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. 071How would you value an illiquid position for the monthly NAV?Financing, NAV and operationsHardsuperdayDistressed debtFund administration

   Say this

   By a written policy applied consistently, not by judgement each month. Hierarchy: an observable transaction price if there is one, then broker quotes, then a model calibrated to comparable market data, with the manager's own view last. Then document it, get it reviewed independently, and disclose the level.

   Then walk it

   1. Start at the top of the fair value hierarchy. Level one is an exchange price and there is nothing to decide. Level two is observable inputs, so indicative broker quotes on a similar bond or a recent trade in the same issuer's other paper. Level three is a model with unobservable inputs, which is where the real work and the real risk sit.
   2. For a private or restructured equity stake, a defensible approach is a multiple on the latest reported earnings against listed comparables, plus an illiquidity discount, cross-checked against the last primary round or any secondary transaction.
   3. For a stressed loan, recovery analysis: enterprise value, the waterfall, then a discount rate reflecting the time and uncertainty of the process. Mark the claim, not the face amount.
   4. Governance is most of the answer. Broker quotes from at least two independent sources where possible, a pricing committee that signs off, a written valuation policy reviewed by the board, the administrator striking the NAV rather than the manager, and an annual audit that tests the level three marks.
   5. Consistency matters more than precision, and this is the part to say out loud. A defensible method applied every month is better than a more accurate method applied when it suits. Changing methodology when a mark is inconvenient is the classic abuse.
   6. Then the disclosures that let an investor judge: percentage of NAV in each level, the discount applied, and a sensitivity showing what NAV would be at plus or minus a reasonable range on the key input. If the position is large and genuinely unmarkable, the right answer may be to side-pocket it rather than to invent a number.

   Where candidates lose it

   Giving a valuation technique and no governance. The question is really about controls: who marks it, who checks the marker, and how you stop the method from changing when the number is unhelpful. Also remember to mention that side-pocketing can be the correct answer rather than marking something you cannot mark.

   Expect next

   • What if the two broker quotes differ by 15 points?
   • Who signs off on a level three mark?
   • When should a position be side-pocketed instead?
2. 074You are on an expert network call and the expert starts describing their current employer's unreported quarter. What do you do?Compliance and research processHardsuperdayMulti-manager platformsCompliance

   Say this

   Stop the call immediately, say clearly that you cannot receive that information, and end it rather than steer it. Then report it to compliance the same day, document what was said, and let them decide whether the name goes on a restricted list. You do not get to make that judgement yourself.

   Then walk it

   1. Interrupt, do not redirect. 'I have to stop you there. I cannot discuss unreported financial results for your employer.' Trying to move the conversation along while having already heard it does not help you.
   2. End the call. Continuing after a breach, even on other topics, looks like you kept fishing, and the call is recorded or logged by the network.
   3. Report it immediately and in writing to compliance, with the date, the expert, the network, and what was said. Self-reporting is the single most protective thing you can do, and delaying it is what turns a mistake into a career-ending problem.
   4. Expect the consequence and accept it: compliance will likely restrict the name, meaning nobody at the firm can trade it until they clear it. Even if you were already long, you may be frozen. That is the correct outcome.
   5. Say the structural controls that should have prevented it, because it shows you understand the framework rather than just the etiquette. Pre-approved question lists, chaperoned calls, prohibitions on speaking to current employees of public companies you cover, mandatory network training, and post-call logging.
   6. Then the honest point about incentives. The information would have been valuable, and that is exactly why the rule has to be absolute rather than a judgement call in the moment. Every insider trading case involving expert networks, including the ones that put people in prison, started with someone deciding this once was probably fine.

   Where candidates lose it

   Giving a soft answer: 'I would change the subject' or 'I would not use it in my model'. Both are wrong. Once you possess material non-public information you are restricted whether you use it or not. The three required beats are stop, end, report. And never say you would check with the PM first; compliance is the escalation path.

   Expect next

   • What if your PM already has a large position in that name?
   • What is the firm's obligation once you report it?
   • How do you structure expert calls to avoid this?
3. 078Here are the financial statements of three unnamed companies. Work out what kind of business each one is.Compliance and research processHardcase studyHPS Investment PartnersSpecial Situations · London · 2021

   Say this

   I would read four things in order and narrate as I go: the asset side of the balance sheet, the shape of the cost structure, the working capital cycle, and the capital intensity. Those four together identify a business model within a couple of guesses, and the reasoning is what is being graded, not the final label.

   Then walk it

   1. The balance sheet tells you most of it. Heavy PP&E means manufacturing, utilities, telecom or hotels. Heavy inventory with no PP&E means a retailer or a distributor. Almost no assets but large receivables means services or consulting. Large intangibles and goodwill means an acquisitive or a software business. A balance sheet dominated by financial assets and matched liabilities means a bank, an insurer or a lender.
   2. Then margins and their shape. Gross margin above 70 with heavy sales and marketing is software. Gross margin in single digits on huge revenue is distribution, commodity trading or grocery. High EBITDA margin with heavy depreciation is infrastructure-like, so telecom, towers, pipelines.
   3. Then the working capital cycle, which is the most diagnostic single item. Negative working capital with large payables and fast inventory turns is a supermarket or a restaurant chain. Large deferred revenue is subscription software. Long receivables and inventory days is heavy industry or project work. Receivables that are the business are financial services.
   4. Then capital intensity and leverage. Capex above 15 percent of sales with high depreciation says utility, telecom or semiconductor fab. Very high leverage with stable margins says regulated or contracted cash flows. High leverage with cyclical margins says a leveraged buyout.
   5. Then cross-check with one specific tell per hypothesis. A retailer has operating leases now capitalised as right-of-use assets. An insurer has technical reserves. A hotel has both heavy PP&E and high operating leverage. Say the tell you are looking for before you look for it.
   6. Then commit and quantify your confidence: 'Company A is a grocery retailer, and I am confident because of negative working capital, 25 percent gross margin, 3 percent EBIT margin and inventory turning in under 30 days. If I am wrong, it is a food distributor, and the way to tell them apart is store-level assets versus warehouse assets.' Naming the alternative and the discriminating test is what a credit interviewer is looking for.

   Where candidates lose it

   Guessing early and then defending it. This is a pure reasoning exercise: narrate the evidence in order and let the conclusion fall out. Also, do not neglect the working capital cycle, which is more diagnostic than the income statement. And always name your second-best hypothesis and the test that would separate them.

   Expect next

   • Which of the three would you lend to, and on what terms?
   • Which has the most operating leverage?
   • What single extra disclosure would you ask for?

   Reported by candidates at HPS Investment Partners (Special Situations, London, 2021). 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.