How Much Do Hedge Fund Managers Make and How to Become One?
By Indeed Editorial Team
Published 20 April 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Hedge funds are investment firms that invest large sums of money on behalf of hedge fund investors, who are the clients of a hedge fund manager. Hedge fund managers analyse markets to identify investment opportunities. They typically make important financial decisions on behalf of investors to invest the fund in maximising profits for their clients. In this article, we discuss how much do hedge fund managers make and their roles and responsibilities.
How much do hedge fund managers make?
If you're considering a career in the investment management industry, you may wonder about the salaries of hedge fund managers. A hedge fund manager often has a high income as this is a senior position. The role requires significant skills, as a hedge fund manager manages high levels of financial risks on behalf of their clients.
Depending on a hedge fund manager's qualification and years of experience, their salaries may vary. The average base salary of a hedge fund manager is $6,721 per month. A fund accountant may earn $4,446 per month, while a private equity associate can make $9,083 per month.
What does a hedge fund manager do?
Hedge fund managers often connect investors with the hedge fund's financial portfolio. They're usually in charge of making important investing decisions and keeping the hedge fund operating correctly. A hedge fund manager looks for investors, manages fund pools and creates investment plans for their investors by studying the market. Their funds allow them to make large investments. A hedge fund manager usually has many years of experience in the financial sector, having already held past jobs as an investor or a financial analyst. The position of a hedge fund manager is considered a mid-career or late-career job.
Roles and responsibilities of a hedge fund manager
Essentially, as a hedge fund manager, you invest on behalf of investors that trust you with their funds. Your knowledge and experience in the financial sector and your ability to make large investments often make you a successful hedge fund manager. Here are some of the specific duties of a hedge fund manager:
To obtain a fund with which to invest, hedge fund managers usually start by looking for wealthy clients who are looking to invest. Since a hedge fund manager is a late-career role, they typically have already had the opportunity to network and create connections in the earlier part of their career. It is common for a hedge fund manager's first few investors to be clients they have worked with before. These clients are more likely to trust the hedge fund manager and be willing to invest in their new hedge fund.
Managing the portfolio and funds
After securing funds from investors, the hedge fund manager studies their clients' preferences in investing and the amount of risk they are willing to take. Their clients' preferences act as a guide on what investments are acceptable. Usually, clients interested in hedge funds want to create a high-risk high-return portfolio. Based on their client's preferences, hedge fund managers then select investments that suit their client's needs. They also carefully identify an ideal time to invest or withdraw their investment, enabling them to maximise returns from the financial market.
Drawing up investment strategies
Hedge fund managers are knowledgeable in different strategies of investment. There are many ways of investing depending on an investor's preferences. The state of the financial market may also affect the success of different investing strategies. Being familiar with a few common investment strategies and customising them to your client's investing needs can make your hedge fund more attractive to potential new investors. Some strategies include:
equity market neutral
convertible bond arbitrage
Skills of a hedge fund manager
Here are some skills that may be useful for a hedge fund manager:
Good understanding of the financial markets
Hedge fund managers typically have many years of experience in the finance sector prior to becoming a hedge fund manager. Clients looking to invest money often select hedge funds based on the skill of the hedge fund manager and the past rates of return the hedge fund manager has achieved. A good understanding of the financial markets may help hedge fund managers achieve a higher rate of return on investments for their clients.
Charisma and persuasiveness
Being charismatic can create a positive experience for clients during their communications with a hedge fund manager about their investments. Hedge fund managers often look for investors when they start. Investors may be initially reluctant to trust an unfamiliar hedge fund manager. With a background in investing and financial work, a hedge fund manager who understands a client's requirements and can persuade clients may get more investors for his fund.
Responsibility and trustworthiness
Hedge fund managers typically handle a large sum of their clients' money. Thus, being reliable and trustworthy can encourage potential new clients to invest in their funds. Being able to clearly and convincingly communicate the various investment strategies their fund uses can give clients a clearer understanding of how a hedge fund manager may invest their money. This can also reassure clients that the managers are handling their funds properly.
Managing a hedge fund is a team job. Most hedge funds often comprise teams of individuals with different specialities. For example, some of the roles in a hedge fund include traders, analysts, risk managers, software developers and strategists. Although a hedge fund manager is typically in charge of the team, they may work well with the other team members to prevent conflicts from arising.
How to become a hedge fund manager?
Here are some steps you can take to become a hedge fund manager:
1. Get a bachelor's degree
The basic requirement is usually a bachelor's degree in finance. Having further qualifications such as a master's degree in investment or financial analysis is often valuable. If your degree programme allows it, it can be helpful to pursue a double-major, where you can learn about other finance-related areas such as accounting and economics.
2. Intern at a finance company
Internships can be a way of gaining experience. You can look for internship opportunities at banks or private financial companies. In an internship, you can also observe how more experienced hedge fund managers manage their investor's funds and monitor the market. You can learn useful that can help when you eventually manage a hedge fund. When putting together your financial portfolio, internships can be useful to show that you have experience in investing. Internships can act as evidence that you have managed funds under the guidance of an experienced investor and can highlight your understanding of the financial market.
3. Start a career in investment banking
Hedge fund managers manage large sums of their investors' money. When you attain your degree and know a wide range of financial skills, you can start your career in investment banking and gain industry experience. For example, as an investment banker, you may be required to analyse financial markets to identify investment opportunities. This skill might help you be more successful in the future as a hedge fund manager.
4. Apply for hedge fund manager positions
With your degree in finance and years of experience in the financial sector, you can apply to available hedge fund managing positions. Alternatively, you may also consider starting your own hedge fund by seeking investments from clients you may have worked with in the past.
As of 2021, attaining a licence to operate as a fund manager is only required if you're managing more than 30 qualified investors. For an investor to be considered qualified, they are usually required to be accredited. This means that they have net assets exceeding $2 million for an individual or $10 million for a corporation. To qualify for the Capital Markets Services (CMS) licence from the Monetary Authority of Singapore (MAS), you're also required to fulfil the minimum capital requirement set by the MAS.
Salary figures reflect data listed on the quoted websites at the time of writing. Salaries may vary depending on the hiring organisation and a candidate's experience, academic background and location. Please note that none of the companies, institutions or organisations mentioned in this article are affiliated with Indeed.
Explore more articles
- What Is Basic Salary? (With Overview and Calculation)
- Wage vs. Salary: Definitions, Differences and Examples
- How to Write a Letter Asking for a Raise (With Examples)
- What Is Commission Pay and How Does It Work? (With Types)
- Types of Bonuses: Definition and How To Get One
- What Is a Good Pay Raise and How to Negotiate for One
- How Much Does a Commercial Diver Make? (Plus Tips and FAQs)
- How To Ask For an Increase in Salary (Steps and Example)
- What Is Net Salary: Definition and Guide To Calculating Net Salary
- How To Negotiate a Salary (With Examples)
- Guide: How To Calculate Gross Monthly Income (With Examples)
- What Is a Salary Increment and How to Negotiate for One