How to Interview a Hedge Fund Manager: First Call Tips (Part 1)

You have done your homework. You read the DDQ, you looked at the presentation, you reviewed the monthly letters, and the numbers did not scare you away. Now what?

Now you pick up the phone. Chapter 5 of Frank Travers’ book is about the initial interview, the first real conversation you have with a hedge fund manager. And here’s the thing, this call can tell you more about a fund than a hundred pages of documents ever will.

Setting Up the Call

Travers keeps his initial calls short, around 30 to 40 minutes. Why? Because he already did his research. He does not waste time asking questions he could have answered by reading the materials the fund sent over.

Before the call, he sends an email outlining what he wants to cover and how long the call will take. Simple, professional, keeps everyone on the same page.

The goal is not to learn everything. The goal is to figure out if this fund deserves more of your time. If the initial call goes well, it moves to the next stage, which is deeper quantitative analysis.

What to Cover in the First Call

Travers lists four main discussion areas for the initial conversation:

1. Key investment professionals - who are they, what is their experience, how do they work together
2. Process - how does their investment process work, and why should it keep working
3. Risk controls - what are the rules, and who enforces them
4. Performance outliers - targeted questions about periods where performance was extremely good or extremely bad

That last one is interesting. Most people focus on the good periods. Travers wants to understand the bad ones too. That tells you a lot more about how the manager actually operates under pressure.

Phone Interview Basics

Face-to-face meetings are better for obvious reasons. You can read body language, see facial expressions, pick up on tone. But phone interviews are more efficient. They save time. And in the early stages, efficiency matters.

Travers has some practical rules for phone calls. Keep the number of participants small. Avoid conference calls where everyone is dialing in from different locations, those tend to get messy. Ideally, have everyone sitting at their desk on a landline. Cell phones work but people get distracted when they are walking around.

And here is a key point: Travers wants to control the flow of conversation, but he wants the manager to do most of the talking. You are there to listen, not to show how much you know.

Ten Interview Tips That Actually Matter

The book lays out ten tips for conducting interviews. Let me summarize them because they are surprisingly good, not just for hedge fund analysis but for any interview situation.

1. Do your homework. Know who you are talking to and understand their strategy before the call starts. This lets you spot follow-up opportunities and ask better questions.

2. Do not answer your own questions. Let them talk. Resist jumping in. Travers says he often gets the best information when people ramble a bit.

3. Be quiet. This one is hard for most people. Ask your question, then stop talking. People are uncomfortable with silence and will keep talking to fill it, often revealing things they would not have said otherwise.

4. Ask questions out of order. Hedge fund managers have done hundreds of these calls. They have scripts. Mix up the order to get them off their rehearsed answers.

5. Do not let them dodge questions. If they change the subject or give you a non-answer, ask it again. Do not be shy about pointing out that they did not actually answer your question.

6. Be flexible. Do not stick rigidly to your list. Sometimes the conversation takes an unexpected turn and that turn leads to the most important question you could ask.

7. Ask open-ended questions. Vague questions reveal how managers think. The way they interpret and answer a broad question tells you a lot about their mindset.

8. Always ask “why.” Even if you think you know the answer. Sometimes the response will surprise you.

9. Ask for fresh examples. Do not let them walk you through the examples from their presentation. Ask for new ones. Take them off script.

10. Ask what they do badly. Everyone loves talking about wins. Ask about mistakes, failures, and areas where they need improvement. Then ask for examples of those too.

The Mock Interview: Fictional Capital Management

To make this chapter practical, Travers includes a full interview transcript with the fictional fund FCM. This is where the book gets really interesting because you can see these tips in action.

The interview is between Travers (FT) and Jaime Wernick (JW), one of FCM’s co-founders. And throughout, Travers adds his internal commentary in italics so you can see what he is thinking as the conversation unfolds.

Digging Into Their Past

Travers starts by asking about GCH, the firm where both Jaime and his partner Ted worked before starting FCM. This is smart. Before evaluating what they do now, he wants to understand where they came from.

