Who is a Hedge Fund Manager?
A hedge fund manager is an individual or a firm who manages and controls the hedge fund’s operations and executes rational investment decisions. Building a hedge fund career can be a lucrative option as it offers excellent potential and extremely profitable rewards. The key to being a successful hedge fund manager is considering sharply defined goals, investment strategies, sufficient capitalization, risk management strategies, and a precise sales-marketing plan.
Qualifications of a Hedge Fund Manager
A hedge fund manager is an individual or financial establishment that employs analysts and professional portfolio managers to initiate hedge funds. Hedge fund managers focus on a specific investment strategy to help fund the portfolio’s mandate. Also, hedge fund managers earn more than an average compensation, which comes from the hedge fund industry’s predominant fee arrangement, the 2-and-20 fee structure.
- About all financial firms require at least a bachelor’s degree in Business Administration, Finance, or Accounting. Since several companies prefer a master’s degree, it would be beneficial to have relevant statistics and math coursework to help take up a master’s program.
- It is essential to have well-developed skills in hedge funds, financial analysis, and stock investments. Internships help gain hands-on experience in the field and build a strong network with qualified professionals.
- Even though it is preferable to have a master’s degree, it can be selected as an additional qualification while seeking job opportunities.
- Obtaining additional certifications can strengthen competitiveness, bridge the gap between knowledge and skills, exhibit credibility and commitment, and jumpstart one’s career.
- Some hedge fund managers have started their careers by applying to entry-level positions, traders, or personal investors. This background and experience develop management skills and foster one’s expertise in managing a hedge fund.
Responsibilities of a Hedge Fund Manager
- The hedge fund manager is accountable for making wise investment decisions for the investors’ capital to meet the required net worth of investments. A hedge fund manager’s daily life involves constantly observing the market, evaluating the assets, and conducting research and sales work.
- Hedge funds involve high-risk portfolios that are actively traded, need close monitoring and day-to-day management.
- A hedge fund manager is solely responsible for carrying out hedge funds daily, like rebalancing investments to maintain the risk-reward ratio, raise investment capital, etc. Hedge fund managers are supported by traders and analyst teams who conduct necessary research and execute it.
- The hedge fund manager is responsible for supervising the investment portfolios.
- A Hedge fund manager can be compared to an exchange-traded fund manager or a mutual fund manager.
Mutual fund vs. Hedge fund
Let us understand the basic difference between mutual fund vs hedge fund.
- Institutional fund managers maintain mutual funds, and they offer several options for institutional and retail investors, while the hedge funds target only high-net-worth investors. Further, they need the investors to meet the expected accredited requirements.
- Mutual funds are highly regulated investment portfolios that are offered to the public for daily trading. On the other hand, hedge funds are private investments that are offered only to accredited investors and use high-risk investing strategies, with the primary goal of achieving greater returns for their investors.
How much do Hedge Fund Managers Make?
- A hedge fund manager manages a specific hedge fund or a particular portion of it. The fund management features overlooking a pool of investments with less regulation than traditional investment methods like mutual funds.
- Hedge fund managers bank on market opportunities, and simultaneously, they balance the high-risk portfolio, which gives a higher return rate. These demanding hours of job and high stress reflect the hedge fund manager’s salary, where the top hedge fund managers earn billions a year.
- The fee arrangement for hedge fund managers is two-and-twenty, which is standard in the hedge fund industry. Hedge fund management companies charge their client management and performance fees.
- Two implies 2% of AUM (assets under management), and the hedge fund manager charges the annual management fees for managing their assets. Twenty suggests the incentive fee or a standard performance of 20% of the fund’s profits over a certain predefined period.
- A hedge fund manager’s salary is based on several factors, including the type of investors, the value of investments, the compensation agreement, and the funding firm’s size. In some investment firms, hedge fund managers have total control over the amount they charge.
- A hedge fund manager earns $64,772 per year; some salary ranges from $14,000 to $176,000 a year.