For someone who has been through in the past, HF interviews you’ll know that the hedge fund case study is commonplace in the industry. Why is this? Because this is a test of how you’ll do the actual work. Daily duty of analyst at hedge fund is looking for investment ideas on both the long and short side. Case studies test your investment knowledge to be able to prepare properly the idea of investment. If you can’t pitch a stock so forget trying to get a job in hedge funds.
There are traditionally two types of case studies of hedge funds: in-house and take home.
In both cases I find it very useful to understand what the company does and how to make money before trying to express an opinion. Some of the most useful ways of ramping up a company is through the MD & A in the 10 K, annual earnings transcripts, and sell-side report initiation. Try not to let the research team of sell-side equity guide you in the decision. An analyst is almost always “perma Bulls” and they often wrong time how often they are right.
The case studies are less structured (i.e. HF great guidelines to take home but internally the Portfolio Manager decides what they want to give you). The funds will give you a sell-side model so you don’t have to build your own, there is usually enough time for you to build a model (i.e. If they did would be more than a “modeling test” of a case study). Will usually be limited in time so my advice is: try to spend as much time as possible seeking to understand the thesis.
Case studies to bring home are much more common in interviews of hedge funds. Usually you will be assigned a company and asked to give your opinion on it with a scripture written within 7-10 days. There is a frame-work of 4 questions, that I like to follow when writing a case study to bring home:
1. What is the view of consent?
2. What is your perception of variation?
3. How do we get paid (what must happen for the variant perception playing out)?
4. How do you expect to make?