Here’s what he learns: GCH was founded as a long-only value shop that transitioned into hedge funds in the 1990s. Jaime and Ted started as analysts, worked under two different portfolio managers (both of whom left), and eventually became co-portfolio managers themselves.

But here’s the problem: the PM role at GCH had a revolving door. Three different managers in less than ten years. Travers notes this as a potential red flag.

The founder, Jonah, was a great long-only analyst and an excellent marketer. But he did not really understand the long/short business and was apparently tough to work for. Jaime and Ted eventually left because Jonah would not give them equity in the firm. They were getting paid a salary and discretionary bonus but had no ownership stake despite running the fund.

So they launched FCM with just $10 million, half their own money and half from friends and family. Travers notices this is small for a hedge fund launch, especially considering they had managed $600 million at GCH. But it turns out they had signed a non-compete clause and those clients were loyal to Jonah anyway.

Strategy Differences Between GCH and FCM

This part reveals something important. At GCH, influenced by Jonah’s buy-and-hold approach, they ran lower gross exposure (100-120%) with a strong long bias (60%+ net). At FCM, they run higher gross (around 150%) with net exposure in the 40-50% range. Turnover is also higher at FCM, around 2-3x, with the short book turning over more frequently.

So they adapted their approach once they were on their own. That is not necessarily a bad thing, but Travers wants to understand what is genuinely theirs versus what was Jonah’s influence.

The 2008 Question

Travers probes their behavior during the financial crisis. The data shows FCM took net exposure down dramatically in 2008, going as low as 2% at one point. For a fund that claims to be bottom-up, this was a strong macro call.

Jaime’s answer is interesting: it was both bottom-up and top-down. Their fundamental work was showing fewer conviction longs in the pipeline. At the same time, they could not ignore the macro environment. They even proactively told investors they were getting nervous and would be reducing exposure.

Travers is checking their story against the actual exposure data in real time. The numbers confirm what Jaime is saying, long exposure declined from 100% in January 2008 to 63% by August.

Stop-Loss Rules and Decision Making

Here is where the interview gets really revealing. Travers asks about their stop-loss rules. FCM has a strict 20% stop-loss on shorts but no formal stop-loss on longs. The reasoning: they want to give value longs time to work out.

But here’s the thing, when Travers asks if the 20% is from purchase price or peak-to-trough, Jaime hedges his answer with “I believe.” Travers flags this immediately in his notes. A portfolio manager should know exactly how their own stop-loss works.

Then comes the question about decision-making authority. The DDQ says Ted makes all buy and sell decisions. But Jaime says they make those calls together. When pushed, Jaime clarifies that Ted is the final decision maker, but that everything gets discussed first. This discrepancy between written materials and verbal answers is exactly the kind of thing these calls are designed to uncover.

Employee Compensation and Retention

The last section of this part covers how FCM pays its team. They offer “shadow equity,” which is a share of profits without actual ownership. Last year they paid 7% of net profits to their three non-partner employees.

Travers does quick math in his head: with $222 million in average AUM and a 10% gain, that is roughly $22 million in gains. A 20% performance fee means $4.4 million for the firm. 7% of that is about $311,000 split three ways, so roughly $100k per person on top of base salary.

The really sharp moment comes when Travers asks: “Are you doing to them what Jonah did to you?” Jaime had just explained they left GCH because they had no equity. Now his own employees have shadow equity but no real ownership. Jaime says it is different because the analysts support them rather than running the fund. Maybe. But it is worth watching.

What Makes This Chapter Useful

The real value here is not just the tips list. It is watching Travers apply those tips in real time. You can see him jumping between topics (tip #4), staying quiet to get more information (tip #3), pushing back when answers do not match the documents (tip #5), and doing mental calculations while the conversation is happening.

The initial interview is a filter. You are not trying to learn everything. You are trying to figure out: does this fund deserve more of my time? And if the answer is yes, you now have a list of threads to pull on in the next round.

In Part 2, we will continue the interview transcript where Travers digs deeper into FCM’s investment process, their portfolio management tool, and how they actually pick stocks.

Previous: Chapter 4: Data Collection (Part 2) Next: Chapter 5: Initial Interview (Part 2)