Alternative investments interviews are becoming increasingly common as the alternative investment industry continues to grow. To successfully get a job in alternative investments, it’s crucial to understand the core concepts that drive the alternative investment industry and be able to articulate your knowledge during the interview process. This article will provide an overview of key alternative investment concepts and example questions you may be asked related to alternative investments during job interviews.
Common alternative investment strategies
Some of the most common alternative investment strategies include hedge funds, private equity, venture capital, real estate, commodities, and managed futures funds. Within each strategy there are more specific sub-strategies – for example, hedge funds encompass strategies like long/short equity, event driven, relative value, and more. Understanding the objectives, mechanics, risks, and historical performance of these various strategies is fundamental.
Structures for alternative investments
Many alternative investments utilize investment structures like limited partnerships and limited liability companies. Becoming familiar with how these structures work, how funds are raised, the incentives created, and the lifecycle of a typical fund will help demonstrate your understanding.
Valuation methodologies
Because many alternative investments are not traded on public exchanges, specific valuation methodologies must be employed to determine their value. These include methodologies like comparable company analysis, discounted cash flow modeling, net asset value calculations, and more. Being able to explain these methodologies is key.
Risk management
Managing risk is central to most alternative investment strategies. Understanding risk management concepts like position sizing, hedging, diversification, risk attribution, scenario analysis, and risk modeling is imperative.
Fund due diligence
Conducting due diligence on alternative investment managers involves evaluating their investment strategy, risk management approach, operations, fees, and historical performance in detail. Being able to articulate what should be focused on during a due diligence process demonstrates you grasp diligence best practices.
Current trends
Keeping up with the latest developments and trends in the alternative investment space – such as growth in private credit strategies, adoption of technology, focus on ESG factors, and more – shows you have your finger on the pulse of the industry.
In interviews for alternative investment positions, expect questions that assess your knowledge of key alternative investment concepts. Preparing by studying various alternative asset classes and strategies, structures, valuation approaches, risk management techniques, due diligence practices, and latest industry trends will help you highlight your understanding and land the job.