I personally have previous experience working at a hedge fund in Boston.

As an advisor now, I'm seeing a surge in career consultation requests for asset management, hedge funds, and the recently prominent HFT (High-Frequency Trading) industry.

From my experience, I highly recommend the buy-side industry as it offers not only attractive compensation but also an intellectually stimulating environment where you can develop expertise!

However, hedge funds and HFT are often mistakenly viewed as the same thing.

While both operate in financial markets and may appear similar on the surface, there are fundamental differences in their revenue structures and business models, which lead to significant differences in the type of talent and skill sets they require.

Today, I will explain in detail the characteristics and differences between hedge funds and HFT.

# Differences in Revenue Structure between Hedge Funds and HFT
While hedge funds and HFT both pursue profits in financial markets, there are fundamental differences in their revenue structures. The biggest difference is that hedge funds participate in markets as investors, while HFT firms serve as market makers.

What is a market maker?
Market makers are crucial entities that provide liquidity to financial markets. They continuously quote both buy and sell prices for specific financial instruments, creating an environment where market participants can trade smoothly.

The essence of HFT's business model can be summarized in these 3 points:

1. Ultra-high-speed Arbitrage Trading
- Installing order servers near exchange mainframes (colocation)
- Achieving ultra-high-speed trading at millisecond and microsecond levels
- Capturing price differences between multiple markets instantly for profit

2. Market Making Activities
- Providing bid-ask quotes in place of traditional market makers
- Earning revenue from the bid-ask spread (difference between selling and buying prices)
- However, unlike traditional market makers, they don't have special obligations

3. Advanced Algorithm Utilization
- Automated trading using computer programs
- Capturing minute price movements in the market for frequent trading
- Controlling everything through algorithms, including risk management

HFT's profitability is very stable. This makes sense because their operations are essentially front-running short-term trades, which are theoretically designed to be consistently profitable.
Let's look at the business model of U.S. online broker Robinhood as a specific example.
Robinhood attracted many retail investors with their revolutionary zero-commission service. Their revenue source came from selling retail investors' order information to HFT firms.
For example, when a retail investor places an order to buy 100 shares of Toyota at 100 yen, HFT firms who receive this information would buy the same shares at 99 yen in the market, then place a sell order to the retail investor to profit from the difference.
This business model has faced much criticism, particularly regarding:
- The issue of "front-running" by exploiting timing differences across multiple markets
- Concerns about market fairness and transparency
- Potential to trigger sudden market fluctuations (flash crashes)
Despite various issues, HFT makes significant contributions by providing liquidity to markets. As investors know, markets without liquidity (where you can't buy at your desired price when you want to buy) see dramatically reduced investment appetite, ultimately leading to significant declines.

Hedge Fund Revenue Structure

So how does the hedge fund revenue structure work?
Hedge funds' revenue structure fundamentally creates value through "investment." They identify price inefficiencies in the market and develop business models that generate profits from these fluctuations.
Specific revenue sources include:
1. Capital Gains
They find market inefficiencies and profit by buying undervalued assets and waiting for price increases (long positions), or selling overvalued assets and waiting for price decreases (short positions). Holding periods can often extend from several weeks to several years.
2. Management Fees
They typically receive two types of fees from investor assets:
- Management fee: 1-2% of assets under management (annual)
- Performance fee: About 20% of profits
The key characteristic of this revenue structure is that "prediction" and "judgment" about market direction are crucial elements. They pursue profits by predicting market movements and taking positions based on these predictions.
In other words, what they do is not much different from retail investors.
The basic flow of making predictions based on thorough analysis and following through with investment decisions doesn't differ significantly whether you're a retail or institutional investor.

However, hedge funds undoubtedly have advantages in their investment environment, including access to abundant information sources, detailed market analysis reports from securities firms and banks, and precise understanding of supply and demand trends.
Though, like myself, they often primarily use Google searches to research companies and markets, with sell-side (securities/banking) information serving mainly as supplementary material.

How to Get Into Hedge Funds and HFT?

