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What Does a Hedge Fund Manager Do?

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Last editedNov 20212 min read

From overseeing investments to researching market trends, hedge fund managers have their fingers on the pulse of finance. But what exactly does a hedge fund manager do on a day-to-day basis? Here’s a closer look at the definition and responsibilities associated with this job title.

What is a hedge fund manager?

A hedge fund manager is responsible for overseeing investment accounts, typically at a hedge fund. They help investors manage investments, tracking liquidity and giving advice about fees. In addition to direct associations with a hedge fund, fund manager jobs are found in environments including:

  • Asset management firms

  • Private investment firms

  • Investment banking firms

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.

How do hedge funds work?

To better understand what a hedge fund manager does, it’s first helpful to investigate the activities of a typical hedge fund. A hedge fund uses multiple investment techniques to mitigate risk, generating higher returns for clients by spreading investments across multiple asset classes. Because of this wider reach, hedge funds often generate higher returns than other investment firms. Hedging reduces risk by offsetting different assets or investment types. When one aspect of a portfolio is underperforming, another aspect offsets it.

Hedge fund managers are expected to understand market conditions and factor these into their recommendations, to generate profit for investors despite market volatility. Hedge funds can be big or small; some will be limited partnerships, while others qualify as companies. Fund managers typically share in the fund’s profits, giving them added incentive to aggressively pursue higher returns.

What does a hedge fund manager do?

Now that we’ve answered the question of what a hedge fund manager is, it’s time to look at what a fund manager does. Fund manager jobs carry responsibilities such as the following:

  • Manage short and long-term investments for clients

  • Oversee hedge fund portfolios

  • Choose suitable investments for each portfolio

  • Stay current with market conditions with consistent research

  • Follow and analyse investment trends using relevant software and data metrics

  • Discuss client needs to choose suitable strategies

  • Provide advisory services to clients

  • Hire and train associated investors

Of course, a fund manager doesn’t work alone. They’ll have a team of finance professionals to help, including traders, accountants, and analysts.

How to become a fund manager

You can’t become a hedge fund manager overnight; this type of career requires a high level of expertise and education. This includes a university degree in finance, economics, or accounting as well as a graduate degree in business. Most fund managers start their career with internships at big-name investment banking firms and hedge funds, usually in finance hotspots like New York and London.

A good hedge fund manager will possess a bevy of soft skills in addition to a thorough knowledge of financial markets and instruments. They must have strong communication skills to work with fellow analysts and clients, along with excellent analytical skills and a confident personality. Most are quite competitive with a high tolerance to risk.

Fund manager compensation

You might be wondering how much hedge fund manager jobs pay. Fee structures vary according to how the hedge fund is legally set up. However, a common arrangement is called the ‘two and twenty’ which leads to significant profit for the manager. Under this type of contract, the hedge fund manager receives 2% of assets under management along with 20% of portfolio profits. This gives the manager plenty of incentive to seek out lucrative investments – and they’ll work for long hours to earn it.

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