The hedge fund analyst career track is much different from the typical sell-side career track. Hedge funds are typically much less structured, less formal, and have fewer tiers and titles. As a general rule of thumb, a career track for an analyst usually consists of: 2-3 years as analyst, 1-3 years as senior analyst, and then a portfolio manager (if at a single P&L fund you might have to leave to accomplish a PM role). As a trader, the general rule of thumb is 1-3 years as an execution trader followed by 1-3 years as a trader or senior trader with P&L responsibilities.
Analyst compensation varies very much by fund and performance but, as a general rule, investment bankers or MBA students with little-to-no prior experience will earn a $90,000-$120,000 base with a bonus that is 1-2x the base amount. New traders with little-to-no HF experience can expect a base of $50,000-$80,000 with a bonus that is 1x the base amount. It is much harder to lay out compensation for the hedge fund industry than it is for investment banking, private equity, and others. Hedge fund compensation is very much tied to the performance of the fund: If the fund makes money, employees are heavily compensated, but if the firm loses money, they do not get paid. It is not uncommon to hear of hedge fund analysts in their mid- to late-twenties making well into the half million-dollar range per year or more.
Life of a Hedge Fund Analyst
Analysts are the heart and soul of a hedge fund. Analysts at a hedge fund typically have a well-developed passion for following the stock and bond markets and a passion for developing ideas either on the direction of the market or individual securities. Analysts perform the in-depth research, analysis, and due diligence required to make an investment decision. They support senior analysts and portfolio managers to build investments into the fund’s portfolio.
The career path for analysts into a hedge fund is much less structured than into investment banking or other financial services sectors. An analyst may work for two to five years before either being promoted to sector head or leaving the firm. At the lowest entry point, a college undergrad may join a hedge fund as an analyst, but typically firms are looking for traditional hires in investment banking, equity research or other buy-side careers.
The most junior-level analyst for a hedge fund based in New York City will require an undergraduate degree and a minimum of one year of work experience. Typically, junior analysts support the investment managers in screening, researching, analyzing, and monitoring external investment managers. A junior analyst would have the opportunity to move into a more senior role of analyzing companies to issue buy or sell recommendations to the portfolio manager. A more senior analyst would be a member of the investment committee for the fund and would report directly to the portfolio manager. Moving up the ladder is strictly at the discretion of the portfolio managers.
Hedge fund analysts work market hours: getting into work around 7 a.m. and leaving around 6 p.m. This is quite a change from the 90-100 hour investment banking hours some are accustomed to. Typically, hedge fund analysts are not expected to work weekends or holidays. At some hedge funds, including SAC, analysts hold weekend phone conversations with their portfolio manager to go over new ideas and positions within the fund.
Hedge Fund Analyst Responsibilities Over Time
Year 1
- Work with Sector Head and conduct fundamental research.
- Attend industry conferences.
- Attend management meetings.
- Conduct field level research.
- Learn a Sector.
- Build financial models within a sector.
- Start creating surveys and proprietary research tools.
- Listen to company and industry conference calls.
- Read sell-side equity and macro-economic research.
Year 2
- Engagement:
- Analyze investments on own and work more independently.
- Engage in senior level investment idea conversations.
- Have a positive impact on choice and size of sector positions.
- Develop a network of other buy-side analysts and management teams.
Year 3
- Becoming a Senior Analyst:
- Lead the analysis on several investment ideas.
- Generate own investment ideas.
- Enhance sector performance.
Year 3+
- Recommend investment ideas that get implemented.
- Generate positive P&L.
- Demonstrate ability to add value to other sectors.
- Understand the consensus view on stocks and have the ability to quickly find differentiating views.
- Participate in investment team meetings.
Life of a Hedge Fund Portfolio Manager
The fund’s Portfolio Manager (PM) either went out and raised the money (single P&L model) or was assigned a certain AUM to invest (multi-manager). Either way PMs have the sole responsibility for trading decisions, hiring, monitoring risk, and managing the back office operations. Very often the founder of the hedge fund is the portfolio manager. The compensation structure can be very lucrative, with portfolio managers earning fees of “2 and 20.”
Examples of well-known portfolio managers include:
- Steven Cohen
- John Paulson
- Julian Robertson
- James Simons
- Timothy Barakett
- Philip Falcone
- George Soros
- Kenneth Griffin
The job of a hedge fund portfolio manager is not to know the future, but rather to understand that it is uncertain and to construct a portfolio that should generate attractive results under a wide variety of outcomes.
A large component of portfolio managers’ responsibilities is risk management—managing risk well turns volatility into opportunities. Liquidity is a key part of the risk management philosophy, i.e. going to cash may be the best option in certain scenarios. Portfolio sizing is also critical to the risk/reward balance. A large percentage of can come from being outsized in high conviction trades.
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FAQs
Hedge fund analysts perform detailed research on stocks, bonds, and other securities; commodities; currencies; and hard assets (particularly real estate). Hedge fund firms use this research to make investment decisions that translate (ideally) into large profits for the firm and strong returns for investors.
