Hedge Fund Jobs & Career Path
Hedge funds jobs are very common among the people of finance domain as they can get lucrative salary by getting into it where the various jobs in hedge fund include the role of the fund manager, role of analysts, role of Sales Manager, the role of Marketing Manager, the role of accountant, etc.
Want to land up with a hedge fund job? Well, it is not something uncommon today. What makes it the highly looked-for path in the finance domain is that it provides excellent prospects to have a thrilling work life and make piles of money. I am sure you are tempted to know how and why? Let’s get started.
Types of Hedge Fund Jobs
You could be hired for any of these hedge fund jobs;
- The analyst is often the typical entry-level position in hedge fund careers. The hedge fund analyst job is also referred to as the investment analyst or research analyst.
- Role: In this role, you would be evaluating- company financials, economic and market conditions, investments such as bonds, commodities to invest for the hedge fund. Also, you are required to analyze financial statements, prepare financial models in excel, evaluate the risk of an investment, and find assets that comprehend the hedge fund strategy to bring in maximum returns.
- Pre-requisite: Working as an analyst in a small hedge fund would require a broad knowledge base, whereas, in the case of a larger one, it could be more extensive with specific know-how of the industry, region, or investment.
- You could spend a lot of time attending meetings, traveling, and making phone calls, which is why making contacts is vital for their success.
- A hedge fund Career as an accountant requires you to manage the finances of the hedge fund and maintain the books of financial records accurately for the fund.
- Role: The role includes recording the financial transactions, preparing and filing the financial statements, examine and report the profitability of the fund, and reviewing the same. The work is essential for the fund as it allows them to go back and analyze the funds’ profit and losses.
- Pre-requisite: These accountants are usually Certified Public Accountants (CPA’s)Certified Public Accountants (CPA's)CPA is Certified Public Accountant, and AICPA conducts these exams. This course takes a minimum of seven months and a maximum of one year to complete. Whereas CA stands for Chartered Accountant, and ICAI conducts these exams, it takes an average of 4 to 5 years to complete.
Sales and Marketing Manager
- This hedge fund job is for you to maintain client relations, particularly when the fund manager does not desire to take up this responsibility.
- Role: Your job would involve bringing in the capital for the fund. This is done by marketing the strategy and returns of the fund to prospective investors. The work would be more target-based; for example, you would be expected to bring in at least 10 million for the first year at the fund.
- Pre-requisite: As a marketing and sales manager, you will have to manage and maintain client relations and continuously bring capital into the fund. Therefore, someone in this role must be confident, persuasive, and have good people skills.
- Maximizing the return on investment funds is the most crucial goal of the hedge fund manager.
- It depends on the size and type of strategy employed in the hedge, more than a kind of hedge fund manager specific to the kind of investment such as bonds, commodities, or sectors such as telecommunication or pharmaceutical.
- Role: Hedge fund career as a manager is responsible for selecting the investments of the hedge fund in certain specific proportions to make up a portfolio. For choosing the investments, you would be required to research a wide range of assets such as stocks, currencies, bonds, etc. and pick the best ones for the portfolio. So basically, you are buying and selling those investments on behalf of the hedge fund for the corporations and individuals. You could also be partial if nor entirely responsible for the client relations and explaining investment strategies.
- Pre-requisite: The job as a fund manager would require more experience than managers and analysts who usually begin their careers as hedge fund analysts.
Pros and cons of Hedge fund jobs
Looking at the brighter side of the hedge fund jobs;
- Hedge fund jobs allow a greater level of individuality than other areas of the domain.
- Compared to the investment banks, the hedge fund is generally smaller, which gives them greater intimacy and control.
- It can be considered a highly rewarding hedge fund career; it is not uncommon to see people in this field at the significant funds pulling down $5 million a year. It is so because, in hedge fund jobs, one can easily quantify the contribution to the total profit of the fund.
- You have the opportunity to do well and get noticed quickly. This can help you in getting up the ladder rather sooner and get compensated well for the same.
Looking at the darker side;
- Many haven’t been able to survive the competition and pressure and have failed miserably in hedge fund jobs. In such cases, one can be easily kicked out of business as there is room for failures.
- Managing the hedge fund is not an easy task as it entails a lot of responsibility. This is because the investors hand over a massive amount of money with a promise of guaranteed return regardless of the market condition. To do this, the hedge fund manager and others involved need to apply hedge fund strategiesHedge Fund StrategiesHedge fund strategies are a set of principles or instructions followed by a hedge fund in order to protect themselves against the movements of stocks or securities in the market and to make a profit on a very small working capital without risking the entire budget.. Hence someone cannot start managing those funds and requires experience to do it efficiently.
Hedge Fund Job Essentials
Hedge Fund Jobs are isn’t the type that you can pick up straight after an MBA degree. The size and structure of the fund decide the positions, which are where the candidate would be eventually placed depending upon the academic credentials and skills.
The hedge fund job positions generally include being a junior trader, strategist, analyst, quantitative, software developer, risk manager, and various administrative roles. To finally get into any of these roles and enter the hedge fund careers will require specific credentials and preparations, discussed in the below infographics.
Skills Required in Hedge fund Jobs.
Listed below are the skills or characteristics that are required for hedge fund jobs.
- High intellect
- Strong domain knowledge
- Consistency and accuracy
- Deep investing and finance knowledge.
- Financial Modeling Skills
- Strong quantitative and legal skills
Apart from these, you need to feel the financial marketsFinancial MarketsThe term "financial market" refers to the marketplace where activities such as the creation and trading of various financial assets such as bonds, stocks, commodities, currencies, and derivatives take place. It provides a platform for sellers and buyers to interact and trade at a price determined by market forces. and sense the changes and act accordingly. The essential quality expected is credibility as you would be handling a massive sum of money coming from the public.
