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. 051How do you assess deal-break risk?Event-driven and merger arbHardsuperdayMerger arbitrageEvent-driven

   Say this

   By working through the conditions in the merger agreement one at a time and asking which one could actually fail. In practice almost all breaks come from four places: antitrust or regulatory, financing, the shareholder vote, or a material adverse change claim by a buyer who wants out.

   Then walk it

   1. Regulatory is the biggest and the slowest. Overlap between the parties, market share in the relevant definition, which agencies have jurisdiction, whether a second request or a phase two review is likely, and whether remedies are available. Cross-border adds Chinese and European approvals, which have their own political weather.
   2. Financing next. Is it fully committed, is there a financing condition, is there a ticking fee, and has the credit market moved against the buyer since signing. A buyer whose debt got 300 basis points more expensive has an incentive to find a problem.
   3. Then the vote. Who owns the target, are there activist holders arguing the price is too low, is a proxy adviser recommending against, and is the premium defensible against the unaffected price.
   4. Then the contract itself, which is where the real work is. Read the definition of a material adverse effect and the carve-outs, look at the outside date and extension mechanics, the break fee in both directions, and whether there is specific performance.
   5. Then read the incentives. Strategic buyers close; the risk is regulatory. Sponsor buyers have financing risk and a history of renegotiating price when the world changes. A buyer who has walked before is a different underwriting.
   6. Then price the downside honestly. Undisturbed price, adjusted for how the market has moved since, plus the chance of another bidder. And say the base rate: historically around 5 to 8 percent of announced deals break, so any model implying a 1 percent break probability is wrong.

   Where candidates lose it

   Answering with 'regulatory risk' and stopping. Merger arb is a documents business. Naming the material adverse effect definition, the outside date, the break fee and whether specific performance is available is what distinguishes someone who has read an agreement from someone who has read a headline. Also know the historical break base rate.

   Expect next

   • What is in a typical MAE carve-out list?
   • Would you rather own a spread with a strategic or a sponsor buyer?
   • What do you do when the spread widens on news you already knew?
2. 053A deal you own gets a second request from the antitrust authority. Walk me through what you do.Event-driven and merger arbHardsuperdayMerger arbitrageEvent-driven

   Say this

   First reprice the trade rather than react to the print. A second request lengthens the timeline and raises break probability, so the spread should widen; the question is whether it has widened by more or less than the new facts justify. Then decide whether the position is still correctly sized.

   Then walk it

   1. Step one: re-derive the implied probability from the new spread. If the spread went from 3 percent to 9 percent and the undisturbed downside is 20 percent, the market is now implying a much higher break risk. Compare that with your own estimate.
   2. Step two: re-underwrite the substance. What is the theory of harm, is the overlap horizontal or vertical, how large is the combined share in the market definition the agency will use, and are divestiture remedies plausible? Base rates matter: most second requests still end in completion, historically the large majority.
   3. Step three: reset the timeline. A second request typically adds six to twelve months, so the annualised return on the remaining spread can actually fall even as the gross spread widens. Recompute it, because that is where people fool themselves.
   4. Step four: check the agreement. Is the outside date far enough out to survive the review, who bears the obligation to litigate, and is there a reverse break fee if the buyer walks on regulatory grounds.
   5. Step five: size. Higher variance and a longer hold means less capital, not more, unless my own probability estimate is genuinely above the market's. And I would check what else in the book has the same regulatory exposure, because arb books accumulate correlated antitrust risk without noticing.
   6. Then the honest self-check: am I adding because I have new information, or because the position is down and the spread looks attractive? The second is how merger arb books turn a break into a disaster.

   Where candidates lose it

   Automatically adding because the spread widened. Widening on genuine new information is not an opportunity, it is a repricing. Also, forgetting that a longer timeline can reduce the annualised return even when the gross spread doubles. Do that arithmetic out loud and check correlated regulatory exposure across the rest of the book.

   Expect next

   • What proportion of second requests end in a block?
   • Who pays the reverse break fee and when?
   • How would you hedge regulatory risk across the whole book?

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.