Managing several million dollars worth of investments is a major part of what a hedge fund manager does every day. At the helm of hedge funds,managers also ensure that investments bring in the most profit by adopting sophisticated and often risky techniques. As successful hedge fund managers stand to earn thousands or millions of dollars every year,increasingly financial analysts who have the necessary net worth are opting to manage such funds. With the amount invested in hedge funds also set to increase in the coming years, we look at how hedge fund managers are created and the salient aspects of their job.
The qualifications that a hedge fund manager needs
Setting up and running a hedge fund and ensuring that it is successful is a complicated process. The basic qualification for becoming a hedge fund manager is a bachelor’s degree, a master’s degree in finance or an MBA.Usually those with an Ivy League background score better jobs in hedge funds and therefore most managers have an elite education and in addition several certificates required for their job.Some even prefer to earn MBAs that deal with managing funds and assets. Managers of hedge funds also tend to have several years of experience working as financial analysts or have administered companies successfully. A manager must have a large repertoire of skills, knowledge and in addition have unique ideas of their own and be able to utilize them effectively.
Do managers invest in a hedge fund?
Hedge fund managers make a personal investment in a fund and often have large stakes in them. During the period when hedge funds first came into being, managers often joined at lower levels and then advanced into top level jobs. This gradual progression into the top job in a hedge fund is now rare, and most managers instead invest in and market their own funds to high-net-worth individuals.
How do investors choose a hedge fund and manager?
Due to managers having a lot of flexibility in managing a fund investors choose to evaluate managers in detail before putting money into a fund. Additionally even though managers have a stake in the fund investors make sure that they are qualified to run it, and have no pending disciplinary and legal action against them.
Skills and knowledge that a hedge fund a manger needs
Fund managers are expected to have a number of skills that help in solving problems and the process of making decisions. Exemplary communication skills and knowledge of international laws and financial markets, all ensure that managers handle their job with ease.
How much can a hedge fund manager earn?
A hedge fund manager can expect to earn a minimum 2% management fee which is calculated based on the total value of assets. The “management fee” is earned irrespective of whether the fund is being run badly and the profits are poor. As a result a manager can earn millions of dollars if the fund is large and has assets in excess of a billion dollars. In addition to this a manager earns a“performance fee” of 20% if the hedge fund’s profits exceed a specific amount known as a “hurdle”.