds' tells the interviewer nothing. The organising question is always what you are being paid for, and the honest way to close is to say most strategies are short some kind of tail: liquidity, correlation or deal completion.

   Expect next

   • Which of those would you want to work in, and why?
   • Which one is most exposed if funding markets freeze?
   • Where does the return in each case come from, in one word each?
2. 003What is a long-short equity fund actually doing, and where does the return come from?Strategy taxonomyCoretechnicalLong-short equityMulti-manager platforms

   Say this

   It buys the companies it thinks will do better than the market expects and shorts the ones it thinks will do worse, so the return is meant to come from being right about relative fundamentals rather than from the market going up. The shorts are there to fund the longs and to strip out the market move, not just to hedge.

   Then walk it

   1. Simple version: long 100, short 60. Gross is 160, net is 40. The 40 of net gives you some market exposure and the 160 of gross is where the stock selection lives.
   2. The spread is the product. If your longs are up 12 and your shorts are down 4 in a flat market, you made 16 points of gross spread on your book before financing.
   3. Shorts do three jobs: they generate alpha of their own, they neutralise the sector or factor you do not want to bet on, and the proceeds reduce the capital you need for the longs.
   4. Pairs are the purest expression. Long the share gainer, short the share loser in the same end market, and the industry cycle largely cancels.
   5. Where it breaks: in a violent rally the shorts hurt more than the longs help because losses on a short are unbounded and the position grows as it goes against you. That asymmetry is the whole reason short books get smaller when volatility spikes.
   6. And be honest about the fee maths. A 40 percent net exposure fund charging two and twenty needs meaningful spread just to beat a cheap 40/60 equity-cash blend, which is why gross spread and not net return is how these books are judged internally.

   Where candidates lose it

   Describing the short book as insurance. If shorts were only a hedge you would short the index and save the borrow cost and the research time. A long-short fund shorts single names because it thinks it can make money on them, and saying that is what shows you understand the business.

   Expect next

   • How do you choose between shorting a single name and shorting the index?
   • What happens to your book in a factor rotation?
   • What net exposure would you run and why?

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.