Get involved in as many financial-related activities as you can while in high school and college. Join investment clubs and follow the stock market closely. Many clubs compete in regional or national investment competitions, which will give you a good opportunity to test your skills against others and make networking contacts. Some colleges provide students with the opportunity to run an actual hedge fund or investment fund. These funds are managed by students with the help of a faculty advisors. Schools that offer these types of opportunities include the University of Missouri (Mizzou Investment Fund), University of California-Berkeley (Berkeley Investment Group), and Pennsylvania State University (Nittany Lion Fund).
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At small funds, the manager performs the research to find the best securities to buy, sell, or hedge. He or she also manages the firm’s operations and administrative staff. At a large fund, the portfolio manager is assisted by research analysts, accountants, auditors, risk managers, traders, and the chief operating officer, chief financial officer, and other managers, among other staff. Some of these duties may be outsourced to hedge fund administration firms owned by investment banks, public accounting firms, and independent administrators.
Most portfolio managers invest a substantial proportion of their own money in the fund. This allows them to align their personal interests with those of their shareholders. It also helps with fundraising and promoting investor confidence by sending a signal to investors that they have a personal stake in the successful outcome of the fund.
If a manager plans to launch a new fund, he or she must first determine the trading and investment strategy for the portfolio, then develop a marketing and capital-raising business plan. They work closely with lawyers and administrators to set up the hedge fund, and then must recruit, select, hire, and retain employees to oversee different aspects of the fund—from accounting and compliance, to risk management and financial analysis. During this time, they meet with prospective investors to try to convince them to invest in the fund.
At an existing fund, hedge fund managers have many duties. One of their most important tasks is investing in a wide variety of financial instruments in addition to stocks, including bonds and other interest rate–sensitive securities, commodities (e.g., natural gas, gold, copper, corn, wheat, cattle, etc.), and currencies. Hedge funds also invest in real estate (especially commercial properties) and companies that are experiencing financial difficulties (i.e., possible bankruptcies). They manage the hedge fund portfolio and monitor risk, and readjust its components to guard against loss of market value and to increase its profits. Hedge fund managers must meet regularly with analysts and other employees to review stocks and other financial instruments and adjusting financial models that form the basis of the day-to-day management of the fund. They also meet with or otherwise communicate with shareholders to provide updates on current funds.
Hedge fund managers continue to manage and expand their portfolios by assessing companies to determine the true value of their stock prices—and purchasing shares if they believe that the stock is undervalued. They do this by reading industry reports and publications, utilizing financial modeling software, talking with analysts, meeting with executives of the company, assessing the overall strength of the industry and the company’s role in it, among other methods. Managers also analyze various investment classes and monitoring domestic and global stock markets to identify promising assets for the portfolio.
Just like any bosses, hedge fund managers must oversee in-house staff (accountants, lawyers, investor relations specialists, etc.) and/or work with staff at hedge fund administration firms. They must make sure that everyone is doing their jobs effectively and follow company rules and government regulations.