Hedge Fund Manager (2024)

Discover what it takes to embark on a career path of a hedge fund manager

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Written byAndrew Loo

What is a Hedge Fund Manager?

A hedge fund manager is an individual who makes investment decisions on behalf of their clients, called limited partners (“LPs”), using aggressive and sophisticated investment strategies.

Hedge Fund Manager (1)

Hedge fund managers fall into the buy-side within the world of capital markets. This means that hedge funds, like other asset managers, are in the business of managing money on behalf of investors, but differ as they tend to be more actively managed, unregulated, and only offered to wealthy and sophisticated investors.

Therefore, a hedge fund is basically a private investment partnership between a hedge fund manager and their limited partners.

Stars of the investment management world

Starting from the first hedge fund started by Alfred Jones in the 1950s, hedge fund managers have been viewed as the rock stars of the investment management world. Hedge fund managers such as George Soros, Ken Griffin, John Paulson, David Tepper, and Steve Cohen have used to their instincts, intellect, and sometimes less than scrupulous methods to amass great wealth for their investors and themselves.

Given the lucrative and elite nature of the hedge fund industry, there is intense competition, both externally and internally, for the coveted role of a hedge fund manager.

Hedge fund management strategies

There is no one generic hedge fund manager role. Instead, managers tend to be organized by the strategy or strategies that they employ.

The main hedge fund strategies are as follows:

  1. Global macro strategies
  2. Directional hedge fund strategies
  3. Event-driven hedge fund
  4. Relative value arbitrage strategies
  5. Long/short strategies
  6. Capital structure strategies

What Makes Someone Successful in Hedge Fund Management?

Regardless of which hedge fund management style or styles a particular manager employs, there are some skills that an individual needs to have to be successful as a hedge fund manager.

Firstly, most hedge fund managers have the relevant educational background and intellectual rigor. While many managers have advanced degrees in business, finance, economics and accounting, most of the trading styles also tend to favor candidates with strong financial modeling, data analytics and other quant skills. The most well-known hedge funds tend to attract graduates from the top schools globally with the right internship experience, so competition is fierce.

Hedge fund managers also need to have a comprehensive understanding of financial markets and instruments, as well as how to effectively hedge or leverage those risks to achieve their returns. This means that many hedge fund managers have cut their teeth working as traders or research analysts on the sell-side. We also see hedge fund managers who come from other investment management roles or have moved up from more junior roles at the same firm. But ultimately, these people all have a strong knowledge and love for the markets.

Lastly, since the hedge fund industry is highly competitive and hedge fund managers are compensated in large part for the returns they derive for their LPs, the drive to succeed is arguably the most important characteristic that hedge fund managers must need to have. Most hedge fund managers are extremely confident and have a very strong work ethic.

Typical Job Duties for a Hedge Fund Manager

Hedge fund managers work on a trading floor but there might not be as much of the hustle and bustle as a trading floor on the sell-side. But make no mistake — the stakes are just as high (if not higher) and the pressure just as palpable.

A typical day

On a typical day, hedge fund managers start very early. The first thing to do is to review overnight news and trades, peruse the latest research and see how their trades have performed in the overnight sessions. Since most hedge fund managers are not restricted by mandate to trade only certain assets in specific markets, they often trade many different markets in different time zones.

The rest of the day will be spent speaking to capital markets salespeople and traders to hear about market intelligence, flows, and trade ideas. As hedge funds are a very lucrative business for investment banks, many hedge funds work closely with these banks, most times even with special arrangements called Prime Brokerage in place. Hedge fund managers will meet with their own analysts and other internal colleagues to discuss potential trades or other ideas. They will also have to closely work with their internal risk management colleagues to ensure that they don’t breach their firm’s standards.

Lunch is almost always taken at the desk in order to read more research, work on models or formulate trading strategies. Occasionally, hedge fund managers may be entertained during lunch or attend luncheons held by prospective issuers, called roadshows. On a slow day, they might even have time to go to the gym for a quick workout over lunch.

