A hedge fund manages a pool of money for large investors. First started in 1949 by Alfred Winslow Jones, hedge fund was inspired while writing an article in 'Fortune' magazine about current investment and managing money. Jones himself raised $ 100,000, including $ 40,000 out of his own pocket, and set forth to try to minimize the risk in holding long-term stock positions by short-selling other stocks. This investment innovation of Jones is now referred to as the classic long/short equities model. Jones also used the concept of leverage in an effort to enhance returns.
Hedge fund job
The attraction of a hedge fund job is in its returns. The fund compensates for managing investments by taking a management fee, usually hefty, typically 2% of assets under management per year. In addition, a percentage of returns over a benchmark are paid for performance as well. The carry is almost 20%. For instance, a hedge fund with $2 billion under management and a 2/20 compensation scheme would simply generate a whooping $40 million in management fees plus whatever is made on the carry.
Hedge fund jobs are in great demand. In fact many MBA graduates as well as experienced financial professionals look for possible ways to enter into the hedge fund industry. There are individual and specific recruiters for hedge fund jobs. Those looking for placement in areas of quantitative analysis, risk management, and sales and marketing can instantly search and receive latest tailor-made jobs in the hedge fund community.
Placement reports in few schools in Chicago, Columbia, Harvard Business School and Stanford indicate that there was MBA hiring into hedge funds in 2007 and 2008 but declined for the classes in 2009/ 2010. Still there are plenty of opportunities to be had in hedge fund.
Hedge fund career
There are many hedge fund jobs available, other than the ones in the finance quarter. They are software developer, risk manager and in various administrative roles. The gamut of hedge fund jobs also includes working as a junior trader, strategist, analyst, quant, software developer, risk manager and other administrative options.
Hedge fund managers routinely engage themselves in short selling - betting that a security will decline in value. For instance, a long/short equity fund will try to be market neutral and instead of making an excess return, there would be shorting stocks headed down and those headed up going long. The excess return is called 'alpha'. The managers also facilitate borrowing against assets in the fund in order to buy more securities.
In hedge fund jobs, the incumbent is close to money so much so that he/she can estimate the take home. This is the kind of job where one can easily and directly measure the profit depending upon performance. The larger the number, the bigger the compensation.
Present scenario in hedge funds
In keeping with the global recession, hedge fund also underwent unusual turbulence in late 2009. Many hedge funds had to be shut down. But all is not lost and there is hope yet with new hedge funds trying to shoot out again. Hedge funds are here to stay and probably will rise to newer heights before long. Opportunities for alpha are already out and there is no better time than the present to exploit these opportunities.
Planning for hedge fund job
It may be an entry-level position or a mid-career shift to work as a hedge fund manager, this plan could help an aspiring candidate get off a lucrative start. Nevertheless, it should be understood that landing on hedge fund job is not a cakewalk and it requires a lot of determination and networking stamina.