There is a lot to find desirable about hedge fund jobs. Industry insiders can look forward to days spent trading in exotic securities, earning extravagant salaries and living the elite lifestyle that comes with them. Beyond the Wall Street prestige and monetary rewards that hedge funds offer, however, there is an innate amount of risk that comes part and parcel with jobs in the sector.
Before one settles on a career in the industry, potential fund employees should spend due time and consideration weighing its pros and cons. But for those select few financial professionals with the right balance of skills — including the ability to trade in a diverse array of commodities and products, and continually meet performance expectations, all while keeping a thick skin media to critique – hedge funds remain one of the most alluring career paths in the world of finance.
Hedge Funds, the Media and Public Perception
On the whole, hedge fund managers tend to shy away from the press and operate in near-total secrecy. They have unlisted phone numbers and addresses, and often refuse to disclose details and information upfront to potential investors. That perceived lack of transparency, combined with several industry scandals over the past decade, has only increased media scrutiny of the unique niche that hedge funds occupy. The Bernie Madoff scandal of 2009, in particular, focused an unprecedented amount of attention from both the press and government on the industry.
For a line of business used to operating in anonymity, negative press coverage and fund closings in the wake of the economic meltdown have left many in fear of being labeled guilty by association. As such, respectable fund professionals trying to move on from an otherwise blighted fund can be presented with a seemingly insurmountable set of preconceived notions hanging over their heads. Naturally, before choosing a place in the hedge fund sector, one should thoroughly research their potential employers before deciding which fund meets their professional standards.
The good news, however, is that there are dozens of newsletters, magazines and web sites that track and report on the current standing of individual funds in terms of both compensation and performance. This type of coverage not only illuminates the upsides working for a hedge fund, but ensures that the competition for open positions will be fierce as well. Among both seasoned financial professionals and newly minted MBA graduates seeking their first big break, hedge funds jobs remain some of the most hotly pursued in the world of finance.
Risk and Competition in the Hedge Fund Industry
During times of economic hardship and recession, most of the industry’s largest firms have the financial wherewithal to continue paying top dollar salaries to their most valued employees as they await the return of favorable market conditions. Smaller firms, whose pay scales are usually governed by the performance of their assets under management (AUM), are generally regarded as less secure and can present a “longevity risk” for employees seeking long-term, stable positions.
As the majority of new firms launched each year are indeed small enterprises, their resilience and overall viability must be carefully considered. After getting one’s foot in the door at an upstanding fund, the penultimate challenge for would-be fund managers, analysts and traders is remaining on board for more than two years. Hedge funds are meritocracies and, as such, employees are required to perform at consistent level, no matter how poorly the markets may be faring. Under this “survival of the fittest” system, funds ensure that the finance professionals in their employ are among the very best that the industry has to offer.
Reaping the Rewards
Hedge fund workers can anticipate more than ample compensation for their efforts, to put it mildly. Fund portfolio managers, traders, analysts and even lawyers rank amongst the highest paid professionals in the entire financial sector. For example, those who have worked themselves into the A-list of portfolio management, such as George Soros, routinely earn in excess of $1 billion a year. Beneath them, the number of second-tier fund workers making between $5 and $10 million is virtually uncountable.
Though the average hedge fund is estimated to manage roughly $170 million in assets, some titans of the field are known to exceed $2.5 billion. Due the structure of performance and incentive fees in place at the majority of funds, a manager producing a relatively low fund growth of only 15% a year would still earn $6.8 million, if his or her fund had the average $170 million in assets under management.
While money can be the deciding factor for some of those entering the field, it is far from the only perk one can expect – and not all of which are material pleasures. While it is true that many hedge fund professionals are afforded the privilege of private jets, beachfront homes and five star jaunts around the world, it is a love of the game and the prestige it provides that keeps many working in funds around the world.. Moreover, while investment bankers are known for their round the clock schedule, the average hedge fund worker only keeps normal business hours — not only improving one’s quality of life, but allowing for a more finer balance between the duties of their business and family life as well.Mail this post