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. 016Tell me about the case competition you did, and what happened to the stock afterwards.Stock pitchIntermediatefirst roundPoint72Investment Research · New York · 2026

   Say this

   Know what the stock did after your pitch, and know why. The follow-up is the whole question. Whether it worked matters far less than whether you can say which part of your thesis was right, which was wrong, and what you would do differently.

   Then walk it

   1. Give the pitch in three sentences: name, the variant view, the target. Do not re-present the deck.
   2. Then the outcome with numbers and a date. 'Pitched it at 34 in March, it is 46 now, so up about 35 percent against a flat sector.'
   3. Then the honest attribution, which is the part they are grading. Did it work for your reason or for a different one? A stock that went up because the whole sector re-rated is not a vindicated thesis, and saying so is a strong signal.
   4. If it went against you, that can be the better answer. 'I was right on the volume ramp and wrong on pricing, which I had underweighted because I anchored on management commentary rather than checking channel pricing myself.'
   5. Then the process change. One specific thing you do differently now. That converts a story into evidence that you learn.
   6. Keep tracking it, right up to the interview. Nothing kills this answer faster than not knowing where the stock trades today, because it says you stopped caring once the competition ended.

   Where candidates lose it

   Not knowing the current price. It is the most predictable follow-up in a hedge fund interview and candidates still walk in without it. Second trap: claiming a win that was really a sector move. Interviewers check, and attributing your own P&L honestly is exactly the skill they are hiring for.

   Expect next

   • Where does it trade now, and would you still own it?
   • Was it right for your reason?
   • What would you do differently on the next one?

   Reported by candidates at Point72 (Investment Research, New York, 2026). Source: Wall Street Oasis.

2. 018How would you perform a whitespace analysis?Stock pitchIntermediatecase studyViking Global InvestorsQuantitative Research · New York · 2024

   Say this

   Whitespace analysis maps where a company could sell but currently does not, and then asks how much of that gap is actually reachable. It is a growth-runway tool: define the full addressable grid, mark what is already penetrated, and size the remainder with an honest win rate.

   Then walk it

   1. Build the grid explicitly. Two or three axes that matter: customer segment by geography by product. Cells are combinations, and every cell gets a size and a current penetration.
   2. Get the penetration from disclosure and bottom-up data rather than management's TAM slide. Customer counts, store counts, licence counts, segment revenue, and where possible third-party data like app downloads or job postings.
   3. Then subtract what is not really reachable. Cells owned by an entrenched incumbent with switching costs, cells where the product does not fit without heavy investment, cells where regulation blocks entry. That haircut is the analytical content of the exercise.
   4. Then convert it to a number the model can use. Reachable whitespace times a realistic win rate over a defined period equals incremental revenue, and I would keep the win rate low enough to be defensible, often 10 to 20 percent rather than a third.
   5. Cross-check against history. If the company has been adding 400 customers a year and your whitespace implies 2,000 a year, the whitespace is not the constraint, execution is. Reconcile the two or drop the analysis.
   6. The limitation to say out loud: whitespace tells you the ceiling, not the path. Plenty of companies with enormous whitespace never grow, because the gating factor is sales capacity or the economics of serving the marginal customer, not the size of the opportunity.

   Where candidates lose it

   Producing a large TAM number and calling it a thesis. TAM slides are marketing. A credible whitespace analysis is mostly about what you exclude and the win rate you apply, and it must reconcile with the company's demonstrated rate of expansion.

   Expect next

   • How would you validate the penetration numbers independently?
   • What win rate would you use, and why?
   • Where does this analysis mislead you?

   Reported by candidates at Viking Global Investors (Quantitative Research, New York, 2024). Source: Wall Street Oasis.

3. 019Pitch me a short.Short sellingIntermediatesuperdayLong-short equityShort-biased funds

   Say this

   Same structure as a long, but three extra things have to be in the pitch: why the market is wrong in a way that resolves on a clock, what the borrow costs, and what blows you up. Shorts are timing trades, not valuation trades, so name the catalyst before the valuation.

