What are hedge funds?

What do MBAs do at hedge-funds?

• I have read/heard that hedge-funds are one of the most sought after places for MBA grads or investment bankers (both of whom more or less have the same profile). However I have also heard that hedge-funds make money via trading, which would require either advanced quantitative skills or market intuitions. However I do not see B-schools or IBs instilling such skills in their students/employees. Sure there is some maths in a MBA program, but that cannot the compared to the one at a MFE or PhD program. Furthermore neither IBs or B-schools give exposure to markets. So why are hedge-funds so much sought after and what exactly do MBAs do there? I understand that my knowledge of hedge-funds is rather limited, but this is what I understand after reading articles/blogs/quora posts. I may be completely wrong in my understanding of hedge-funds; please correct me if that is the case.

• Answer:

  I just read Stanford recent placement/employment statistics for 2015 batch, whose students are the most sought after by financial sercices industry in general and Private Equity/Hedge Funds/LBOs etc besides the traditional investment banks. These donot include corporate finance roles. 2015 Batch has witnessed about 9 percent increase in pay over last batch and the mean pay for 2015 batch is whopping 165K or thereabouts. The skewing of such exhorbitant mean pay has been attributed to high pay offered by hedge funds like around 200K , as the next best industry offering is by Consulting around 130k to 140K. No doubt Consulting industry has not been able to attract so much from top B schools. This should give you an idea why such school students are in high demand by hedge funds etc. No doubt hedge funds employ high quants traders. But it is only one side of it. Hedge funds dont stop with trading alone. Their core structure is different, complex strategies woven around different spell binding ideas developed by each of these successful recruits. Hedge funds' basic philosophy is maximising return not simple returns but on risk adjusted basis. Hedge funds strategies are highly secretive, confidential and privy and not accessible to everyone.  My daughter who is in her second year MBA is assisting her professor on a project funded by a hedge fund in Australia, as to a currency trading strategy, which she cannot disclose in detail to me but gave me an outline, which involves exhaustive research/financial modelling/backtesting and so on. This is just to give an example of her RA activity.