Have you heard the one about the hedge fund manager who thinks his trading approach is so automated that even a chimp could run it? So on a dare, he gets a circus trainer to put a monkey in front of one of his computers and allows the animal to go to town. Everything seems to be going fine until one day the manager returns to see the trainer shaking his head. ‘Is everything all right?’ he asks the trainer. ‘That depends on your point of view,’ he replies. ‘The monkey just orchestrated a leveraged buyout of the Bronx Zoo.’
More seriously, chimps aren’t hired by hedge funds–but a select few MBAs from top business schools certainly are. And just as in private equity, the rewards for MBA grads who work at a successful hedge fund can be exorbitant. Just how lucrative it can be is rarely captured in a business school’s annual employment report. That’s because base salaries tend to be comparatively low, with the upside rewards that are more difficult to measure extremely high. “The structure of payments are different,” says Jonathan Masland, who heads up Tuck’s career management center. “PE and hedge funds are often difficult to put a hard number to. It’s often not baked into what we list.”
Wharton and Columbia are significant feeders into the industry. At Wharton, roughly 4.2% of the Class of 2013 went to work for “hedge funds and other investments,” as the school defines the category. Their median starting salaries were $122,500, higher than any other finance job category other than private equity and venture capital where the firms paid median bases of $150,000 to start.
At Columbia Business School, some 4.1% of the Class of 2013 landed jobs in a broad category that included hedge funds, mutual funds, and fund of funds. While the reported median base for those MBAs was $125,000, the median “other compensation” was $55,000, the highest median of any job category for the year. Even more interesting, perhaps, is that the highest salary paid in hedge funds at Columbia was $175,000 with “other compensation” of a whopping $200,000.
Harvard Business School is no slouch in this game. In fact, the school sent a higher percentage of its MBAs into hedge funds last year than either Wharton or Columbia. HBS said 5% of the Class of 2013 gained jobs with hedge funds (a category that is all on its own). The median base salary for those grads hit $135,000, with a high of $150,000–not all that extreme.
But Harvard reported that the sign-on bonuses for hedge fund MBAs added another $30,000 to their packages and–even more telling–the median “other guaranteed compensation was a hefty $72,500. Add it all up–though not every single MBA collected all three components of pay–and it comes to a “median” pay package of $237,000 to start. Now that is real money.
How do all the top schools fare against each other in employment in the lucrative hedge fund field? We analyzed the member profiles on LinkedIn to come up with a list of MBAs from the top 10 U.S. business schools who are employed by some of the world’s leading hedge funds, ranging from Bridgewater and BlackRock to J.P. Morgan Asset Management and Och-Ziff Capital Management Group.
Though hardly definitive, searches of LinkedIn’s database provide a fascinating and fairly accurate glimpse at what you could call the “market penetration” of a school’s MBAs in any one firm. Sure, not everyone has a profile on LinkedIn, though people who fail to list with the world’s number one professional network are certainly in the minority at this point. It’s also possible that LinkedIn’s search algorithm could be slightly askew and count undergraduate business majors.
At Farallon, for example, an insider notes there are five MBAs from Harvard, six from Stanford, one MBA from INSEAD, and one MBA from Anderson–but none from Wharton, though LinkedIn counts 37. It might be because of LinkedIn is counting some former Farallon junior employees from Wharton. As if often the case at many hedge funds, Farallon’s hiring is not at MBA focused. Nearly all of the investment professionals are summas or magnas from Ivys and Ivy equivalents while the senior investment professionals tend to be much more experienced people with much less gilded pedigrees.
In any case, we think the results are worth a look–and we think you’ll find them quite compelling. Based on the LinkedIn data, the biggest employer of MBAs who plays in the hedge fund arena is BlackRock which obviously does a lot more than hedge funding investing. Still, the firm has 120 grads on the payroll from New York University’s Stern School, along with 66 from Columbia Business School, and 44 from Harvard Business School, according to LinkedIn.
As you might expect, the biggest players in the hedge fund arena are Columbia, Wharton, NYU, and Harvard which have the lion’s share of MBA grads in the leading firms we examined. That’s no joke.
(See following page for our analysis of where the top MBAs work in hedge funds)