While it is true that successful hedge funds will have lots of investors lined up out the door to throw money at them, given the large number of hedge funds nowadays, hedge fund managers will often need to actively market their fund to potential LPs to attract new investors.

Long and stressful days

The day for hedge fund managers is very long and full of stressful hours. The end of the market day doesn’t necessarily mean that they are done for the day. Many hedge fund managers run positions in overnight markets so they will need to monitor those trades, often late into the night. If they work for a large global hedge fund, they will also need to speak with colleagues, subordinates, or managers in other time zones, as well as attend investment committee conference calls. When not in the office in evenings, many hedge fund managers will attend dinners with their peers and competitors to network and talk shop.

Given the pressure, many young and successful hedge fund managers tend to believe in the “work hard, play hard” mantra and so lead exciting and sometimes hedonistic lives.

Compensation Factors and Salary Expectations for Hedge Fund Managers

With this extremely intense competition, it is perhaps no surprise that compensation for hedge fund managers is very lucrative. However, the compensation is based on performance so hedge fund managers have a “eat what you kill” mindset. Base salaries are meant to provide enough to sustain a decent lifestyle, but the bonuses are where it counts.

Successful hedge fund managers routinely pocket millions of dollars in total compensation, with the top fund managers earning paychecks in the billions of US dollars[1]. This doesn’t include how much they personally stand to benefit from their own investments in the funds they manage. Given the 2-20 pay structure, hedge fund managers stand to make more than most of their buy-side peers in non-hedge fund investment management.

Even though part of the compensation of a hedge fund manager might be affected by the overall success of the limited partnership, most managers are not overly loyal and will jump ship if they feel that they are not being compensated fairly.

Risks of Working as a Hedge Fund Manager

However, not all hedge fund managers are guaranteed to make the big bucks — the stark figure is that one in three hedge funds fail within their first three years and the average lifespan of a hedge fund in five years[2]. The industry is so cutthroat that underperforming managers (and teams) are routinely fired, sometimes within a quarter or two if results are not delivered.

Additionally, since hedge fund performance fees are mostly based on high-water marks, a fund that suffers a few down years may choose to voluntarily close up shop and start a new fund.

Lastly, as many successful hedge fund managers end up managing their own money exclusively, there is also the risk that a very successful fund ends up becoming a family office and closes investment to LPs, thereby reducing headcount.

Job Qualifications for Hedge Fund Managers

Roles in hedge fund management are fast-paced, competitive, and very lucrative for those who have the right skills.

New candidates are frequently recruited from highly sought-after graduate or post-graduate programs across the globe and tend to be hired for analytics and mid-office functions. Very rarely will you see someone hired fresh out of school and be given a front-office role in investing. To become a hedge fund manager, there are specific licensing courses and regulatory exams one must pass. For example, in the United States, you need to pass the Series 7 and Series 63 exams.

Those who show promise might have the opportunity to be moved from the mid-office into “alpha-generating” roles to make investment decisions. Candidates are also actively recruited from sell-side firms and other competing hedge funds.

Interviews for roles in hedge fund management are extremely grueling and demanding, given the potential of working in a hedge fund. Interviewers will routinely give very difficult tasks and scenarios to test the intellectual ability of candidates.

Hedge Fund Manager (2024)


Hedge Fund Manager? ›

A hedge fund manager is an individual or financial company that employs professional portfolio managers and analysts to establish and maintain hedge funds. Hedge fund managers typically earn above-average compensation, often from a two-and-twenty fee structure.

Why are hedge fund managers so rich? ›

Hedge funds seem to rake in billions of dollars a year for their professional investment acumen and portfolio management across a range of strategies. Hedge funds make money as part of a fee structure paid by fund investors based on assets under management (AUM).

