What is a hedge fund manager?

A hedge fund manager is a key decision-maker of a hedge fund. Here we take a look at what a hedge fund manager is and what they do… 

A hedge fund manager may be defined as an individual or a company in charge of a hedge fund. They overlook operations of a hedge fund and provide direction to its investment strategy. 

In order to be an effective hedge fund manager, one must possess extensive investment knowledge, a keen eye for studying the money markets, a clear investment strategy, a risk-management strategy and an adequate plan for marketing and sales.

What is a hedge fund?

Hedge funds are an important part of the alternative investments space. They can be defined as actively managed investment funds that utilise non-traditional and high-risk investment strategies or asset classes. 

These funds are mainly aimed at wealthy investors since they require a high minimum investment amount and charge much higher fees than regular funds.

Hedge fund manager explained

What does a hedge fund manager do? A hedge fund manager is responsible for making investment decisions on behalf of their clients with the help of assertive investment strategies. 

The objective of a hedge fund manager is to boost their client’s investments while mitigating risks. Hedge fund managers are expected to come up with a high return on investment irrespective of the market scenario, which makes their job quite challenging. 

Since hedging essentially means to lower risk, hedge fund managers are particularly bound to lower the risk exposure of their clients’ investments without reducing the return on investment with the help of their strategies, which are often on the riskier side. This is why hedge funds require high capital, since the risks are higher than traditional investments. 

Investment strategies of hedge funds include equity-focused strategies, relative value strategies, event-driven strategies, multi-manager strategies, opportunistic strategies and specialist strategies.

It is important to note that when investing in hedge funds, investors cover the management fees, which are meant to take care of the operating expenses, and performance fees that are normally distributed to the owners of the fund as profit.