Why not work for a hedge fund instead if you’re passionate about investing (private equity)? (1 min)

The key here is to emphasize your interest not only in investing, but also in learning more about business strategy and being more hands on with the direction of portfolio companies. As the owner of a company as opposed to a minority investor, you have almost complete control and can help determine which growth strategy to pursue and which segments or geographical markets to expand in.

You can also be heavily involved in improving margins and efficiency, and apply best practices in the areas of finance, accounting, and IT. You also have the ability to monitor and incentivize management closely and even make staffing changes or additions in senior management if it will improve the organization.

The financial engineering and modeling also is more sophisticated in PE than in hedge fund, and it can be a great way to learn about different debt and capital structures and how they can enhance returns.

Finally, as a long term owner for a period of around 5 years, you will be invested in the long term direction of the company rather than short-term results, and it can be more satisfying to see the tangible results of your work.

Hedge funds, on the other hand, are more focused on the short-term, and while they have the ability to buy and sell stocks very quickly, they will not have as much emphasis on long term results. Furthermore, although hedge funds may win themselves a seat on the Board of Directors and gain voting power, they do not have complete control like PE firms and cannot redirect the company’s strategy at will. Therefore, with the exception of activist hedge funds, the focus is more on buying low and selling high rather than improving the company.