Wondering how much you’d make if you were a hedge fund manager? Take a look at the following Buzzle article, which efficiently describes the annual remuneration that hedge fund managers get.
According to the Forbes article, Raymond Dalio, the highest-paid hedge fund manager in 2011, took home about $3 billion, which amounts to a little over $1 million per hour. Steven Cohen, the founder of SAC Capital Advisors, who took home $1.3 billion, was the highest-paid hedge fund manager for 2014.
According to the Bureau of Labor Statistics, the demand for financial managers of all types is expected to grow 9% between 2010 and 2020. A hedge fund manager is the one person, people entrust with their money, so that he/she may invest in the correct stocks, the correct way, and earn a high return on investment.
Hedge funds are quite a lot like mutual funds – the main similarity being that the investor’s money is spread over several high and low-risk investments by a qualified fund manager. The difference between a hedge fund and a mutual fund is that the hedge fund aims for absolute return regardless of what the market is doing. Hedge funds are not regulated by the SEC. A hedge fund manager has fewer constraints to deal with as compared to a mutual fund manager. However, he is expected to put some of his own capital at risk in the strategy. This helps gain confidence of investors.
A hedge fund manager earns way more than a typical financial manager. The salary of a hedge fund manager can go into billions, based on, whose portfolio he’s managing.
➺ According to Business Insider, the total average yearly compensation for a hedge fund manager can be around $409,826. It may vary according to the performance of the manager, location and size of the firm, fund amount, etc.
➺ According to CNBC, the average salary for an entry-level analyst at a mid-performing hedge fund was around $335,000 in 2013.
➺ According to the 2014 salary guide by Robert Half, a national financial recruiter, those working specifically on funds bring home around $118,250 on the low end, while for the top-earning professionals, the base pay can be $172,250 annually.
➺ The highest paying states were New York, Massachusetts, and California.
➺ According to Indeed, the average Hedge Fund Portfolio Manager Salary is $107,000 p.a.
➺ According to the Alpha Magazine’s 2007 Compensation Report, the salary figures for a hedge fund head were in the range of US $908,960 to US $8,961,180. The top-earning hedge fund managers of 2008 took home $250 million – $2.5 billion.
➺ A report by Benchmark Compensation shows that the average salary at hedge funds comes in at a whopping $368,000.
➺ According to the annual ranking published by Institutional Investor’s Alpha magazine, the top 25 hedge fund managers reaped $11.62 billion in compensation in 2014. So, that’s the higher end of the salary spectrum. Of course, not all of them make anywhere around that amount, but these managers have one of the highest paying jobs. To be sure, there are a couple of factors the manager’s salary is based on.
Factors that Determine the Earning Potential
The first factor is of course, the charge that the manager demands every year for managing the fund. Usually, the charge is about 1 – 2% of the total money invested. So the more money he handles, the more money he receives as his salary. Typically, managers handle money of a lot of the richer clients, and hence, the commission they earn on the investment is generally pretty high, and definitely supersedes most salary ranges for jobs.
Performance-based Fee and Bonuses
Apart from the commission, the manager may also choose to charge a performance based fee. He generally promises a certain, very high return on the money he invests, and if he can achieve his target, he can charge a performance based fee from the client. The performance based fee commonly goes up to 20% of the profit over the investment of the client. So, if you promise lofty gains and achieve them, you stand to earn a lot of money. These managers can have bonuses anywhere from 50-100K to as much as 100M.
A hedge fund manager very often invests his own money and the gains that he receives. The profit that he makes through his own investment is also included in his annual earnings. Now that’s a lot of money!
Becoming a hedge fund manager is not easy, and you need a pretty good track record if people are to trust you with their wealth. These managers generally hold a degree or two in fields like mathematics, economics, stock market operations, financial management, etc. They generally have to be from reputed schools in the field, because clients check all of this, when they entrust a manager with their money. Secondly, the manager has to have a good work experience record. The manager generally starts off small, as an analyst or at a job in a similar company, where he learns his trade, and how to work in the stock market. It takes a long experience record and successful investing to become a good manager that people give their money to.
So, this was all about the hedge fund manager salary and how to become one. So, if you are looking to take up this career opportunity, then start working your way into a good enough college, and start working really hard right away!