Hedge Fund Manager’s Salaries
Hedge Fund Manager’s Salaries
The Hedge fund is an investment vehicle and a business structure. The manager accumulates capital from multiple investors, invests the funds in securities and other investment instruments.
A fee of 2% of assets under management is charged yearly. The charges also include a performance fee. Typically 20% of any returns made for the clients over and above the 2% base fee is the performance fee. For instance, when a fund returns 10% yearly, the performance fee is 20%, (10% – 2%), or 1.6% of assets. Including the base fee, the total revenue will be 3.6% of assets under management.
By implication, a $1bn hedge fund returning 10% per year would have annual revenue of $36m.
Limited partnerships or limited liability companies involved in hedge funds. The hedge fund is different from mutual funds. Regulators do not cap leverage. Also, most of the investments are highly liquid.
Hedge Fund Managers
A hedge fund manager oversees the investments of their several hedge funds. A successful hedge fund manager must create a competitive advantage. Being successful in the industry demands some qualities.
The hedge fund manager should have a well-defined investment strategy. For investment, a high amount of capital is needed and the best marketing plan. Most importantly, a robust risk management strategy.
The most successful managers make a lot of money annually, just like the highest-paid hedge fund managers in 2018.
Hedge fund management is one of the highest paying jobs in the world. But the stress and high time demand are worth it, in which top earners bring in billions.
A strong background in the financial industry is needed for a career in hedge funds.
As a fund manager, your rank and earnings increase or is equated with your level of experience and expertise.
What Hedge Fund Managers Do
Hedge funds are funds that generally avoid a great deal of government regulation. They are only available to some licensed established investors or investment companies. They are not accessible to the public at large. A manager is responsible for the investment strategies of hedge funds. The decision of which investments to pursue and how actively to pursue them is the duty of the manager.
They capitalize on market opportunities, at the same time, consistently balancing high-risk investments with the potential rate of return.
To become a hedge fund manager, you should display a high financial acumen in prior roles and networking your way to the top. The same skills are needful when you attain the management suite.
Finding investors and managing the funds is incumbent on the manager. The manager is entitled to networking with companies and consistent study of the financial markets. The result should be discovering unique opportunities to drive returns.
Average Salary Of A Hedge Fund Manager
According to Forbes, in 2018, the top-earning hedge fund manager of 2017 was $2 billion, and each of the top four earners made over $1 billion. In the same year, the lowest earner in the top 25 earned $200 million. According to a survey in 2017 by SumZero, the average compensation for money managers was about an average of approximately $350,000.And the pay ranges increase drastically as years of experience in the industry grows. The survey also shows that someone with 20 to 25 years of experience expects an average salary from $260,000 to $705,000.
The Labor and Statistics Bureau in May 2017 reveals the average wage of a financial manager to be $143,530.
Top Earners in Hedge Fund Management
The Hedge Fund industry cannot leave out the record of managers with a high-income level. Their contributions to the trade show off in their income.
Below are some of the top-earning managers.
James Simons is the founder of Renaissance Technologies. Renaissance Technology is a highly regarded quantitative hedge fund firm. He made a total hedge fund income of $1.6 billion last year, making his net worth $16.6 billion. Forty-three percent of his income, amounting to $680 million, was made from fees.
Although retired in 2010, Simons still contributes to how Renaissance is run and makes money from its fund’s performances. Renaissance Institutional Equities fund generated 8.5% last year. The Diversified Global Equity generated 10.3 percent, while Medallion, the Renaissance’s oldest fund’s performance, is unknown. Only the employees and owners of the company know about it.
Forbes records Simons as the 23rd richest person in the world.
Ray Dalio is the founder of the biggest hedge fund. It is regularly notable as one of the wealthiest in the industry. His fortune rose to $1.3 billion in 2018, powered by Bridgewater’s, closely $160 billion worth of assets. Dalio’s $610 million was in the form of fees.
Similar to the Renaissance, Bridgewater grew last year during financial market turmoil. The flagship, Pure Alpha strategy, generated 14.6% to investors net of fees. It is its best performance in five years. Forbes records that Dalio’s net worth is $18.4 billion. Forbes records that he is the 25th wealthiest person in the world.
Ken Griffin, being the founder of Chicago-based Citadel. He has been making headlines for acquiring penthouses and mansions across the globe. Griffin has given away millions of dollars to charity.
Over 9% was generated by Citadel’s flagship Wellington fund. Its global equities and tactical trading funds return almost 6% and 9%, respectively. The above impressive performances in 2018 have Griffin’s fortune enlarge by $870 million. Forbes has him as the 45th richest person in the world. His total hedge fund income records $360 million to be from fees.
John Overdeck records $770 million in 2018 and $370 million in the form of fees. Overdeck, the co-founder of Two Sigma Investments. The Sigma Investment is a hedge fund that tracks large amounts of data to predict securities’ prices. Two Sigma’s Absolute Return fund made 11% in 2018. The global macro Compass fund returns 14%. According to Forbes, Overdeck is the 118th richest person in the world, having a total net worth of $6.1 billion.
The successful year for Two Sigma also benefitted a second co-founder, David Siegel. Like Overdeck, Siegel’s net gain was $770 million after their hedge fund returned $3.2 billion for investors last year.
Siegel, a computer science graduate, records the joint 118th richest person in the world, according to Forbes.
Conclusively, statistics by the Bureau of Labor show that there will be a 19-percent growth rate in the financial management field existing between 2016 and 2026. The overall growth levels will vary by industry.