Almost all hedge fund interviews will always consist of an in-house modeling test.  Hedge funds want to see your ability to understand how a financial model works: it is very important because day in-day out you’ll be building various financial modeling scenarios to understand fundamental effects on companies.

Most investment banking analysts are very familiar with Merger Models and Leveraged Buyout Models, but neither will be tested during Hedge Fund interviews.  In fact, unless you’re working in merger arbitrage there is a good chance you will never work a Merger Model or an LBO model on the buy-side.

All modeling tests will be timed and given in the hedge fund’s office.  These models will vary a lot by fund but will test your knowledge on how to work 3-statement standalones, how an Income Statement works,  how to balance the Balance Sheet,  how to construct a Cash Flow, and  how to build a debt pay-down table.

Modeling tests might also test your knowledge on building out revenue drivers.  Hedge fund analysts will build out their own earnings projections, so understanding how to build out income statement estimates is very important.

I learn best by repetition: doing things over and over again until I get it perfected.  When I was an investment banker interviewing at Hedge Funds I would constantly be pushing myself to build my 3-statement standalone model as accurate and fast as possible. Practice makes perfect.