Even though becoming a hedge fund manager is a highly competitive and very challenging career path, it’s not all that difficult to get your foot in the door.
“If opportunity doesn’t knock, build a door.”
— Milton Berle
Let’s just cut right to the chase: Becoming a hedge fund manager is not easy. There are a lot of hoops you have to jump through and the time commitment to your career is absurd. But since you’re here, I’m going to walk you through what it really takes to become a hedge fund manager — because believe it or not, there is more than meets the eye.
There are basically three paths that you can take to become a hedge fund manager. Unfortunately, not all three paths will be available to everyone.
In fact, your background and personal circumstances will be a deciding factor in narrowing down the most viable path(s) for you.
Now, this can be good news or it can be bad news. It really depends on your current situation.
This path is the most simple and straightforward out of all three. You start by raising money from investors and launch your own hedge fund.
Obviously, this is not the easiest path, but if you have the necessary skills, this is the quickest way to become a hedge fund manager.
You essentially go from point A to point B in one simple step, which is also why most people think this is the easiest option.
Well, let me assure you, it is not — far from it.
There are a lot of challenges with this approach, which I’ll discuss in another article, but for many, it’s still the most viable path forward, despite all the difficulties.
Especially, if you’re in a position to raise sufficient capital and knock it out of the park.
But, just so we are on the same page and there is no confusion, let me be clear that this is the most difficult path you can choose.
Path number two is slightly easier and a lot more conventional. You join a hedge fund after college and then work your way up to the position of portfolio manager.
There are many key benefits to this career path that were not really available back when I started my career in the late 1990s, and a lot of that has to do with the fact that the industry is a lot more institutionalized today.
Back then, for most aspiring portfolio managers, the path to a hedge fund started on the sell side by joining an investment bank and then after a few years making the switch to the buy side.
Today, it’s a very different industry and the path to a hedge fund is a lot less rigid in terms of your background and your experience. Which brings us to path number three.
Path number three is open to a wide variety of backgrounds and experiences. You essentially have to first build your reputation by being successful in another profession.
This might seem counterintuitive at first, but the industry continues to change and there is a growing need for specific know-how to manage all these new niche investment strategies, which is a trend that is only going to grow and accelerate going forward.
It doesn’t really matter what industry you are in. There are probably already more than a few funds that specialize in it. Which means, you want to get to a point in your career where you can add value to that process.
This is also why it’s so important for you to focus on building your reputation. Because it increases your chances to get on their radar. In which case, you don’t even have to go look for them — they will find you.
I hope this answers your question on how to become a hedge fund manager and gives you some insight into the hedge fund industry. Obviously this is a very top down and highly condensed answer to a much more complex topic, but the goal is to give you some direction, so you can pick your preferred path. And then the rest is lots of hard work and a bit of smarts.