   Then walk it

   1. Lead with the trade and the constraint. 'Short X at 40, target 25, borrow is 3 percent annualised and there is ample availability, and I would cap it at 2 percent of the book because short interest is already 9 percent of float.'
   2. Then the thesis, and pick a category. The good short buckets are structural decline being extrapolated as cyclical, accounting that overstates earnings quality, a broken unit economic that growth is masking, and a balance sheet that needs to refinance into a worse market.
   3. Then the catalyst with a date, because time works against a short. A refinancing, a covenant test, a lock-up expiry, a competitor's capacity coming online, a guidance reset. Valuation alone does not close a short.
   4. Then the carry. Borrow cost, dividends you owe, and the interest you earn on the proceeds. A 12 percent borrow means you need the thesis to work within months, not years, and saying that shows you have actually shorted something.
   5. Then the blow-up risk, explicitly. Float, short interest as a percent of float and days to cover, retail interest, index events, and whether the company could do something reflexive like a buyback, a raise or getting acquired. A takeout is the classic way a good short thesis loses 40 percent overnight.
   6. Close with sizing and stop. Shorts get smaller as they go against you in risk terms because the position grows, so I would run a hard stop and a smaller starting size than an equivalent-conviction long.

   Where candidates lose it

   Pitching an expensive stock. 'It trades at 60 times earnings' is not a short thesis, it is an observation, and the last decade has been brutal to people who thought otherwise. Also, candidates forget the borrow and the squeeze risk entirely, which tells a PM you have never actually been short anything.

   Expect next

   • What is the borrow on that name?
   • What is short interest as a percentage of float?
   • What would make you cover?
4. 020How is a short thesis different from a long thesis?Short sellingIntermediatetechnicalLong-short equity

   Say this

   The payoff is inverted and the clock runs the other way. A long can compound while you wait and your loss is capped at 100 percent; a short bleeds carry while you wait, your loss is unbounded, and the position grows as it moves against you. So a short thesis needs a catalyst where a long thesis can survive on patience.

   Then walk it

   1. Asymmetry first. A short that halves makes you 50 and the position shrinks. A short that triples loses you 200 and the position has tripled in size. Risk management is therefore built into the thesis, not bolted on.
   2. Time is a cost. You pay borrow, you owe the dividends, and equity markets drift upwards, so a short has a negative expected return from the market factor alone. That is why the market drift is roughly a 7 to 9 percent annual headwind you have to beat.
   3. Reflexivity is against you. A falling stock can be rescued by a buyback, an equity raise, an activist, a takeout or a short squeeze. A rising stock has no equivalent mechanism working against a long.
   4. Information dynamics differ. Company access is worse, management will not help you, sell-side coverage is almost uniformly positive, and you are arguing against the promotional side of the market.
   5. So the thesis has to be harder edged: fraud or accounting distortion, a genuine structural decline, a funding wall, or a specific dated event. Vague overvaluation is a long thesis in reverse and it does not survive.
   6. And sizing discipline is different in kind. Most disciplined books cap single-name shorts well below the maximum long, and many will not short a name with heavy retail ownership at all regardless of the thesis.

   Where candidates lose it

   Treating a short as 'the opposite of a long'. It is not symmetric in payoff, in carry, in information access or in position growth. If you can only describe it as a mirror image, a PM will assume you have never run one and will not trust you with the short book.

   Expect next

   • How much smaller would you size a short than a long of the same conviction?
   • Would you ever short a name with 20 percent of the float short?
   • How do you deal with the market drift working against you?
5. 022What is the borrow cost, and how does it change the hurdle on a short?Short sellingIntermediatetechnicalLong-short equityPrime brokerage

   Say this

   Borrow cost is the annualised fee you pay to keep a stock on loan, and it is the carry on the trade. It tells you how fast the thesis has to work: a general-collateral name at 40 basis points is essentially free to hold, while a 20 percent borrow means you lose the argument if you are right in eighteen months instead of six.

   Then walk it

   1. The range in practice is wide. Easy-to-borrow large caps are 25 to 75 basis points a year. Crowded shorts run 5 to 20 percent. Genuinely restricted names, small floats, recent IPOs, situations in a squeeze, can go past 50 percent and occasionally past 100.
   2. Do the hurdle arithmetic out loud. At a 15 percent borrow, a short that takes two years to work has cost you roughly 30 points of carry. If your target is 40 percent downside you have given away most of the trade to financing.
   3. Add the dividend. You owe it, so a 4 percent yielder at a 3 percent borrow is a 7 percent annual drag before the stock moves at all.
   4. Borrow is also information. A fee that is rising fast tells you the crowd is arriving, which raises squeeze risk exactly when your thesis feels most obvious. I would check the fee trend and days-to-cover before adding, not just the level.
   5. It also changes how you express the trade. Above a certain borrow it is cheaper to buy puts or use a swap, because the borrow is embedded in the derivative price and at least the loss is capped and the position cannot be recalled.
   6. The limitation: borrow is not contractual term funding. A cheap borrow today can reprice or disappear tomorrow, so a thesis that requires a specific borrow cost to work is a fragile thesis.

