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Hendon
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What is the typical background of a hedge fund manager?

November 14th, 2010, 5:51 pm

What is the typical background of a hedge fund manager?To the extent I know the most important thing in starting a hedge fund is 1- Capital-Lets say 10,000 pounds/dollars2- Right contactsBut what about technical side and job background and initial place of start?Is the following order ?roughly? true? Junior trader ------> senior trader--> portfolio manager--> starts his/her own hedge fundJunior Quant -> senior quant (who trades as well) -> portfolio manager-> starts his/her own hedge fundDo they start working in hedge fund from the beginning or they initially work in the investment bank? [I know there is no written route but I am just curious of what the normal/typical route of hedge fund management industry is]
 
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daveangel
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What is the typical background of a hedge fund manager?

November 14th, 2010, 6:33 pm

this is very useful
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daveangel
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What is the typical background of a hedge fund manager?

November 14th, 2010, 6:39 pm

I think it rather depends on the strategy. I would suggest the following routes1. equity l/s - analyst, senior analyst, portfolio manager long only, hedge fund2. event driven - credit analyst, high yield distressed debt, hedge fund 3. macro - economist, strategist, senior strategist, hedge fund4. convert arb - trader, senior trader, hedge fund
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farmer
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What is the typical background of a hedge fund manager?

November 14th, 2010, 7:01 pm

The current largest fund managers that come to my mind mostly did not come through the investment-bank career paths that you describe. It may be that those who did have more money, but have a lower profile towards outsiders like me, so I never heard of them.Hedge funds do involve communication as much as anything else - you are a business manager - and so various technical jobs will be less likely to capture people who can communicate. I think the best path to being a big manager is to start at a young age, and not have a drawdown greater than 20% for 15 years. This favors someone who is patient - unlike the typical college grad with dollars in his eyes - and who is attracted to the idea of running his own business right away, even for small money.If you are an important and well-known guru in an investment bank, you won't need 15 years to raise big money. But even without hard numbers to back up my suspicion, I suspect that people who are more communicators at heart than traders at heart will not stay in the industry long if they don't have success in their first two years.I think people who are successful hedge fund managers, like a lot of areas of business, will be money managers right away at a young age, it is what their personalities are built to do. Of the people who start out trying to do it right off at a young age, some will be both lucky and good, and find themselves as major managers at a later age.I am skeptical that someone who works as a quant developer for even 18 months will ever be a successful money manager. This type of person is an order-follower, not a leader. A leader can lead people into even bad investments over and over, if that is what he was born to do.I would be curious to hear a list of past quants who became hedge fund managers. Or if it is assumed this is more a path for future than current managers.
 
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farmer
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What is the typical background of a hedge fund manager?

November 14th, 2010, 7:17 pm

I think actually wanting to do it, in fair weather and foul, is more important than background. Look at Nassim Taleb and Paul Wilmott. Neither is currently a hedge-fund manager so far as I know. Nassim could probably raise some money. And Paul Wilmott could probably design some good trading programs. But they have a choice, and choose something else.Most people in the world are less successful than they hoped to be most of the time. If you are just doing something for the money, and the grass is not that green, you will probably gravitate toward something you are built to do. I have no idea what Nassim does all day, but I will guess he doesn't send any orders to options exchanges. He could if he wanted to, no doubt.So I think it is two filters, wanting to do it, and being good at it. And perhaps not being unlucky. At a young age - the age when your background is formed - you have not been filtered for these qualities. So I think people could come from anywhere to pass these filters.
 
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Hendon
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What is the typical background of a hedge fund manager?

November 14th, 2010, 7:22 pm

As 'farmer' said most of the hedge fund managers do not come from Quant background. The top 10 Hedge fund managers of 2009 are the following according to the business insider:Top 10 Hedge fund managers of 2009As I can see the only guy who has superior math and academic skills is James Simon who has retired. The rest of the guys apparently are mostly relying on their money,contactsleadership skills and risktaking.Aprat from John Arnold who has been lucky enough to be under 40 to be super rich guy the rest are in their 40s and 50s.
 
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farmer
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What is the typical background of a hedge fund manager?

November 14th, 2010, 7:25 pm

QuoteOriginally posted by: outrunJames Harris Simons, and he's running of the best operation.He was never a quant. He was never any of the investment-bank or finance roles listed. He was a professor, so far as I can tell. I would put this more in my "leadership" filter than the average employee.QuoteIn 1978, he left academia to run an investment fund that traded in commodities and financial instruments on a discretionary basis.Simons was never a junior trader, a junior quant, an analyst, a credit analyst, an economist, or a trader, before striking out running his own operation. So far as I know, he was never the employee of anyone who was remotely connected to trading. Probably the first and last trade he ever put on was for his own account.
Last edited by farmer on November 13th, 2010, 11:00 pm, edited 1 time in total.
 
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farmer
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What is the typical background of a hedge fund manager?

November 14th, 2010, 7:42 pm

Probably the typical background of a hedge fund manager is being born in New York. I grew up in New York in the 1980's, so of course I wanted to be a stock-index arbitrageur, or a quant in bond pricing. When I was living in Colorado, I told my friend from Chicago how I wanted to be in finance. He said yeah, trading grain futures in the pits is the thing! Then I met a guy who had a natural talent for computer programming and economics. I told him you are a natural for algorithmic trading. He said what is that, I never even dreamed of it. Having grown up in Washington, DC, his dream was to be a big contractor for government programming projects.If people think being a quant is a good way to become a hedge fund manager, then at least a few people who end up being hedge fund managers - because they both want to be and are good at it - will have started out as quants.
Last edited by farmer on November 13th, 2010, 11:00 pm, edited 1 time in total.
 
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winstontj
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What is the typical background of a hedge fund manager?

November 14th, 2010, 8:02 pm

takes a bit more than 10k pounds or dollars - Goldman just upped the bar to $5mm as did Morgan Stanley and many are about to follow suit. Anything smaller than that will be considered "Prop". EDIT: All things asside - just knowing enough people to raise the capital - then you have a hedge fund. Profitable or not is a different story.
Last edited by winstontj on November 13th, 2010, 11:00 pm, edited 1 time in total.
 
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plumhoff
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What is the typical background of a hedge fund manager?

November 14th, 2010, 8:55 pm

There is also a niche for consultants (tax advisory, for example) of big banks who can convince senior bank management to source "capital" out into a hedge fund.
Last edited by plumhoff on November 13th, 2010, 11:00 pm, edited 1 time in total.
 
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Hendon
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What is the typical background of a hedge fund manager?

November 14th, 2010, 9:38 pm

A real life scenario could be Eric Mandelblatt which his Soroban Capital Partners LLC begins trading stocks next month:Ex Goldman trader forming his own hedge fund
 
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farmer
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What is the typical background of a hedge fund manager?

November 14th, 2010, 9:51 pm

QuoteOriginally posted by: HendonA real life scenario could be Eric Mandelblatt which his Soroban Capital Partners LLC begins trading stocks next monthThe article made it sound like factors beyond his control forced this life decision. But it is possible he wanted to do it all along, only it was politically difficult until the factors beyond his control gave him the chance.My bet is he will be a company man again in two years.I am irritated by their characterization of Global Alpha as averaging 12% a year. Global Alpha probably had 10 times more assets under management the year it lost 40% compared to the average year it made 15%. The regulations of Commodity Trading Advisors used to require they disclose accounts closed profitable, and accounts closed unprofitable. They probably still require this. It is a much more realistic measure of performance, as many managers have actually lost money for clients for having even gone into business, even though they averaged a positive return overall, meaning weighted for time rather than for capital.