What is the average salary of a hedge fund manager on Wall Street? ›
Hedge Fund Jobs, Salaries & Compensation
| Position Title | Typical Age Range | Base Salary + Bonus (USD) |
|---|
| Junior Analyst or Research Associate | 22-25 | $100K - $150K |
| Analyst | 24-30 | $200K - $600K |
| Senior Analyst or Sector Head | 28-33 | $500K - $1 million |
| Portfolio Manager | 32+ | $500K - $3 million |
Hedge Fund Analyst Salary (and Bonus) Levels
Hedge fund salaries vary a lot based on the fund size, type, strategy, annual performance, and other factors. The most likely range for total compensation at the Analyst level is $200K to $600K USD.
What is the average bonus for a hedge fund analyst? ›
What Is A Hedge Fund?
| Role | Base Salary | Average Bonus (% of Base) |
|---|
| Execution Trader | $80,000 - $100,000 | 30% - 50% |
| Junior Analyst | $70,000 - $100,000 | 25% - 50% or more |
| Analyst | $100,000 - $150,000 | 50%+ |
| Senior Analyst | $150,000 - $250,000 | 70%+ |
1 more rowHedge funds employ some of the best-paid business professionals anywhere, but landing your first job in the industry is no cakewalk. Building a hedge fund career takes determination, networking stamina, and a fierce competitive streak.
What do hedge fund analysts do day to day? ›
A hedge fund analyst is somebody that does quantitative research in order to identify the assets to trade with the fund's money that adheres to its trading strategy and mandate. Analysts may research individual securities, market sectors, macroeconomic trends, or all of the above.
Why are hedge fund managers so rich? ›
Hedge fund managers typically earn above-average compensation, often from a two-and-twenty fee structure. Hedge fund managers typically specialize in a particular investment strategy that they then use to power their fund portfolio's mandate for profits.
Who is the richest hedge fund manager? ›
Who Is the Richest Hedge Fund Manager? Ken Griffin of Citadel is both the richest hedge fund manager and the highest paid. In 2022, he earned $41. billion, and by the beginning of 2023 his net worth was estimated at $35 billion.
How much do quants make at hedge funds? ›
How much does a Hedge Fund Quant make? As of May 10, 2024, the average annual pay for the Hedge Fund Quant jobs category in the United States is $169,729 a year. Just in case you need a simple salary calculator, that works out to be approximately $81.60 an hour. This is the equivalent of $3,264/week or $14,144/month.
What is a PM at a hedge fund salary? ›
Pay at this level depends almost 100% on performance, which means that PMs could make a few hundred thousand USD… up to $1 million or even $10 million+. On average, though, a PM at a mid-sized fund that performs decently might earn between $500K and $3 million.
degree in finance is ideal for a variety of hedge fund jobs, but your major will matter. Bachelor of Science degrees in mathematics, accounting, physics, computer science, and even engineering are also useful, given the recent rise in algorithmic trading.
How many hours a week do hedge fund managers work? ›
At hedge funds, meanwhile, the 'reasonable' working week is around 70 hours. Around 80% of people working in hedge funds work between 50 and 70 hours a week, according to a recent report from consultants Benchmark Compensation.
What are the best paid jobs in hedge funds? ›
Hedge fund manager salary, then, like in most other fields, has a pyramidal structure. Those at the very top make astronomical amounts. In 2020, for instance, the top 25 hedge fund managers took home over $32 billion in compensation. The average hedge fund manager makes a more modest $145,437 per year.
What is the salary of a VP in a hedge fund? ›
While ZipRecruiter is seeing annual salaries as high as $277,500 and as low as $43,500, the majority of Vice President Of Hedge Funds salaries currently range between $115,000 (25th percentile) to $190,000 (75th percentile) with top earners (90th percentile) making $244,500 annually across the United States.
Is hedge fund as a career worth it? ›
Compensation: You can no doubt make a lot of money at hedge funds, especially if you join a team that has a good long term track record. Your income can scale significantly when you start getting a cut of the P&L and contribute to money making investments. More about hedge funds salaries and bonuses here.
Is hedge fund a hard job? ›
Reality: High Stress and Potentially Constant Long Work Hours. Depending on the type of fund, you could work long hours especially when you are just starting. There is a reason why people say at hedge funds your first 6 months is like “drinking from a fire hose.” The role is unlike investment banking or private equity.
Do hedge funds pay a lot? ›
Hedge funds pay a lot more than private equity firms
Hedge fund pay is higher than pay in private equity. The average hedge fund employee earns $487k in combined salary and bonus; the average private equity professional earns 'just' $263k in salary and bonus. The real difference, though, is in pay per hour.
What do hedge funds do in simple terms? ›
A hedge fund is a limited partnership of private investors whose money is pooled and managed by professional fund managers. These managers use a wide range of strategies, including leverage (borrowed money) and the trading of non-traditional assets, to earn above-average investment returns.
How does a hedge fund make money? ›
How do hedge funds make money? Hedge funds take a management fee of between one and two per cent of the amount you invest. In addition, the hedge fund manager will receive a performance fee (usually around 20 per cent on any profit).