   Where candidates lose it

   Quoting a borrow cost with no view on how it changes the trade. The number is not the answer; the hurdle is. Multiply the fee by the expected holding period, add the dividend, and compare it to your target return. Candidates who skip that step are pitching shorts they could not actually hold.

   Expect next

   • At what borrow level would you use puts instead?
   • What does a rapidly rising borrow fee tell you?
   • How do you think about the short rebate on the proceeds?
6. 023What is a short squeeze, and how do you manage the risk of one?Short sellingIntermediatetechnicalLong-short equityMulti-manager platforms

   Say this

   A squeeze is a self-reinforcing rally driven by shorts being forced to buy. Price rises, margin and risk limits bite, shorts cover, that buying pushes the price higher, which forces the next cohort out. The defence is almost entirely position sizing and instrument choice, because once it starts you cannot argue with it.

   Then walk it

   1. The mechanics need two ingredients: crowded short interest and constrained supply of stock. Small float, high short interest as a percent of float, and high days to cover are the measurable warning signs.
   2. Then the accelerants. Borrow recalls that force buy-ins, option market makers hedging calls by buying stock, which is the gamma squeeze layer, and index or passive holders who cannot lend more.
   3. Numbers I would actually look at before shorting: short interest above roughly 15 percent of float, days to cover above five, borrow fee rising week on week, and whether retail and options volume are unusually high relative to the market cap.
   4. Management during the event is mostly pre-committed. Size the position so a 50 percent adverse move is survivable, set the stop before you enter, and never average into a squeeze on the argument that the thesis is now better.
   5. Instrument choice is the cleanest structural defence. A put caps your loss, cannot be recalled, and lets you keep the view through the violence, at the cost of paying premium and needing to be right on timing.
   6. GameStop in 2021 is the reference case and the lesson is not 'retail beat hedge funds'. It is that a correct fundamental view on a business can be irrelevant to the outcome of a position when the funding and float mechanics turn against you.

   Where candidates lose it

   Answering with 'I would cover'. Everybody covers; the question is what you did before the squeeze started. The content of a good answer is the pre-trade checks, the size cap, and the choice to use options in crowded names. Also do not cite GameStop without saying what it actually taught you about position sizing.

   Expect next

   • What short interest level would stop you putting the trade on?
   • How does option market maker hedging contribute?
   • Would you rather be short the stock or long a put in a crowded name?
7. 024Would you ever short on valuation alone?Short sellingIntermediatetechnicalLong-short equity

   Say this

   Almost never as a standalone position. Expensive can stay expensive for years while you pay borrow and the market drifts up, and multiples are the slowest thing in the market to mean-revert. Valuation is the size of the prize, not the reason the trade works.

   Then walk it

   1. The structural problem is that a high multiple is usually a statement about expected growth, and the way to make money short is for the growth to disappoint, not for the multiple to be high. So the thesis has to be about the numerator.
   2. Carry makes the timing problem expensive. At a 5 percent borrow and a 7 percent market drift, you need roughly 12 percent of downside a year just to break even on a valuation short.
   3. Expensive names are also the most reflexive. They can raise equity cheaply, buy growth, get taken out, or get repriced higher by one more year of delivery. Every one of those is a loss for a valuation short.
   4. Where valuation does earn its place is as a multiplier on a real thesis. If you already believe the unit economics break, a 40 times multiple means the derating on top of the earnings miss gives you a much larger move. That is a valuation-assisted short, not a valuation short.
   5. It also works better in relative form. Long the cheap compounder, short the expensive peer with the same end market, sized to be sector neutral. Now you are trading the spread rather than betting on the market's willingness to pay.
   6. The honest exception: in a clear liquidity-driven bubble with a dated funding event, valuation shorts do work. But you need the funding wall or the lock-up expiry, and that is a catalyst, which means you were not shorting valuation alone after all.

