Hedge Fund Manager Meaning

Becoming a hedge fund manager can be very lucrative but comes with long hours of top-notch critical thinking and good decision skills. A bachelor’s degree is necessary for a candidate to become a hedge fund manager. Since these jobs are so competitive, additional certifications and experience may be necessary.

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Job Description

Hedge fund managers are responsible for handling and overseeing hedge fundsHedge FundsA hedge fund is an aggressively invested portfolio made through pooling of various investors and institutional investor’s fund. It supports various assets providing high returns in exchange for higher risk through multiple risk management and hedging techniques.read more. To put it simply, a hedge fund is a vehicle for investment that’s generally organized as an LLC or limited partnershipLimited PartnershipIn a limited partnership, two or more individuals form an entity to undertake business activities and share profits. At least one person acts as a general partner against one limited partner who will have limited liability enjoying the benefits of less stringent tax laws.read more. Hedge funds are composed of high-risk, high-reward investments. It is also one of the lesser regulated investment categories.

Key Takeaways

  • Hedge fund managers manage a pool of investments called hedge funds. These investments are generally high risk, high reward, and need daily hands-on management.Hedge fund managers can earn a high income through the fees they charge. It’s typical for the top hedge fund managers to charge a 2% management fee and 20% performance fees. To become a hedge fund manager, a person needs a minimum of a bachelor’s degree. Hedge fund manager jobs are highly competitive – additional financial certifications can help job candidates stand out.

Hedge funds are much more exclusive than mutual fundsMutual FundsA mutual fund is a professionally managed investment product in which a pool of money from a group of investors is invested across assets such as equities, bonds, etcread more or index funds. They follow a specific investment strategy that the hedge fund manager creates, and the investors agree to. The hedge fund manager (or managers) will monitor the fund to ensure it is hitting its goals.

Typically only the richest and the most knowledgeable invest in hedge funds as several specific requirements have to be met. Some of those requirements are:

  • Be an accredited investorAccredited InvestorAccredited investor refers to a person who has been granted special status under financial regulation laws, allowing him to trade in securities that have not been registered with the regulatory authorities, and it usually involves high-net-worth individuals, brokers, trusts, banks, and insurance companies.read more.Have a personal net worth of more than one million dollars.Have a yearly salary that exceeds $200,000.

Hedge funds can have investments in almost anything. Assets can include stocks, bondsBondsBonds refer to the debt instruments issued by governments or corporations to acquire investors’ funds for a certain period.read more, art, businesses, and real estate.

A hedge fund manager manages their clients’ hedge fund. The manager is supposed to bring in high rewards at minimum risks. Since hedge funds are made up of high-risk investments, the manager is hands-on, monitoring the assets and making investment decisions every day. They spent most of their day evaluating investment models, making changes to them, and incorporating the clients’ requirements so that the investment portfolioInvestment PortfolioPortfolio investments are investments made in a group of assets (equity, debt, mutual funds, derivatives or even bitcoins) instead of a single asset with the objective of earning returns that are proportional to the investor’s risk profile.read more brings great results.

On a daily basis, their duties can include the following:

  • Analyzing investment data to make the most informed investment decisions.Reconciling accountsReconciling AccountsReconciling account is a process to make sure the account’s ending balance is correct. The general rule of accounting is to pass the journal entries first, then to prepare individual ledgers. The accounting ledgers reflect an ending balance tallied by the account’s reconciliation.read more.Communicating with investors.Reviewing and rebalancing investments.Raising capital investmentsCapital InvestmentsCapital Investment refers to any investments made into the business with the objective of enhancing the operations. It could be long term acquisition by the business such as real estates, machinery, industries, etc.read more.Communicating with equity researchEquity ResearchEquity Research refers to the study of a business, i.e., analyzing a company’s financials, performing Ratio Analysis, Financial forecasting in Excel (Financial Modeling), & exploring scenarios to make insightful BUY/HOLD/SELL stock investment recommendations. Moreover, the Equity Research Analysts discuss their findings & details in the Equity Research Reports. read more departments.

Hedge fund managers typically work long hours – almost always around 40 hours per week. A hedge fund manager is compensated liberally because of the generous workload and longer hours.