In conclusion, I recommend learning tech to enter either hedge funds or HFT. While many hedge funds still engage in traditional management - that is, medium to long-term investment based on fundamentals analysis - where finance knowledge might be more important than tech skills.
However, there have been recent changes in hedge funds.
Since hedge funds use investment methods similar to retail investors, as mentioned earlier, finance and accounting skills/knowledge are highly valued. This is why many employees come from investment banking, securities research divisions, or hold MBAs.
On the other hand, HFT firms are almost entirely comprised of engineers.
This is because their business model involves completely automated computer trading, instantly providing optimal prices for retail investor orders and repeating this at high speeds. HFT firms like Citadel, Jane Street, and DE Shaw primarily hire those with master's or doctoral degrees in computer science or financial engineering.
However, demand for technology talent is also increasing in hedge funds. Even in traditional long-short investing, technology-driven analysis and investment strategy development have become essential.
Therefore, I recommend pursuing graduate studies in technology for those considering careers in hedge funds or HFT. While the required depth of expertise varies depending on your target sector, technology knowledge will definitely be valuable.
But how can those without programming backgrounds acquire technology skills and pursue hedge fund careers through graduate or doctoral programs? Is there a path for this?

Why NYU Tandon Bridge Program is Perfect for Those Aiming for Tech-Focused Financial Institutions

Why Tech Skills are Necessary in Tech-Focused Financial Institutions

As mentioned earlier, technology has become an essential element supporting the core business of both hedge funds and HFT. Particularly in HFT, 80-90% of organizations consist of technology talent, and the business cannot function without engineering skills.
Even in hedge funds, there is increasing demand for tech talent in the following areas:
- Data Analysis: Processing market data and alternative data
- Algorithm Development: Automating investment strategies
- Backtesting: Verifying investment strategies
- Machine Learning: Building prediction models

With growing demand for tech talent from both hedge funds and HFT, what should someone who has no programming experience do?
This is where I recommend the NYU Tandon School of Engineering's Bridge Program.
This program has become an attractive option not only for those in finance but also for anyone looking to pursue a career in tech without prior experience.

Program Features:
NYU Tandon Bridge is designed for non-tech professionals (Non-STEM backgrounds) who want to enter graduate programs in computer science, data science, and engineering.
The program has the following characteristics:
- Completely online
- Very reasonable cost at $1,850
- 24-week (or 28-week) curriculum
- Students with excellent performance can apply to NYU MS Computer Science and other master's programs without GRE
- Instruction from top university faculty

The most distinctive feature is that it serves as "the fastest route to a Computer Science graduate program." If you complete the Tandon Bridge Program with excellent grades, you can apply to NYU CS without taking the GRE.

Typically, applying to Computer Science programs requires prerequisites in programming and mathematics. This has been a significant barrier for people without tech backgrounds. However, through the Tandon Bridge Program, you can become eligible to apply for CS graduate programs. Moreover, if you achieve excellent grades, you can seamlessly progress to NYU CS!

This is an enormous advantage for those without tech backgrounds.
With a master's degree in Computer Science, you can potentially enter hedge funds or HFT firms.

However, the essay is crucial for the Tandon Bridge Program.
The Tandon Bridge Program generally doesn't require letters of recommendation or tests. Therefore, test scores like GRE, TOEFL/IELTS are not necessary. However, an essay is required for the application.

Since the Tandon Bridge Program is not just an online course, you need to be properly accepted by admissions through this essay. That's why before applying to the Tandon Bridge Program, come to Alpha and let's thoroughly prepare your application.

Some people actually apply on their own and get rejected. To avoid this, let's start preparing early!

Summary

Today's insights can be summarized as follows:
- Hedge funds and HFT have similar but fundamentally different revenue structures
- Both hedge funds and HFT are seeking tech talent
- For those without programming and math backgrounds, the NYU Tandon Bridge Program is recommended
- The career path of Tandon Bridge Program → NYU CS → hedge fund/HFT is realistic

If you're aiming to work at hedge funds or HFT firms, I recommend first enrolling in the NYU Tandon Bridge Program. Since this program is 100% online, you can take it while working in Japan. It's perfect for those seeking a career change!

However, you must pass a rigorous admission process.
While letters of recommendation and tests aren't required, you need to submit an essay. Let's aim to get accepted into the Tandon Bridge Program by making your essay stand out significantly!