As alternative investments like hedge funds, private equity, and venture capital gain popularity, interview questions about them have become increasingly common. Having good answers prepared can help you stand out in finance interviews, especially for investment analyst or portfolio management roles. Here are some tips for how to best answer questions about alternative investments.
Understand the different alternative asset classes
The most common alternative asset classes are hedge funds, private equity, venture capital, real estate, infrastructure, commodities, and derivatives. Know the key features, risks, and return profiles of each one. Understand how they differ from traditional stock and bond investing. Be able to articulate why institutional investors allocate to alternatives.
Highlight relevant coursework and readings
Interviewers want to see you have academic exposure to alternative investments. Mention classes you’ve taken that covered these topics like Alternative Investments, Hedge Funds, or Private Equity. Discuss books or papers you’ve read about the industry. Demonstrate intellectual curiosity about the space.
Prepare 2-3 examples of how you value alternative investments
Be ready to walk through how you’d value a hedge fund, private company, or other alternative asset. Understand valuation methods like comparables, DCF, multiples. Have a framework for assessing opportunities and risks. Use cases from internships or classes if possible.
Link alternatives to your investment philosophy
Explain why you are personally interested in alternatives and how they fit into your broader investing approach. Do you favor absolute return strategies to manage risk? Seek access to fast-growing private companies? Believe active management adds value? Anchor answers to your core beliefs.
Ask thoughtful questions
The interview is a two-way street. Have smart questions prepared that show your interest in their alternative investment activities. Ask about the types of strategies they invest in, due diligence process, portfolio construction approach, and risk management. Thoughtful questions make a strong impression.
Preparing strong answers about alternative investments can give you a competitive edge in finance interviews today. Do your homework on the major asset classes, valuation methods, and portfolio impacts. Link alternatives to your personal philosophy. Ask smart questions that show genuine interest and intellectual curiosity.