Salary of Hedge Fund Manager

While it’s hard to find specific data on hedge fund managers’ salaries, the U.S Bureau of Labor Statistics has up-to-date information on the salaries of financial managers, which hedge fund managers fall into.

According to the BLS, financial managers earn, on average, $129,890 per year or $62.45 per hour. Experts forecast that this industry will grow by 15% in the next ten years, which is higher than average growth.

While hedge fund managers fall under the financial manager category, they can earn far more than the average income. Some of the highest-paid head fund managers make as much as $4 billion per year.

A hedge fund manager’s income is directly tied to the hedge fund he deals with. Therefore the better the fund does, the more money they will make. The best hedge fund managers earn money by charging management fees and performance fees. Whole numbers can vary, it’s typical for management fees to be 2% of the fund and performance fees to be 20% of the funds’ profits.

According to data compiled by Zippia, the top three states that provide opportunities for hedge fund jobs are Massachusetts, Rhode Island, and Connecticut. 

How to Become a Hedge Fund Manager

An essential step in becoming a hedge fund manager is earning a bachelor’s degree. However, many employers will specifically look for candidates with master’s degrees or those who have passed the certified public accountant exam.

Hedge fund management jobs are very competitive. Therefore, earning one may mean starting as a junior analyst and then climbing up the ladder until one reaches their desired position. Unless one has personal connections to an owner or upper management at a firm, finding their way in with a part-time job may be the best strategy.

Here’s what a path to becoming a hedge fund manager may entail:

#1 – Earn a degree – The minimum requirement to become a hedge fund manager is a bachelor’s degree. The degree can be in accounting, business, finance, or economicsEconomicsEconomics is an area of social science that studies the production, distribution, and consumption of limited resources within a society.read more. But a few hedge fund managers also work with just certification and no degree.

#2 – Consider certifications– Certifications are usually not necessary but can help one stand out in securing this job. Some certifications to consider are:

  • Chartered Financial AnalystCertified Public AccountantCertificate in Hedge Fund Regulations

Obtaining a certificate can be highly beneficial if the job aspirant lives in a city where job competition is fierce.

#3 – Obtain experience– Next, one needs to obtain experience in a related financial role. They may have to work entry-level trader or financial analyst jobsFinancial Analyst JobsA Financial Analyst is someone who uses the fundamentals of financial analysis to evaluate the company’s position in terms of raising capital in the form of debt or equity, credit ratings, or budging. They are expected to analyze various scenarios, including but not limited to current market conditions, and make intelligent inferences.read more to get the necessary experience to become a real fund manager.

#4 – Apply for jobs – After earning the degree, completing optional certifications, and gaining job experience, a candidate will be ready to apply for hedge fund manager jobs.

The person may have to start at a hedge fund company as a junior analyst and work their way up before they can actively start to manage the fund’s portfolio.

This has been a guide to Hedge Fund Manager and its meaning. Here we discuss the job description, salary and how to become a hedge fund manager. You may learn more about financing from the following articles –

Hedge fund managers decide what to do with a pool of capital on behalf of their investments. They do this by researching, evaluating, and building investment models that can bring higher returns at minimum risks for specific client requirements.

Studies show that the average income of the best hedge fund managers in the U.S is $62.45 per hour. The manager’s income is directly proportional to the performance of their hedge fund. The better the hedge fund does, the more the managers make.

On average, the top hedge fund managers usually work around 40 hours a week. This is a hectic job profile that needs constant monitoring and active engagement. The highest-paid hedge fund managers can even put up to 70 hours a week.

  • How to Get Into Hedge Fund?How To Get Into Hedge Fund?To work in a hedge fund, an individual must fulfill the necessary educational and skill requirements, obtain a master’s degree such as the CFA or CAIA, and gain knowledge of the industry through internships at hedge funds.read moreTop 20 Hedge Fund Interview Questions and AnswersTop 20 Hedge Fund Interview Questions And AnswersThese 20 most-asked questions will prepare you for your hedge fund interview. They’re divided into three categories for your convenience, 1. Basics 2.Structure and 3.Strategy.read moreHedge Fund RisksHedge Fund RisksThe main reason for investing in hedge funds is to diversify the funds and maximize the investor’s returns. However, high returns come with a cost of higher risk since hedge funds are invested in risky portfolios and derivatives, which has inherent risk, and market risk in it.read more