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. 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.

2. 050A target trades at 46, the cash offer is 50, and the deal is expected to close in six months. What is your return, and what are you being paid for?Event-driven and merger arbIntermediatetechnicalMerger arbitrageEvent-driven

   Say this

   The gross spread is 4 on 46, which is about 8.7 percent over six months, or roughly 17 to 18 percent annualised before costs. You are being paid for the risk the deal breaks, and given where rates are, roughly half of that annualised number is just compensation for tying up capital.

   Then walk it

   1. Arithmetic first: 50 minus 46 is 4, over 46 is 8.7 percent. Doubling for the six-month period gives about 17.4 percent annualised, or 18.1 percent if you compound it. Say the simple number, then note the compounding refinement.
   2. Net it down. Subtract the financing cost of the long, add back any target dividend you receive, and subtract the cost of any hedge. At a 5 percent financing rate, roughly half the annualised spread disappears.
   3. Then the risk question, which is the real question. What is the undisturbed price? If the target traded at 34 before announcement, a break costs you 12 while success pays 4. Three to one against, so you need a completion probability well above 75 percent to break even.
   4. Compute the implied probability: 4 divided by 16 is 25 percent implied break risk. Then ask whether that is right. A friendly, all-cash, fully financed strategic deal with no antitrust overlap should be well below that, which would make the spread attractive.
   5. A spread this wide is a message. Eight percent over six months usually means antitrust review, a financing condition, a shareholder who has objected, or a regulatory regime with a track record of blocking. Find out which before you take the other side.
   6. And the sizing conclusion: because the payoff is three to one against you, position size and deal diversification do more for the return than spread selection. Twenty deals at 2 percent each beats four at 10 percent, and that is the whole discipline of the strategy.

   Where candidates lose it

   Quoting 8.7 percent as the return and stopping. You must annualise, and you must net the financing. Then the bigger trap: giving a return with no reference to the downside. Without the undisturbed price the spread is meaningless, and an arb interviewer will judge you almost entirely on whether you asked for it.

   Expect next

   • What was the price before the deal was announced?
   • What implied break probability does that spread give you?
   • How many deals would you hold, and why?
3. 099Is television damaging to society?Career and fitIntermediatesuperdayBridgewater AssociatesGeneralist · Westport · 2024

   Say this

   On balance the medium is neutral and the business model is what does the damage. Television that competes for advertising attention optimises for engagement, which rewards outrage and simplification. The same technology used for education or shared information has been clearly beneficial. So I would say the incentive structure is the variable, not the screen.

   Then walk it

   1. Start by making the question answerable. Damaging compared with what, measured how, and over what period? Time displaced from other activities, effects on civic knowledge, effects on polarisation, effects on children. Naming the metric is the first move.
   2. Then the evidence in both directions, briefly. Broad access to news and education raised shared information enormously; there is also credible research on displacement of reading and social activity, and on attention effects in young children.
   3. Then the mechanism that explains the split. An advertising-funded model monetises attention, so content evolves towards whatever holds it. That selects for conflict and simplicity regardless of anyone's intent, which is a structural argument rather than a moral one.
   4. Then the natural experiment, which is where the answer gets interesting. Social media took the same incentive structure and made it faster, more personalised and algorithmically optimised. If the mechanism is right, the effects should be larger there, and broadly they appear to be. That is a testable implication of my claim and it is the kind of thing worth offering unprompted.
   5. Then the counterfactual test. If television were removed, would the attention go to reading or to something else with the same incentives? That question tells you whether you are indicting the medium or the underlying demand.
   6. Then commit: not damaging in itself, damaging as commercially structured, and the policy implication is about funding models and disclosure rather than about the technology. And then genuinely listen to the pushback, because at a firm that asks these questions the grade is on how you handle disagreement.

   Where candidates lose it

   Giving a cultural opinion rather than an analytical one. The test is whether you can define terms, weigh evidence on both sides, identify a mechanism and commit to a view you can defend. The other trap is being immovable. When the interviewer pushes back, update genuinely if the argument is better; that is the behaviour they are screening for.

   Expect next

   • How would you test your claim?
   • Does the same argument apply to social media?
   • I disagree. Convince me, or tell me why I am right.

   Reported by candidates at Bridgewater Associates (Generalist, Westport, 2024). 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.