With the growing interest in alternative investments such as private equity, venture capital, hedge funds, managed futures, and real estate, investment firms are increasingly looking for candidates with knowledge and experience in this area during the recruiting process. As a candidate, you need to be prepared for alternative investment-related interview questions that aim to assess your conceptual knowledge as well as hands-on experience. This article provides an overview of key considerations around alternative investments interviews and some sample questions you may encounter.
Understand the firm’s alternative investment strategies and products
Thoroughly research the specific alternative investment funds, products and strategies of the firm you are interviewing with. Understand how they fit into the firm’s overall offerings and what niche they serve. Be prepared to discuss specifics around investment style (e.g. equity long/short), targeted returns, fee structure, liquidity terms, sector/geographic focus, risk management approach, and investor base. Asking informed questions about the firm’s alternative investment offerings shows genuine interest.
Review alternative investment concepts and trends
Brush up on key alternative investment concepts, recent trends and current issues. Know the difference between the major alternative asset classes, their risk/return profiles, liquidity considerations, and correlations with traditional assets like stocks and bonds. Be aware of latest developments such as growth in private credit, emerging managers, retail alternative investments, and technology infrastructure. Peruse industry trade publications, conference materials, and thought leader websites to immerse yourself in current topics.
Prepare for technical questions on valuation, risk management, and due diligence
Many alternative investment interviews involve technical questions gauging your understanding of topics like asset valuation (especially illiquid assets), risk measurement, portfolio optimization and due diligence. For private equity, know valuation methods like comparables, precedent transactions and DCF analysis. For hedge funds, review risk metrics like VaR, portfolio beta and exit strategies. For real estate, brush up on cap rates, NOI and lease types. The key is being able to articulate your thought process and analysis framework, not necessarily memorizing formulas.
Have deal examples and investment cases ready
Come armed with at least one, preferably two or three deal examples – either from previous work experience, internships, or classroom case studies. Be prepared to walk through the investment thesis, valuation analysis, structuring, execution, and performance. Have the numbers and figures at your fingertips but focus more on the qualitative insights. Interviewers want to understand your investment decision making process. If you have limited experience, use academic case studies and discuss how you would approach the deal from sourcing to exit.
Ask smart, thoughtful questions
Always prepare 2-3 thoughtful questions to ask at the end of the interview. For alternative investment roles, you can ask about investment philosophy, approach to manager selection, growth strategies, competitive differentiation, investor base, team dynamics, or career progression. Avoid generic questions easily found online. Demonstrate genuine interest and intellectual curiosity relevant to that specific firm.
To maximize chances of success in alternative investment interviews, thoroughly research the firm, brush up on concepts and trends, prepare technical examples, and ask insightful questions. Showing command of both theory and practice is key.