Hedge Fund Risk Managers
Education and Training Requirements
During high school, take classes in business, mathematics, economics, accounting, computer science, history, government, English, and speech.
Most risk management positions require a minimum of a bachelor’s degree in risk management, insurance, accounting, finance, economics, or business. Some hedge fund managers prefer to hire those with a master’s of business administration or a master’s in risk management for upper-level positions. The HF industry is very selective, so you’ll increase your chances of landing a job if you attend a prestigious college and have a high GPA.
The Chartered Alternative Investment Analyst Association offers the Fundamentals of Alternative Investments Certificate Program. In this online, self-paced course, you’ll learn about traditional vs. alternative investments, hedge funds, investment returns and risks, due diligence, risk management, and other topics. Visit https://caia.org/programs/fundamentals for more information. The Institute of Risk Management offers the international certificate in enterprise risk management, international certificate in financial services risk management, the digital risk management certificate, and the international diploma in enterprise risk management to applicants who pass examinations. Visit https://www.theirm.org/qualifications for more information.
Other Education or Training
RIMS—The Risk Management Society offers "hands-on" workshops that will help participants stay up to date on practices and developments in risk management. Recent workshops included Contractual Risk Transfer, Applying Enterprise Risk Management Theory, and Risk Assessment Methods. The Global Association of Risk Professionals and the Public Risk Management Association also provide professional development opportunities.
Certification, Licensing, and Special Requirements
Certification or Licensing
You do not have to be certified to work in the hedge fund industry, but becoming certified will allow you to stay up to date on developments in risk managements practices. It will also be useful if you plan to work in other industries, where certification is more important. Here are two popular certifications for risk managers:
- The financial risk manager designation, which is offered by the Global Association of Risk Professionals, is geared toward risk managers, chief risk officers, senior risk analysts, managers of operational risk, and directors of risk management. See http://www.garp.org/#!/frm.
- The RIMS-certified risk management professional designation, which is offered by the RIMS—the risk management society, is geared toward risk managers at any point in their careers. See http://www.RIMS.org/certification.
Some firms seek risk managers who have the chartered financial analyst credential, which is administered by the CFA Institute (https://www.cfainstitute.org/en/programs/cfa).
Experience, Skills, and Personality Traits
To become a risk manager, you’ll need approximately 10 years of experience in lower-level risk management positions or in other hedge fund careers. Risk associates must have a year or two of experience (a combination of an internship, co-op, or part-time job) in a risk management position at an alternative investment firm or a corporation.
Risk professionals need excellent communication skills in order to effectively present and explain risk assessment reports. They also need confidence, intellectual curiosity, and independence in order ask the hard questions that may “rock the boat,” but help their firm avoid major risk areas. Risk professionals should have strong quantitative skills and the ability to use risk management software. Other important traits include leadership abilities, strong analytical and problem-solving skills, and a thorough understanding of a variety of trading products (e.g., options, fixed income, mortgage backed securities, swaptions) and options risks (e.g., delta, gamma, Vega, rho, and theta).