What are Hedge Funds?
There are numerous big players in the financial world. Some of these players take on extremely high risks and promise to produce equally high and sustainable returns, while others take on a significantly lower risk and usually deliver lower returns. Hedge funds and their managers align with the high risk/high yield model. Since the creation of the first hedge fund in 1949, this model has continually proven to be one of the most lucrative and yet most potentially damaging investment strategy.
Hedge funds, in definition, are simply “an investment vehicle in which investors pool their funds to achieve an active return through various investing strategies” ("Hedge Fund Definition | Investopedia"). The name "hedge fund" came …show more content…
Keown, “in order to invest, you have to have a net worth of at least $1 million…or your net income has to have been at least $200,000 ($300,000 if married) for the past 2 years”. In addition to this, hedge funds are highly unregulated, which opens doors to a variety of investment options, but increases the level of risk exponentially. This uncertainty of risky investments, can lead to very high fees “even when the fund loses money” (Keown, 2013).
Roles of Hedge Fund Managers
The roles of a hedge fund manager is often liken to the role of a mutual fund manager. Hedge fund managers are predominately in charge of maintaining and operating the daily affairs of the fund. This activity involves creating and executing ongoing investment decisions regarding the structural composition of the fund 's portfolio. Furthermore, while they perform these functions, they also have the great responsibility of “managing a fund 's risk and return, marketing strategy, and capital funding from unit sales” ( ). A job of this caliber comes with a hefty paycheck and while “hedge fund managers are compensated handsomely… they face tremendous pressure because of the high risk of the portfolios that they manage” ( …show more content…
First it involves a combination of both technical (hard skills) and exemplary soft skills. The features that most hedge funds desire from individuals, are those who are humble, motivated and smart. In other words, in order to become a hedge fund manager, one must develop a shrewd financial sensibility, through the highest level of education; most hedge fund managers have MBAs or Professional degrees in their field from Ivy League colleges. In addition to this, one must also be adaptable and hungry.
The financial world is still reeling from the economic crisis of 2008. Hedge funds were badly hit, with many hedge funds being virtually wiped out. In response to this, there has been a driving effort to reposition and restructure how hedge funds operate. This task was not an easy one, and “it took almost two years for confidence to come back” (Gregoriou & Lhabitant, 2011) . As a result, hedge fund managers must also have the ability to adapt and illicit confidence even when the markets fall. This characteristic is paramount when faced with such a high level of
There are numerous big players in the financial world. Some of these players take on extremely high risks and promise to produce equally high and sustainable returns, while others take on a significantly lower risk and usually deliver lower returns. Hedge funds and their managers align with the high risk/high yield model. Since the creation of the first hedge fund in 1949, this model has continually proven to be one of the most lucrative and yet most potentially damaging investment strategy.
Hedge funds, in definition, are simply “an investment vehicle in which investors pool their funds to achieve an active return through various investing strategies” ("Hedge Fund Definition | Investopedia"). The name "hedge fund" came …show more content…
Keown, “in order to invest, you have to have a net worth of at least $1 million…or your net income has to have been at least $200,000 ($300,000 if married) for the past 2 years”. In addition to this, hedge funds are highly unregulated, which opens doors to a variety of investment options, but increases the level of risk exponentially. This uncertainty of risky investments, can lead to very high fees “even when the fund loses money” (Keown, 2013).
Roles of Hedge Fund Managers
The roles of a hedge fund manager is often liken to the role of a mutual fund manager. Hedge fund managers are predominately in charge of maintaining and operating the daily affairs of the fund. This activity involves creating and executing ongoing investment decisions regarding the structural composition of the fund 's portfolio. Furthermore, while they perform these functions, they also have the great responsibility of “managing a fund 's risk and return, marketing strategy, and capital funding from unit sales” ( ). A job of this caliber comes with a hefty paycheck and while “hedge fund managers are compensated handsomely… they face tremendous pressure because of the high risk of the portfolios that they manage” ( …show more content…
First it involves a combination of both technical (hard skills) and exemplary soft skills. The features that most hedge funds desire from individuals, are those who are humble, motivated and smart. In other words, in order to become a hedge fund manager, one must develop a shrewd financial sensibility, through the highest level of education; most hedge fund managers have MBAs or Professional degrees in their field from Ivy League colleges. In addition to this, one must also be adaptable and hungry.
The financial world is still reeling from the economic crisis of 2008. Hedge funds were badly hit, with many hedge funds being virtually wiped out. In response to this, there has been a driving effort to reposition and restructure how hedge funds operate. This task was not an easy one, and “it took almost two years for confidence to come back” (Gregoriou & Lhabitant, 2011) . As a result, hedge fund managers must also have the ability to adapt and illicit confidence even when the markets fall. This characteristic is paramount when faced with such a high level of