Before considering how to become a hedge fund manager, it is necessary and important to know what hedge funds are all about and how it works in business.
Essentially speaking, hedge funds are nothing but pooled investments from a number of high-end clients who invest initially in high volumes into hedge funding options for gains and returns, both in the medium and long term.
These hedge funds, in turn, invest in an arrayed portfolio of stocks, shares, securities, and bonds for gains.
The main aims of most hedge fund managers are minimizing risks and maximizing returns and also protecting against future losses and devaluations, which it does through an array of methods, called hedging transactions.
In a typical hedge, where risks realign to rising interest rates, varying commodities costs or adverse currency fluctuations take place, two parties having similar genres of risks may enter mutual hedge transactions, that virtually eliminates risks and increases returns with the help of a chartered financial analyst.
While hedging is much more than just insurance, it is to simultaneously enter two opposite transactions so that the possible losses in one aspect could be offset by gains in another.
Another use of hedging is in the airlines’ businesses which are plagued with exorbitant and rampant rises in airlines fuel prices.
In order to avoid economic losses caused by fluctuating airline fuel prices, airliners enter into futures contracts, in effect binding the prices they would pay for future gasoline.
If the prices shoot above the market price, they win, but if it is less, the airlines still lose since they have to pay the contract price.
However, this can be offset by entering into both simultaneous buying and selling of energy, and the losses gained in one segment could be offset or neutralized by gains in another.
Role of Hedge Fund Manager
Hedge fund managers also need to be fully aware and have a practical insight into how markets behave in the short, medium, and long terms.
The hedge fund manager must be fully conversant with options, derivatives, and futures trading, and how to seek protection against market volatility and vicissitudes.
Besides, aspects like call options, put options, and how to gain the most out of derivatives trading are also important components of a Hedge Manager’s job and work profile.
It is indeed the solemn and dutiful task of hedge managers to protect and progress the assets and resources of customers/clients who place trust and funds in them.
The hedge fund manager must invariably involve his clients and take them into confidence before making any hedge deals, or consult them for permission before investing their monies in deals for which he does not have their consent or permission even though he is acting in their best economic and fiscal interests.
Sometimes, hedge fund managers may be placed in situations in which they have to exercise their own discretion or choices and this is where the main risks lie, especially when we have to consider possibilities of potential economic losses or fiscal damages/ harms that may occur due to their misjudgments, or miscalculations
In order to become a good hedge fund manager, it is important that one enjoys stock trading and other fiscal adventures, be excellent in figure work, have good analytical, communication, and convincing presentation skills since s/he would need to convince potential or even skeptical clients why they should choose your hedge fund business, as compared to competing for hedge firms.
Besides, it is also necessary to have expert knowledge and practical skills in the gamut of hedge funds, the highest demonstrable fiscal and financial accountability and responsibility, report writing and oral skills, especially financial presentations, and excellent interpersonal and public relations without rubbing people the wrong way.
It is also necessary to have perfect and excellent attention to details and how to interpret them, get along well with peers, and subordinate and superior groups, robust ability to build relations and work independently and display the highest degree of leadership, tact, and initiative, including persuasive powers.
Education and Training
Finally and most importantly, it is necessary to possess a good CFA, CAIA, or Master’s Degree in Finance or Business Administration to become a hedge fund manager.
Besides, it is also necessary to have good hands-on training and experience in the various nuances of stock trading, Stock Exchange operations, share and commodities markets, and share trading, among others.
Excellent knowledge and insight into capital markets and money markets are also indispensable to becoming a hedge fund manager.
The hedge fund jobs are very important and critical, requiring a great deal of judgment, caution, and good trading sense, especially when dealing with clients’ monies, funds resources, and assets and it is also necessary that the hedge funds manager exercises maximum care, discretion and tact dealing with client’s assets as if it were his, or her own funds.
One of the major areas in which these managers should be well abreast is the legal environment in which these hedge fund managers operate.
There are a plethora of local, regional, and global laws, directives, and regulatory regimes under which hedge funds operate and run.
It is, therefore, necessary and important, for his or her own business interests, that hedge fund managers are well aware and cognizant of impinging laws and regulatory regimes, with regard to hedge fund managers and how these could be most effectively honored and managed so as not to cause any issues later on with the law and the Administration.
Not only does he have to honor and maintain country-specific laws and company-specific rules regarding hedging and the regulatory regime and legal requirements encompassing it, but he is also at risk for channelizing client funds, assets, and resources in the best and least risk pathways of hedge transactions.
He is not only accountable to the Government, shareholders, and stockholders but also to his clients, hedge fund employees, and customers for the safety, protection, and furtherance of assets and resources held in trust by him on their behalf and he must do all within his powers to protect their business and fiscal interests and not let them down, especially if conflicts of interests arise concerning investment strategies.
A successful hedge fund manager is in a fiduciary position vis-à-vis his clients and customers and asset protection is his top priority in the finance industry, even before asset management and earning profits on hedging funds and their improvements.
Hedge Fund Manager Salary in the US and India
As per PayScale, salaries in the US and India:
Do hedge fund managers earn a lot? According to hedge fund professionals, the average hedge fund manager’s salary in the US is USD 103,303.
Hedge Fund Manager Pay by Experience
The average salary of a hedge fund manager in India is INR 12,87,500.
As a matter of fact, the tasks, responsibilities, and job demands of a Hedge manager are much more demanding.
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