To understand what a hedge fund manager or hedge fund analyst is paid, you should first understand how a typical hedge fund pays out. In the past, most hedge funds would charge an annual fee ranging from twenty-five thousand dollars to one million dollars. If the fund earned an additional six hundred thousand dollars, they would automatically give investors the equivalent of forty thousand dollars. In other words, the larger the fund, the higher their annual fee would be.
Since the market is not in the shape that it was back then, the fees charged by hedge fund managers are considerably less now. Now, the average hedge fund manager earns anywhere from fifteen to fifty thousand dollars a year. The amount that he is paid depends on the size of the fund, the number of shares he manages, and how long he has been at the job. For the past two years, the average salary earned by hedge fund managers has risen by thirty percent, according to research conducted by the American Association of Private Investors.
It does not matter what type of hedge fund is being managed. For example, there are hedge funds that are primarily geared toward credit risk or even those that specialize in investing in agricultural commodities. Most hedge funds are specialized in a particular field, such as international equity or private investment banking. In order to earn a living as a hedge fund, a manager must always understand the specific needs of his fund. This means that he must understand his competitors, their strategies, and market conditions.
Hedge fund managers, who have been in business for at least five years, are considered successful. A successful manager will always have one or two stocks in his portfolio that have a twenty percent gain or better. The money he earns will be used for other investments, like the expansion of the fund, purchasing new equipment, or buying new real estate for his portfolio. He is paid only when his portfolio makes a profit, so as not to lose all of his investment money at once. The hedge manager must understand that it takes time to build a profitable portfolio. Most hedge managers make between three and ten million dollars a year. This is called the total compensation package.
The other important point of a hedge manager's salary is that he is paid the same whether the fund he is working with makes money or loses it. Although the performance of most hedge funds is generally poor, they do make money at other times. Therefore, they are able to provide their managers with a considerable salary increase, even though the performance of the fund itself is not so good.
Before you are offered any money as a reward for a job with a fund, you must make sure that the fund manager is experienced and well qualified. He should be able to handle all of the details related to the fund and all of the business issues that are involved.
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