Hedge Fund Manager - What Is It, Salary, How To Become? (2024)

What Is A Hedge Fund Manager?

A hedge fund manager is a person or company that manages hedge fund investments. A hedge fund manager is in charge of pooling capital from many investors and investing it in a portfolio that brings optimum results while maintaining lower risks. They also pay close attention to the investment models and market trends.

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.

• 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.

How Does A Hedge Fund Manager Work?

A hedge fund manager is one who keeps a watch on the investment accounts and tries to make wise investment decisions for investors to reap maximum profits. These professionals managing hedge fund accounts earn through the fee they charge.

A hedge fund manager can be seen directly associated with hedge funds or they are found in firms involved in asset management, private investment, investment banking, etc.

Hedge Funds Video Explanation

Job Description

Hedge fund managers are responsible for handling and overseeing hedge funds. To put it simply, a hedge fund is a vehicle for investment that’s generally organized as an LLC or limited partnership. Hedge funds are composed of high-risk, high-reward investments. It is also one of the lesser regulated investment categories.

Hedge funds are much more exclusive than mutual funds 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 investor.
• 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, bonds, 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 portfolio brings great results.

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

• Analyzing investment data to make the most informed investment decisions.
• Reconciling accounts.
• Communicating with investors.
• Reviewing and rebalancing investments.
• Raising capital investments.
• Communicating with equity research 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

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

How to Become?

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 is the hedge fund manager’s educational qualification to become a hedge fund manager is a bachelor’s degree. The degree can be in accounting, business, finance, or economics. 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 Analyst
• Certified Public Accountant
• Certificate 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 as an entry-level trader or check the financial analyst job description 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.

Hedge Fund Manager Vs Investment Banker

Investors often confuse the terms hedge fund manager and investment banker. Though they both play a vital role in the investment sector, their roles are different. Let us check out some of the differences between the two:

• Both these careers require an individual to have good numerical skills and communication skills. However, while an investment banker must have a degree in finance, a hedge fund manager does not necessarily require that.
• The investment bankers provide support and advice to clients and help them with IPOs and M&A, broker execution, debt financing, etc. On the contrary, the hedge fund manager is the one who pools investments and invests clients' assets in different fruitful ways, and manages their portfolios.
• The salary of an investment banker, of course, earn more than a hedge fund manager, whose earning is the commission or fee it charges from clients.

Frequently Ask Questions(FAQs)

Recommended Articles

This has been a guide to what is Hedge Fund Manager. Here, we explain its salary structure, how to become one, job descriptions, and vs investment banker. You may learn more about financing from the following articles –

• How to Get Into Hedge Fund?
• Top 20 Hedge Fund Interview Questions and Answers
• Hedge Fund Risks