How much do hedge fund managers get? ›

Standard fee arrangements

Hedge funds charge clients a fee that is 2% of the assets that they manage, and they take a 20% slice of the profits as an incentive fee. The two and twenty arrangement has enabled prominent hedge fund managers to become very wealthy.

How do you become a hedge fund manager? ›

A hedge fund manager is a financial adviser who oversees investment accounts, leverages advanced financial software and raises expenditure capital. You can become a hedge fund manager by obtaining at least a bachelor's degree, earning CFA certification and gaining experience in the finance industry.

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.

Do hedge funds pay a lot? ›

The top individual Portfolio Managers can earn hundreds of millions or billions each year. Hedge funds offer a much higher pay ceiling than investment banking, (sometimes) better hours and work/life balance, and the chance to do more interesting work.

Is hedge fund as a career worth it? ›

Compared to all the other types of finance careers, work life balance at hedge funds is usually better than investment banking or private equity in the sense that your hours won't be as volatile. It is very unlikely that you will stay up late working past midnight at a hedge fund.

How stressful is a hedge fund? ›

The day for hedge fund managers is very long and full of stressful hours. The end of the market day doesn't necessarily mean that they are done for the day. Many hedge fund managers run positions in overnight markets so they will need to monitor those trades, often late into the night.

What is the highest paying job in a hedge fund? ›

What are Top 5 Best Paying Related Hedge Fund Jobs in the U.S.
Job TitleAnnual SalaryMonthly Pay
Hedge Fund Attorney$175,207$14,600
Cfo Hedge Fund$157,532$13,127
Private Equity Fund Controller$154,999$12,916
Hedge Fund General Counsel$151,643$12,636
1 more row

How old is the average hedge fund manager? ›

Hedge Fund Manager age breakdown
Hedge Fund Manager YearsPercentages
40+ years71%
30-40 years24%
20-30 years5%

What do hedge fund managers do all day? ›

In terms of everyday responsibilities, the main duties of a fund manager include building financial models, meeting with clients, and analysing investments. At a higher level, they oversee the hedge fund's daily operations. This might include risk management, marketing, sales, and cash flow forecasting.

What degree do most hedge fund managers have? ›

Hedge fund managers often have a master's degree or even a Ph. D. in finance, mathematics, economics, financial engineering, quantitative finance, programming, marketing, or business administration. Others have advanced degrees in a specialty such as engineering or accounting.

How many hours do hedge fund managers work? ›

Hedge fund analysts typically work between 60 and 70 hours a week. Working on the weekend is not common but it certainly does happen from time to time.

Why are hedge fund owners so rich? ›

Hedge funds make money by charging a management fee and a percentage of profits. The typical fee structure is 2 and 20, meaning a 2% fee on assets under management and 20% of profits, sometimes above a high water mark. For example, let's say a hedge fund manages $1 billion in assets. It will earn $20 million in fees.

Can hedge fund managers make millions? ›

It is not uncommon for someone with 5 to 10 years of experience (if they last that long) to secure hedge fund salaries that are close to US$ 1 million per year. If you start your own hedge fund, though, hedge fund salaries get a little more complicated.

Who pays hedge fund managers? ›

A hedge fund usually pays its investment manager a management fee (typically, 2% per annum of the net asset value of the fund) and a performance fee (typically, 20% of the increase in the fund's net asset value during a year).

How do hedge fund managers become billionaires? ›

They pay managers handsomely.

So if the fund manages $1 billion and it generates a 25% return ($250 million), the manager is paid 2% of $1 billion ($20 million), plus 20% of the returns exceeding a 5% hurdle, or $40 million. This is how successful managers of big hedge funds become billionaires.

How do hedge fund managers get 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).

Is hedge fund manager the highest paying job? ›

Hedge fund manager salaries typically range between $70,000 and $261,000 yearly. The average hourly rate for hedge fund managers is $65.1 per hour. Hedge fund manager salary is impacted by location, education, and experience. Hedge fund managers earn the highest average salary in New York.


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