Hedge Fund Careers

What is a Hedge Fund Manager?

A hedge fund is an investment structure that’s organized as either a limited partnership or a limited liability company with the goal of earning maximum profit for high net worth individuals or investors. Each hedge fund is set up by a money manager known as a Hedge Fund Manager. Hedge Fund Managers primarily make decisions about the operation of the hedge fund, and they oversee the daily activities of the fund. They define investment strategies as well as risk management strategies. Hedge Fund Managers also oversee capital management and implement marketing plans.

A major job of a Hedge Fund Manager is to find investors. Individuals and companies who want to invest in a hedge fund must meet income requirements. Because of the large amounts of money that’s invested in the fund and the aggressive nature of the investment strategies, Hedge Fund Managers face much pressure to ensure optimal fund performance of the hedge funds they manage. They “hedge” their bets that their funds will provide a large return to their investors.

 

What is a Hedge Fund Manager Responsible For?

Hedge Fund Managers research different investments and decide which ones will bring the most return on investment to the funds they manage. They must market their services to acquire new clients who qualify to invest with them. They then must educate their clients so that they understand the investment vehicles and strategies as well as the risk involved in the hedge fund.

Hedge Fund Managers must meet strict regulations outlined by the Securities and Exchange Commission (SEC). Regulations include how the fund acquires new clients and the daily management of the fund. Hedge Fund Managers are accountable to the hedge fund’s directors and investors and also to regulators and legislators.

Hedge Fund Managers can expect to work at any of the following tasks:

•    Research stocks or funds and evaluate for maximum return on investment
•    Develop deep knowledge of hedge fund strategies
•    Marketing activities
•    Idea generation
•    Make on-site calls to investors and other financial managers
•    Investigate qualified individuals and companies as potential clients
•    Develop proposals for potential clients
•    Analyze current investments for earnings success
•    Prepare reports for existing clients
•    Continue education and licensing activities
•    Compliance activities

 

To be successful as a Hedge Fund Manager, prospects will need to develop the following skills:

•  Strong Analytical Skills. Hedge Fund Managers must evaluate possible fund investments for multiple clients and how their decisions will affect the financial assets of those clients. They must be able to review all prospective pros and cons of every fund and then convey its value to possible investors. They must analyze their clients’ investments within the context of legal and government regulations. Finally, they must manage clients’ investments with their eyes on maximum return on investment.
• Communication and Presentation Skills. Hedge Fund Managers are responsible for providing detailed and sometimes complicated financial information to their clients, prospective clients, and board members and department directors. Clients will make decisions regarding the risk and return on various investments, so the Hedge Fund Manager must be able to clearly convey the information to the client. Additionally, to market their skills as a qualified and successful Hedge Fund Manager, Hedge Fund Managers must create and present reports and graphs showing the details of client investments.
• Organizational Skills. Hedge Fund Managers must have strong domain knowledge as well as consistency and accuracy in review of the funds. Deep investment knowledge and analyzation of existing and upcoming stock opportunities require strong organization of portfolios and client histories.

 

Where Do Hedge Fund Managers Work?

Hedge Fund Managers work for small and large investment firms. The firms they work for manage domestic and global investments for clients ranging from corporate funds, pension funds, central banks, real estate investors, and governments. Hedge Fund Managers also work at large banks, and they manage funds for government entities.

 

What Other Career Options are Available to Hedge Fund Managers?

A few career options available to Hedge Fund Managers include:

Analyst

Hedge Fund Analysts form professional opinions on the value of a bond or security and present it to portfolio managers or investment clients. They review all available sources to find investment potential. They follow stock and bond markets to develop ideas on the direction of the market and individual securities. They review financial news, macroeconomic trends, and market forces to help them identify potentially valuable investments. Once they identify a specific bond, the analyst then researches financial factors, including market and other economic factors that can affect the bond’s future valuation.

Investment Manager

Investment Managers are the specialists who review the analyst’s market information and advise clients on investment opportunities. They familiarize themselves with their clients’ portfolios, develop an understanding of their needs, and then go over the information with them. Investment Managers assist with the day-to-day activities associated with buying and selling securities, including managing transactions, measuring performance, and regulatory and client reporting.

Traders

Traders in hedge funds buy and sell stocks and bonds, derivatives, commodities, and other financial securities for profit. They work for themselves and for financial institutions. They trade based on the fund’s investment plan. Traders suggest modifications to strategies based on the knowledge that they gain in the market by actively trading on a daily basis.

Marketers

Hedge Fund Marketers manage client relations, client services, and fundraising activities. The SEC limits certain hedge fund marketing activities, so the marketer needs to work with legal departments to strategize the firm’s marketing plan. Hedge Fund Marketers develop and manage public relations, releasing newsletters and press releases to advise the public of their firm’s investment strategies. They also create educational programs to help institutional investors to understand their services and products.

Hedge Fund Administrator

Hedge Fund Administrators focus on client relations, accounting, and internal and outgoing paperwork as well as all other back-office services. They are responsible for monitoring and recording monthly and quarterly investor contribution and withdrawal activities. They also compute profits and losses for the business accounting period. They work with auditors, act as registered agents and registrars, and keep other financial records.

 

What Degree Do You Need to Become a Hedge Fund Manager? What Do They Study?

Hedge Fund Managers typically require a bachelor’s degree in accounting, finance, economics, or business. Because successful Hedge Fund Managers need to have stellar financial judgement, some employers may prefer candidates to be a Certified Public Accountant or may otherwise require advanced coursework beyond the normal accounting degree in subjects such as taxes, financial reporting, auditing, and other non-accounting related business areas.

Candidates who want to pursue Analyst and Administrator careers for hedge funds can complete a Master’s of Finance for more in-depth study of finance, business, and economics.

 

How Much Money Does a Hedge Fund Manager Earn?

Because of the nature of the financial industry and the varied companies doing business in it, the salary for Hedge Fund Managers varies widely, depending on the company where they are employed. According to the hedge fund compensation report, entry-level positions at smaller firms may start with an annual salary of around $87,000, while larger industries may start at about $101,700 or more.

Those averages can jump higher than $292,000 after bonuses and profit sharing. Additionally, different positions within the hedge fund can pay drastically different salaries. Analysts can earn a base pay of $250,00 per year and another $250,000 in bonuses. As with many positions in the field of finance, annual salary varies, depending on location, experience, and industry.