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. 066Explain a hurdle rate, a clawback and a crystallisation period to an investor.Fund structure and economicsHardtechnicalFund of funds

   Say this

   A hurdle is the return the fund must beat before any performance fee is earned. A clawback returns fees already paid if later losses show they were not deserved. A crystallisation period is how often the performance fee is locked in and taken. All three exist because the performance fee is an option and investors are trying to make it less of one.

   Then walk it

   1. Hurdle: typically cash, SOFR plus a spread, or a benchmark. With a 5 percent hurdle and a 12 percent return, the 20 percent fee applies to 7 points, not 12. Then ask whether it is a hard hurdle, fee on the excess only, or a soft hurdle, fee on everything once cleared. The difference is real money.
   2. Crystallisation: monthly, quarterly or annual. More frequent crystallisation favours the manager, because fees are locked in on a good quarter even if the year ends flat. Annual with a genuine high water mark is the investor-friendly standard.
   3. Worked example of why frequency matters: up 10 percent in the first half, down 10 percent in the second, roughly flat for the year. With quarterly crystallisation the manager has banked a performance fee on the first half. With annual, nothing is due.
   4. Clawback is more common in private funds than hedge funds, and it is the fix for that problem: fees paid on interim gains are returned if the final outcome does not support them, usually held in escrow.
   5. The equalisation problem sits behind all of it. Investors subscribing at different times have different high water marks, so funds either run separate series per subscription or use equalisation accounting with depreciation deposits. It is administratively ugly and it is why the administrator matters.
   6. The plain conclusion for an investor: the headline two and twenty tells you almost nothing. Hurdle type, crystallisation frequency, high water mark treatment and the expense load determine what you actually pay, and two funds with identical headline terms can differ by hundreds of basis points a year.

   Where candidates lose it

   Defining the three terms in isolation. The value of this answer is showing how they interact and which combinations transfer money to the manager. The hard-versus-soft hurdle distinction and the crystallisation frequency example are the two specifics that make it convincing.

   Expect next

   • Which is better for the investor, a hard or a soft hurdle?
   • Why is crystallisation frequency worth arguing over?
   • What is equalisation and why does it exist?

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.