If talk of a looming recession makes you jittery about a career in finance, then duck behind a hedge. A hedge fund.

Dr Chris Jones, the chief investment officer at Key Asset Management, a hedge fund of funds, and a teaching fellow at Judge Business School in Cambridge, says that hedge funds are a good bet. In particular those hedge funds or funds of funds [funds that invest in hedge funds] that concentrate on activities likely to thrive in a crash. “There will be an increase in interest in distressed investments and credit. This is an area that has been quiet because things have been so damn good, they are likely to come into their own now and generate solid returns,” Jones says.

Hedge funds, high-risk investments that guarantee an absolute return, have been around since 1949. It is only in the past five to ten years, on the back of reports of high earnings, that they have become desirable career destinations. But how do you cut it in this financial niche?

Jones says that “hedge-fund managers come from all sorts of backgrounds and because they work for small boutique firms [hedge funds typically employ less than 150 people] they need to hit the ground running and add value from Day 1. Often people come from relevant financial backgrounds in investment management, trading or risk management. Funds also hire people from graduate and postgraduate courses,” Jones says. “A masters in finance is the most relevant course. There is no masters in hedge-fund management, nor would you want one. It is more useful to learn about the general issues in fund management rather than anything specific to hedge funds. You want to learn about the techniques, mechanisms and jargon used in the business.”

One London Business School (LBS) masters in finance graduate, who doesn’t want to be named, says that the course helped him to switch from working in real estate to hedge fund commercial mortgage-backed securities but that it doesn’t greatly influence his day-to-day work. Helena Fernande, an associate director in the career services at LBS, says that a few people with very specific specialist backgrounds go directly into hedge-fund work, but that for most it is a two-step process via investment banking or consulting.

A masters in finance or an MBA may be a good educational basis for those people who want to be involved in running or designing fund-management strategies, but for the more quantitative research roles, courses such as a masters in financial engineering might have more value, according to David Thesmar, an associate professor of finance at HEC School of Management’s BNP Paribas Hedge Fund Centre in Paris.

“Hedge funds are small entrepreneurial firms that exploit very risky but very profitable niches in their target market,” he says. To do this they need “quants” with statistical modelling knowledge to figure out which niches will generate the most profit. “Quants are not dead, I predict we will need more. The huge losses this summer [attributed to a reliance on quantitative research] were a blip.” He says that the real risk to hedge funds is that their success could cost them their small-company edge as many evolve into ever larger asset-management firms.

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