   Where candidates lose it

   Saying yes with enthusiasm. It is the most common way junior candidates reveal they have never held a short through a rally. The credible answer names the carry, the drift and the reflexivity, and then explains how valuation is used as a multiplier on a fundamental thesis rather than as the thesis.

   Expect next

   • So what does make a good short?
   • How would you express it in relative form?
   • When has a valuation short actually worked?
8. 026What is the Kelly criterion, and why does nobody run full Kelly?Portfolio constructionIntermediatesuperdayQuantitative hedge fundsMulti-manager platforms

   Say this

   Kelly gives the bet size that maximises the long-run growth rate of capital: you bet your edge divided by the odds. For a simple even-money bet it reduces to twice your win probability minus one. Nobody runs it full because it assumes you know your edge precisely, and overestimating it is punished geometrically.

   Then walk it

   1. The formula for an even-money bet: f equals 2p minus 1. With a 55 percent chance of winning, Kelly says bet 10 percent of capital. With a 60 percent chance it says 20 percent, which already feels reckless to anyone who has run a book.
   2. It maximises the expected log of wealth, which is the geometric mean, not the arithmetic mean. That is the right objective if you are compounding one pot of capital forever, and it is why the answer is a fraction of wealth rather than a fixed amount.
   3. Full Kelly produces brutal drawdowns by design. The expected maximum drawdown on a full Kelly strategy is roughly 50 percent. No fund with outside capital survives that, because investors redeem long before the long run arrives.
   4. The estimation problem is worse than the volatility problem. Kelly is very sensitive to the edge, and betting twice the Kelly fraction takes your expected growth rate to zero. Since we estimate edge from short, noisy samples, err low.
   5. So in practice people run a quarter to a half Kelly, which gives up a modest amount of growth for a large reduction in drawdown. That trade is almost always worth it with client money.
   6. The other limitation for an equity book: Kelly is single-bet. Real portfolios have correlated positions, so the useful version is a mean-variance or risk-parity construction with a Kelly-style scaling on the whole book, not per position.

   Where candidates lose it

   Reciting the formula and stopping, or claiming you would use it. The interesting part is the estimation error and the drawdown profile. A candidate who says 'half Kelly because I cannot estimate my edge to two decimal places' has answered the question properly; one who says 'bet edge over odds' has quoted a Wikipedia line.

   Expect next

   • What happens if you bet twice Kelly?
   • How would you extend it to correlated positions?
   • How would you estimate your edge in the first place?
9. 028How do you beta-hedge a long position?Portfolio constructionIntermediatetechnicalLong-short equity

   Say this

   Short an index exposure equal to the position value times its beta. If you are long 10 million of a stock with a beta of 1.4, you short 14 million of index to be market neutral on that position. The residual is what you were trying to own in the first place.

   Then walk it

   1. The arithmetic is just that: hedge notional equals position notional times beta. Do it with index futures or an ETF, and futures are usually cheaper because there is no borrow and the financing is embedded.
   2. Beta is estimated, so it is wrong. Which lookback, which frequency, which index? A daily two-year beta and a weekly five-year beta on the same stock can differ by 0.4, and your hedge ratio inherits that error.
   3. Betas also drift with the business. A company that delevers or shifts mix becomes a different beta, and a hedge set once and forgotten stops hedging.
   4. Sector beta is usually the better hedge. If the thesis is company-specific, shorting the sector rather than the broad index strips out more of the noise you do not want, and you are left closer to pure idiosyncratic risk.
   5. The trade-off is that a sector hedge may remove exposure you wanted. If part of your edge was calling the cycle, hedging the sector hedges away your alpha.
   6. State the honest limitation: beta hedging removes the average market sensitivity, not the tails. In a sharp sell-off high-beta stocks fall much more than their historical beta implies, correlations go to one, and the hedge under-delivers exactly when you need it. That is why net exposure limits exist alongside hedges.

   Where candidates lose it

   Hedging one for one. Shorting 10 million of index against a 10 million position with beta 1.4 leaves you materially net long, and that error shows up as an unexplained market P&L in your attribution. Also, say which beta you used and over what window; interviewers probe that immediately.

   Expect next

   • Which beta would you use and over what window?
   • Index hedge or sector hedge, and why?
   • What happens to your hedge in a crash?
10. 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.

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.