Hedge Fund Career Track
There cannot be a very typical hedge fund career path or hierarchy in the hedge fund organization strategy as it depends a lot on the size. There could only be two titles, such as the analyst and portfolio manager, excluding the fund manager.
For more significant firms than this, they could have more complex structures that could include multiple portfolio managers, managing directors, intermediate vice presidents, etc. Have a look at the hierarchy and their role below starting with the highest position first;
Hedge Fund Manager Job
- The hedge fund manager’s job is responsible for directing the activities related to the operation of the fund.
- They decide on the composition of the fund’s portfolio and look after its daily affairs.
- Speaking about their compensation, they are compensated generously, but they also face tremendous pressure because of the high risk of the portfolios they manage.
- This hedge fund job involves making hedge fund strategy and make investment decisions and allocations.
- The portfolios are compensated via a modest management fee and a performance fee based on the fund’s annual performance.
- Fund managers only get a performance fee if the fund makes money.
Hedge Fund Analyst:
- Those who start their hedge fund career usually begin with a hedge fund job as a junior hedge fund analyst.
- As an analyst, you would conduct due diligence on investment decisions to conduct in-depth research and analysis and support the team of senior analysts and portfolio managers.
- After working for say about 2-4 years, based on your performance, you would be promoted to a senior analyst position.
- At this level, you are expected to have a thorough knowledge of derivativesDerivativesDerivatives in finance are financial instruments that derive their value from the value of the underlying asset. The underlying asset can be bonds, stocks, currency, commodities, etc. The four types of derivatives are - Option contracts, Future derivatives contracts, Swaps, Forward derivative contracts. and financial products of the fund, directly reporting to the Chief investment officer.
Hedge Fund Trader:
- Traders are considered to be the soul of a hedge fund firm.
- Quantitative analysts work along with traders to create trading models based on Statistics and Computational Mathematics.
- The traders are the ones who execute the strategy created by the portfolio managersPortfolio ManagersA Portfolio Manager is an executive responsible for making investment decisions & handle investment portfolios for fulfilling the client’s investment-related objectives. Also, he/she works towards maximizing the benefits & minimizing the potential risks for clients. . A decent educational background, coupled with trading experience, could get you at this job.
Like in the case of a career as a hedge fund analyst, we have Junior and Senior level traders. A junior trader would have a degree and about two years of work experience. After working for five years or so, they might move up the ladder to become a senior trader. Within the traders’ clan, we have the execution traders who execute the trade or ideas of the research team, and others do both the tasks of generating ideas and implementing them.
Hedge Fund Salaries
- If you are someone with a few years of experience in Investment Banking, you would usually start with a basic salary (excluding bonus) of $75,000-$125,000. The compensation would vary according to your and the funds’ performance but is usually 2-3x of your basic salary.
- As a senior in this profession, you would earn anything between a couple hundred thousand USD to $1 million, $10+ million, or even more. These vast figures could get inspiring but keep one thing in your mind straight; your bonus would entirely depend upon the funds’ performance.
You may find the salary numbers in hedge fund jobs unusually high, but of course, many others make much less and many more who fail altogether. All who participate in this industry take on high risk. It would eventually boil down to skill, timing, and a little luck. In a recent salary review of starting compensation for recent graduates of the most extensive MBA programs, the highest average starting pay was hedge fund jobs.
According to Robert Half Accounting & Finance Salary guide (2015), hedge fund management firms are hiring and are in particular search for the positions of senior-level talent to manage the portfolio companies, trade support, and middle office professionals, and also people with capability in accounting and Finance for fund accounting For Fund AccountingFund accounting is a method used by non-profit organizations and governments to account for funds or grants received from individuals, grant agencies, governments, or other organizations who have placed restrictions or conditions on how the funds from the grants are utilized (condition could be implemented on full funds or part of the funds as per the donor)., taxation, and investment valuation analyses.
The below diagram explains the average salary for various hedge funds jobs during the years 2014 & 2015 and shows an increase of approximately 3% over the previous year.
- It is important to note that the income of a hedge fund manager is majorly dependent upon the Hedge fund that is created then only on the base salary.
- The payment structure you would have as a fund manager would include a fee for managing the fund and a performance bonus depending on how the fund finally earns.
Few Guidelines for Getting Hired
- Check whether your personality suits the intense environment of Hedge fund jobs. The competition here is to outperform and have the edge over your other counterparts.
- Learn to analyze and synthesize data quickly.
- Quantitative knowledge and capabilities
- Make contacts and network with people in the hedge fund industry.
- Prove serious dedication for a hedge fund job.
- It is essential to do your homework well before so that you are alert of the kinds of investments a fund makes and how they work.
- Dedication towards Finance field with certifications like CFACFAThe Chartered Financial Analyst (CFA®) Program offers a graduate-level curriculum and examination program designed to expand your working knowledge and practical skills related to investment decision-making. , FRM, CPA, etc.
Hedge funds careers are here to stay. The industry is going to grow and get competitive with time. But it would help if you were sure of why you want to get into hedge funds. Would it be work or money? Make sure the work excites you and not just the money. This field requires passionate about investments & markets, not because they want to make a few million bucks. Good luck to you as you envisage a Hedge Fund jobs.
This has been a guide to Hedge Fund Jobs. Here we discuss the Hedge fund career path and skills required as an analyst, accountant, portfolio manager, trader, and sales and marketing manager. Here we also discuss the salaries of hedge funds and top tips to get hired in a hedge fund. You may also learn more about hedge funds from the following articles –