The Hedge Fund Operations Department

by Derek Loosvelt | March 10, 2009

The operations department at a hedge fund supports the trading and accounting groups by ensuring that all trades are accounted for and settled correctly. Professionals in operations reconcile the trading positions (of securities) with what the banks know to be correct. If there are any errors, it is the operations department's responsibility to ensure that these get corrected. The operations group often generates daily performance reports for analysts and portfolio managers.

An entry-level professional in this department generally starts as an operations associate. Higher positions on this career path include the director of operations, controller, CFO or ultimately chief operating officer. Many operations staff members also move on to areas such as trading and portfolio management. The "back office'"environment of the operations department is not as demanding as the "front office," but the job is very fast paced and the front office heavily relies on this team for accurate portfolio information.

Operations Associate

This position, also sometimes called "operations specialist" requires a bachelor's degree (one from a top 20 school in finance is preferable). If the employee is not already registered (Series 7 and 63), most hedge funds will sponsor and pay for the employee's licensing within the first six months on the job.

When looking for junior operations personnel, all hedge funds look for young, bright individuals who are willing to put in a couple years doing the grunt work for an opportunity to move up within that area or into a front office role such as trading. Typical job duties of this position include, but are not limited to, settlements of trades, daily portfolio reconciliation between in-house systems and prime brokers/banks, and phone interactions with brokers.

These responsibilities can be quite time-sensitive. The most time-sensitive issues are related to trade settlement, which involves the actual payment of money to the seller and delivery of securities to the buyer after the trade is verbally agreed upon. Depending on the security and country it is listed in it, securities have different standard settlement periods. For example, stocks in the U.S. settle three days after trade date (also referred to as T+3), while options in U.S. settle T+1 (the day after the trade is agreed upon). If a particular trade does not settle, it is considered a "failing" trade. Failing trades require immediate attention as they could potentially cause large errors for the trading desk. Operations associates generally report to a senior portfolio analyst or director of operations. Salaries range from $40,000 up to $60,000 plus a discretionary performance-based bonus, which can be 10 to 50 percent of annual salary.

These jobs are typically available through headhunters or job listings. Hedge funds are increasingly utilizing specialized job agencies as a lot of times they don't have time to do the due diligence on each candidate. This way, they get a selected pool of candidates that they can interview. There tends to be high turnover in this position because most individuals in this entry-level position can get bored if their learning curve has diminished and they want to move up within the firm or look for a senior position at a competitor. The job described above with similar responsibilities can also be called trading assistant or analyst.

Filed Under: Finance


Sales and Marketing in Investment Management Credit Checks And The Finance Job Search

Vault welcomes your views. Please stay on topic and be respectful of other readers. Review our User Guidelines.

blog comments powered by Disqus

Featured Companies

Career Update Newsletter

Tips and tools to help you manage your ideal career.

SALARY FINDER

SALARY FINDER

Health Service Administrator

  • $0
  • 25
  • 50
  • 75
  • 100
  • 100+
Yearly Salary Range (US$ Thousands)