Hedge Fund Manager: A Quick Look at the World’s Best Paid Job

infostream By infostream, 2nd Jun 2013 | Follow this author | RSS Feed | Short URL http://nut.bz/ma6-pzvc/
Posted in Wikinut>Jobs>Careers

Lean what a hedge fund is, how they make money and how to become a hedge fund manager.

Show Me the Money

There really is quite a lot to show. Consider that the highest salary paid to a hedge fund manager by their fund was $4,900,000,000 which was made by John Paulson in 2010. To put this number in perspective the average Wal-Mart employee would have to work 136,000 years to earn that.

Paulson is not alone in the billion-a-year category. Other managers such as James Simons, George Soros, Phillip Falcone and T. Boone Pickens have all earned nine figures in one year. So, there really is mega bucks to be made in hedge funds.

What do Hedge Funds Actually do?

Firstly, they are very complicated. If they were simple everyone would be running a hedge fund.

In their simplest form they take investors money and invest it for a fee. They are called “hedge” funds because they are set up (usually) so that they can make money if markets go up or down. They typically take on more risk than other investments and have access to more complex financial instruments. Also, importantly, they are able to borrow money from banks with which to invest which magnifies there potential returns (this is called leverage).

How do they Make so Much Money?

Simply: they charge very big fees. Typically a hedge fund manager will take 2% of the money in the fund each year and 20% of all the profits. So, if you run a big fund which makes big profits you get insane amounts of money. Considering that the assets invested globally in hedge funds is around $2.1 trillion dollars (in 2012) there is plenty cash from which managers can deduct fees.

How do you Become a Hedge Fund Manager?

Again, it’s not easy because if it was everyone would be doing it. The steps required to becoming a hedge fund manager are:

1. Become a financial wizard (or make people think that you are one)
2. Convince lots of people to give you huge amounts of money to invest

That’s basically it. You just need to be very smart and have a lot of money to move. A typical way hedge fund managers raise money is by working for an investment bank (e.g. Goldman Sachs, JP Morgan, Citi etc) and acquiring very rich contacts.

Furthermore, hedge fund managers tend to be intense and highly motivated people. Most managers have had to stomach huge losses and set backs on their way to the top. Could you handle managing billions of dollars of other people’s money (and lots of your own too) during the financial crash? Can you handle that level of stress? Also, if you’re starting work at 5AM it probably means that your late.

Tags

Finance, Hedge Funds, Investing, Money, Pay, Salaries, Stock Market

Meet the author

author avatar infostream
A genuine writer browsing the internet in search of opportunities

Share this page

moderator Steve Kinsman moderated this page.
If you have any complaints about this content, please let us know

Comments

author avatar philpalm
6th Jun 2013 (#)

Not a bad description of who is a hedge fund manager. I suppose a real hedge fund manager would laugh at this sort of description while someone like myself would be scared away with the responsibilities that this job entails.

Reply to this comment

author avatar Sivaramakrishnan A
18th Jun 2013 (#)

To get into the game is not easy and also to have the gumption to survive - siva

Reply to this comment

Add a comment
Username
Can't login?
Password