How many employees does a hedge fund need?
As such, the number of employees can also vary dramatically. It is possible to run a fund with as few as two employees, with much of the work outsourced but industry data shows the average fund having fifteen to twenty employees.
1 2 Hedge fund general partners and managers often create high minimum investment requirements. It is not uncommon for a hedge fund to require at least $100,000 or even as much as $1 million to participate.
Hedge funds can range from smaller boutique firms to large institutions with substantial assets under management. As a rough estimate, a larger and more successful hedge fund might have several hundred employees.
Quant funds have more IT needs and tend to have bigger teams, but many value-oriented funds start with just the Founder, one person on the investing side, and someone else in support. If you only have the funds to hire one person, make it someone on the administrative/operational/marketing side.
| Size | AuM | Total Number of Funds |
|---|---|---|
| Small | US$10-100m (average US$37m) | 4,654 |
| Mid-sized | US$101-500m (average US$232m) | 2,004 |
| Large | >US$500m (average US$693m) | 787 |
| Super-large | 10 largest hedge funds (average US$7,721m) | 10 |
The 2 and 20 is a hedge fund compensation structure consisting of a management fee and a performance fee. 2% represents a management fee which is applied to the total assets under management. A 20% performance fee is charged on the profits that the hedge fund generates, beyond a specified minimum threshold.
Most hedge and private equity funds target a net IRR of 15% for their investors (after fees). This provides their investors with a meaningful premium over historical average stock market returns of 8%.
Today, there are more than 8,900 hedge fund firms in the world. Many firms have fewer than five employees, and even the largest firms typically have only between 200 and 1,000 employees. Bridgewater Associates, for example, has the most assets under management of any hedge fund, but it only employs 1,500 people.
A small hedge fund may have fewer than 20 employees, while a medium-sized hedge fund typically has between 20 and 50 employees. A medium-sized hedge fund is more established than a small one, and it has access to a bigger pool of investors and a track record to back it up.
The day for hedge fund managers is very long and full of stressful hours. The end of the market day doesn't necessarily mean that they are done for the day. Many hedge fund managers run positions in overnight markets so they will need to monitor those trades, often late into the night.
What is the survival rate of hedge funds?
In terms of life-spans (see Figure 1), this paper estimates that 70 per cent of hedge funds die within 47 months (i.e. 3.92 years) and the annual attrition rate is 8.67 per cent per annum.
A typical hedge fund structure requires one business entity for the fund itself and a separate entity for the hedge fund manager. For instance, you may use a limited partnership (LP) structure, in which the hedge fund manager is a general partner and fund investors are limited partners.
The hedge fund is typically set up as either a limited partnership (LP) or limited liability corporation (LLC). In comparison, a general investment manager can set up any type of business structure that meets the needs of the investment manager.
One of the reasons for the perceived high failure rate of hedge funds is that their attrition rate is known to be high, approximately 9% per annum. The latter rate is generally estimated by counting the number of defunct funds in hedge fund databases.
The average age of hedge fund managers is 40+ years years old, representing 71% of the hedge fund manager population.
Bridgewater Associates
Westport, Conn. Westport, Conn. In 1975, Bridgewater Associates was founded by Ray Dalio in his Manhattan apartment. Today Bridgewater is the largest hedge fund in the world and Dalio has a personal fortune of approximately $19 billion.
There is some evidence that in approximately half of cases scrutinised, hedge funds were forced to shut down owing to various operational risk factors, such as misrepresentation of investments, misappropriation of funds/ general fraud, unauthorised trading and style breaches, or inadequate resources and infrastructure.
A "2 and 20" annual fee structure—a management fee of 2% of the fund's net asset value and a performance fee of 20% of the fund's profits—is a standard practice among hedge funds.
Hedge fund makes money by charging a Management Fee and a Performance Fee. While these fees differ by fund, they typically run 2% and 20% of assets under management. Management Fees: This fee is calculated as a percentage of assets under management.
BlackRock manages US$38bn across a broad range of hedge fund strategies. With over 20 years of proven experience, the depth and breadth of our platform has evolved into a comprehensive toolkit of 30+ strategies.
Why are hedge fund managers so rich?
Hedge fund managers typically earn above-average compensation, often from a two-and-twenty fee structure. Hedge fund managers typically specialize in a particular investment strategy that they then use to power their fund portfolio's mandate for profits.
Hedge funds are risky in comparison with most mutual funds or exchange-traded funds. They take outsized risks in order to achieve outsized gains. Many use leverage to multiply their potential gains. They also are unconstrained in their investment picks, with the freedom to take big positions in alternative investments.
New York City
New York is home to major investment banks, hedge funds, and law firms. It's also a central global player in asset management, with firms managing trillions of dollars in assets, as well as major firms in foreign exchange, financial technology, insurance, and private equity.
Who Is the Richest Hedge Fund Manager? Ken Griffin of Citadel is both the richest hedge fund manager and the highest paid. In 2022, he earned $41. billion, and by the beginning of 2023 his net worth was estimated at $35 billion.
In total, Forbes counts 47 hedge fund billionaires who have a combined net worth of $312 billion, up slightly from the same number in 2022 who were worth $310 billion.
