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Hedge Funds Basic Facts, Guide For Marketing, Manager Salary, Profits with Commodity, & Set Up

Updated on November 17, 2013

A Few Basic Facts on Hedge Funds

You may have heard that hedge funds are the same thing with mutual funds, but in fact these two are quite different in the way of manifesting the process of investing and earning profit. Basically they both operate starting from the same premises: borrow money and sell short to gain more capital while all the investments are managed by a professional. While with the mutual funds this process doesn't incur a lot of risks because the money is not too much, with hedge funds the investment company makes use of high-risks techniques with the purpose of making huge capital gains.

Unlike mutual funds, hedge funds are in their majority not regulated and for being able to invest in them, one needs to be qualified or accredited in some sort. It is required to by US laws to possess good knowledge related to investment, a certain income amount per year and a net worth at least $1 million.

There is no limit set for the type of investment since profits can be obtained with almost any environment where managers will see to it to 'hedge' the risk. As such you will find investors approaching different markets making use of strategies that are not very conventional and using as such derivatives and leverage. However due to the speculative nature of the investments, the risk associated with these ones are very high.

As to the ones involved in managing the hedge funds, they get a fee for their service which is usually 1% - 2% of the funds assets for the management and 20% of the obtained profits for the performance.

A Short Guide to Hedge Funds Marketing

This part is meant to introduce you to the things that you need to do when it comes to hedge funds marketing especially now with the crisis where many investors have become very doubtful in regard to the potencies of these funds of making money. This has lead to many investors (more than 60%of them) requiring from their managers to present more transparency in their actions. For this fact you should have more awareness regarding the way of marketing your initiative.

Check out for the following useful aspects to support you along the way:

* In order to convince investors joining in you should present them your project or your funds with a lot of clarity. Display your strategy, the legal structure, the competitive advantage, the fee structure as well as the assets that will be under your management. It is important to be ready to answer all sorts of questions, many of them relating to risks, ranking, returns, valuation methodologies, management, and human resources.

* You can make use of the power point type of presentation where you implement pictures that are more often than not more relevant than words.

* Be prepared to be open about anything they may want to know about you as a person and the team you work with. You will have to make use of all sorts of marketing tools to help you stay in touch with the hedge funds prospective investors. Consider using Customer Relationship Management software to be able to regularly send in-depth reports about everything that appears along the way.

* It is also important to let them know what your management philosophy is and at the same time keep an online profile of your strategy to allow them see your transparency for the investors to make good and informed decisions.

Hedge Fund Manager Salary - Useful Info

If you are interested to know how much a hedge fund manager gets paid, then you should know that this is not as much about the salary as it is with the bonus a manger gets as a result of their good service. Investors will usually pay the manager in accordance to their performance and the good decisions the manager is making. For this fact, we should better say that bonuses are more relevant than salary compensation is.

However, a hedge fund manager salary will mostly depend on the investment company. There are for instance companies to pay employees in accordance to the profits that the entire firm makes. You must have heard cases of mangers known to earn millions in their position, others are known to have made huge fortunes with this job.

Yes, individuals like John Paulson, George Soros are known to have made billions of dollars in this industry. But you shouldn't get your expectations that high because not every such job is paid in the same way. Besides, the individuals aforementioned have made that money because they initiated the funds and as a result they have earned their biggest slice of the cake.

But in order to have an idea on how much you can make in hedge funds management you must know that on average you can earn 300k. It is good mentioning here that the more experienced a manager becomes the more they can earn in this job position. So you can indeed earn that amount for the 5 first years but afterwards chances are that you earn millions. You need to always see the bigger picture here. For instance as an accomplished manager you can start setting your own hedge fund and thus you can increase your chances to earn millions if not billions after a period of time.

How to Make Profits with Commodity Hedge Funds

Commodity hedge funds is exactly what the name indicates: a type of fund that is based merely on commodities where the net value can be of billions of dollars. This is why any type of participation into these funds will come on behalf of wealthy individuals. There is no difference between a usual hedge funds and the commodity type except for the object to where the money is invested in. You will find here also a manager responsible for making the decisions as it happens with any other fund requiring investments.

The manager is the one to decide what assets need to be invested into, what part of the total capital needs to be allocated to each of the asset and also when the right time is when one should get out of an investment. Since investors do not take part in the daily operations, the process is mostly conducted by the hedge fund manager to obtain profits from commodities. It is therefore his responsibility to get the maximum of profits out of the investment he will make with this sort of asset.

Some of the most commonly used commodities to invest into are: copper, rice, silver, crude oil, gold and ethanol. It is therefore important for the manager to get in his team a prime broker to help with the investment and the right time to make one for good profits. On many occasions, investments are thought as good possibilities to make money with various other assets in helping with the offset of price fluctuations. In this way, when the price of one of them falls, the loss will be balanced with the rise in price of another.

Do You Know What Hedge Funds Are Now?

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How to Set Up a Hedge Fund - Basic Things to Know

In the past, hedge funds have been created with the purpose to protect investors (rich people that is!) from those sudden drops in the market by making use of the market inefficiencies. For this fact they were seen as a bold concept of investment for wealthy people.

But it is not the case any more nowadays with many private investment funds that make use of their own strategy and style of investing. Now if you read this article you may be interested into setting up a hedge fund or at least have the knowledge on how to do this for the future. The problem here is that you should be in touch with many rich people or have a good connection to them because there is the need to pool together a huge amount of money.

More than this, you should have solid knowledge on how to profitably make use of their money. As to the setting up of this fund, it is not that hard to do it so long as you have the money, a prime broker, a lawyer, an accountant and an office.

But let's take it one step at a time:

* For the money you could raise it while being supported by family members and close friends.

* To get a prime broker you must make sure that they are qualified into providing fund marketing and services related to capital introduction. Retail brokerage firms must be avoided because they do not have hedge funds as one of their specialty.

* With the help of a lawyer you will gather information that is needed and start the initiative of opening bank accounts as well as brokerage accounts.

* An accountant will be there to take care of managing the account statements.

How to Make Money Like Top Hedge Fund Managers


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