Hedge funds have become the symbol of the Wall Street financial elite, and anyone who can become a hedge fund manager is on the path to join the wealthiest one percent. In the 1970s, it was relatively easy to join a hedge fund and work your way up to management, but over the last 25 years or so, the hedge fund market has grown to more than $2 trillion in total value. At its peak, it reached $2.4 trillion, but the financial collapse of 2008 drastically reduced the value of most hedge funds.
How to Join a Hedge Fund
Jobs at these firms are extremely competitive, even for the world of Wall Street finance, and they’re able to be very picky about the people they hire. Usually, you have to graduate from an Ivy League school like Harvard or Yale to join a hedge fund, but a firm might consider a graduate from another school if he or she has exemplary qualifications. In modern times, it’s possible for ordinary people to join the elite class, but it’s very difficult. The surest way to raise your social position is to enroll in an Ivy League college, and to do so, you will have to be very focused from a young age.
Elite schools admit students based on many factors, such as GPA, extracurricular activities, published works, awards and family connections. If there are no famous professors or politicians in your family, you will have to keep your record as close to perfect as you can. There are only a limited number of spots open at these colleges, so they have to choose their students carefully. If you can show the admissions board that you have significantly improved your position in life on your own, they will be more likely to consider you. An example is a person from a poor neighborhood who defies the odds, gets straight A’s, volunteers at homeless shelters and perhaps invents some breakthrough technology. The key is to make a significant contribution to society while getting excellent grades.
Building a Hedge Fund From Scratch
Many hedge fund managers are in charge of the firms they founded, so a degree in entrepreneurship could be beneficial. Starting a hedge fund is only the first step, and the next step is where your Ivy League pedigree comes into play. U.S. law says that only accredited investors with assets of more than $1 million can buy shares in a hedge fund, according to the U.S. Securities and Exchange Commission. To collect money for your fund, you will have to market your business to large organizations and wealthy people. These investors are drawn to hedge funds because they offer higher returns than other funds, which also increases their risk.
When you become a hedge fund manager, you will not only be managing billions of dollars of other people’s money, but you will be investing in the fund you manage as well. The alignment of your financial interests with those of your clients partly assures them that the big risk they’re taking is reasonably likely to pay off. If you manage a successful fund, you will eventually join Forbes Magazine’s list of billionaires.
Related Resource: Finance Internships
The people who run successful hedge funds are some of the shrewdest money managers on Wall Street. Most business graduates will not have the opportunity to become a hedge fund manager, but making the attempt will give them many other lucrative opportunities.