If you’re dreaming to become a hedge fund manager and looking for a step-by-step guide.
This article breaks down everything you need to know about How to become a hedge fund manager.
Hedge funds are generally private pools of capital contributed by limited investors or institutional investors.
Hedge funds are very flexible for investment, invest in a variety of assets, invest in stocks and bonds, much like a mutual fund, but can also invest in practically anything else, from real estate to currencies.
Use various strategies to earn an active return for their investors by maximizing returns and minimizing risks.
A hedge fund is an investment pool available only to sophisticated investors with significant assets.
The hedge fund manager has the freedom to invest in almost anything. Hedge Fund Manager is one of the most rewarding careers one could choose.
The manager is compensated in terms of their performance, usually taking one-fifth of all the returns earned by the fund.
Along with the annual charge, they carry higher fees than most other types of funds.
In fact, it is a well-known truth that a hedge fund manager with five to ten years of experience in the field brings in an average salary of $1 million every year.[Sourcel: FinanceWalk]
Here’s how to become a hedge fund manager
Steps to Become a Hedge Fund Manager
1.Education Requirements
What are the educational requirements for becoming a hedge fund manager?
1. Bachelor’s Degree
Bachelor’s degree is the standard prerequisite if you are interested in becoming a hedge fund manager.
Make sure to choose the appropriate bachelor’s degree and maintain a consistently good performance.
Generally, a bachelor’s degree in finance or a related area of study will develop your skills for working in this high-powered field.
You need to get a bachelor’s degree — preferably in a finance-related area, such as accounting, business administration, statistics, or economics.
A bachelor’s degree in finance or business administration can help get you on the right path.
These degrees also provide a baseline of essential skills you can translate to the real-world challenges of the hedge fund industry.
It is important to choose an appropriate institution to pursue your degree.
Make sure to choose the institution where you get the most practical experience necessary to be competitive in the market.
2. Master,s Degree
Many hedge funds require or prefer candidates with an MBA. The MBA can be a powerful differentiator when you’re competing against dozens of candidates all vying for the same position.
Picking a master’s degree in finance or a Master’s of Business Administration (MBA) will give you more in-depth knowledge and experience about finance, management.
The right MBA program will teach you the skills you must possess in order to become a hedge fund manager.
Many hedge funds have tended to hire their professionals with an MBA. Because most hedge funds are relatively small organizations with only a modest number of employees.
Therefore they don’t want to carry anyone who isn’t properly trained to perform the key elements of their role.
A strong professional network is one of the most valuable assets that you can have in business.
MBA will help you to develop a strong professional network that enables you to gain access to new opportunities.
2. Study the Industry
Do in-depth research about the hedge fund industry. Go through every research program available to you to compile the facts.
To become a hedge fund manager, you should learn everything you can about the financial market.
If you are dreaming to become hedge fund manager then these are fields that require specific expertise.
You must need to have a strong understanding of hedge funds and also you need to have a good ability to do quality research.
Hedge Fund Manager is responsible to do in-depth research, analysis to study and understand the financial markets that are required for the purpose of investment decision.
You must need to develop the expertise in the sector where you will be managing investments, whether in company shares or other securities.
Working as a hedge fund manager you have to analyze lots of data and market trends to understand the patterns and trends on a daily basis so that you can quickly develop a strategy and recommend it to the fund manager.
That helps in minimizing risk and maximizing return on investment.
There are certain skills you must need to have, like Accountability, responsibility, analytical ability, superior writing and communication skills, ability to deal with colleagues, investment managers, and clients.
3. Licenses
Generally, a hedge fund manager does not need any specific license to start a hedge fund.
You’ll have to research your own state, city regulations to check the legal requirements.
1. Series 65
If the hedge fund is registered as a business it may necessitate the fund manager obtaining a Series 65 license, administered by the Financial Industry Regulatory Authority.
Licensing requirements often vary by state. Check out your state’s website to find out any legal requirements.
You may find it necessary or at least helpful to get a Series 65 license. Which allows an investment professional to function as an Investment Adviser Representative in certain states.
2.Chartered Financial Analyst (CFA)
You may need to choose a Chartered Financial Analyst (CFA) designation offered by the CFA Institute. Which measures and certifies the competence and integrity of financial analysts.
CFA credential is one of the most respected designations in finance.
To become CFA you need to pass 3 exams, covering a range of subjects such as professional ethics, risk management, and portfolio management.
Along with that, you need to complete formal training and also have work experience.[Source: Investopedia]
3.Chartered Alternative Investment Analyst (CAIA)
Chartered Alternative Investment Analyst (CAIA) is another charter you may need to choose.
Its globally-recognized credential for professionals who analyze, manage, distribute, or regulate alternative investments such as hedge funds.
To become CAIA you’ll need to take and pass the level 1 and level 2 exam. Make sure to meet one of these two requirements:
- Bachelor’s degree with a minimum of one year of professional experience.
- Without a degree, you need to have a minimum of four years of professional experience.
4. Internships
Find out internship opportunities to get pre-professional work experience. It takes some time but results are definitely worth the effort.
Having internships gives you the opportunity to work for hands-on in a professional environment.
As an intern, you will receive invaluable practical experience. It can be difficult to understand the theoretical concept and how it will impact you in the working world.
But As an intern, you will be able to apply what you have learned in class and you will be able to understand the concepts as they relate to real people, situations, and organizations.
One of the most important benefits of internships is interns have the opportunity to integrate acquired knowledge and theory to real work experiences, witnessing firsthand the day-to-day job duties in the professional community.
Internships will help you establish credibility with investments and understanding the financial market.
This will help learn etiquette, talking to people at all levels of an organization, improves your confidence these professional skills will help you gain an edge over others as you enter the market.
In the professional world, it’s all about who you know. As an intern, you’ll find yourself surrounded by professionals in the industry.
You’ll have an opportunity to learn from the experts around you.
5.Hands-On Experience
Start building experience, to become a hedge fund manager you need to gain experience in the financial market.
Be prepared to go through all the ups an downs in the financial market make yourself mentally prepared.
Raising capital for a hedge fund is the most difficult part for the hedge fund manager.
To get the fund started you need to establish an investing track record, here you can do one thing, invests a substantial amount of your own money into the fund.
To attract the attention of large institutional investors you have to perform exceptionally well and show them excellent returns on investment so that you’ll attract substantial amounts of capital.
Once you’ll start performing well you are likely to bring out the investment of additional capital from initial investors.
As a hedge fund manager, raising investment capital for a hedge fund totally depends on your ability to find and convince some initial investors and manage their fund profitably.
This will help you attract the fund from additional investors in the future.
As a hedge fund manager, it’s your responsibility to give positive results so that investors are to invest their money.
You must need to have strong business skills, you need to have the ability to manage your investors and raise capital for a hedge fund.
Not only you need to invest your own money you’ll also need to share your tactics and strategies with other people so that they are interested in your proposal and help you to raise capital for the hedge fund.
If you can invest a substantial amount of money to raise capital for a hedge fund, investors will have confidence in your plans and invest money with you.
You must need to learn in-depth about risk management it will help you to handle the acute losses the company may suffer from.
To learn these skills, you need to be a hard-working, determined and focused attitude towards work.