Warren Buffett, a former hedge fund manager at the Buffett Partnerships, ’56–’69

What Is a Hedge Fund Manager?

A hedge fund manager is a special type of investment manager for people and businesses in the premium market for investment management.

Hedge fund managers, like other types of investment managers, make investments on behalf of investors.

Hedge fund managers typically manage stock purchases and sales through a fund rather than through a different account for each client/investor.

Other types of investment managers typically do not use the fund structure. They instead manage investors’ money through separately managed accounts they may have already established, such as Interactive Brokers, or Robinhood.

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What Does a Hedge Fund Manager Do?

The most important thing a hedge fund manager is tasked with is ensuring they deliver investment returns that beat their competition, without undertaking added, unnecessary risk to their investors’ portfolios.

How Are Hedge Fund Managers Different Than Investment Manager-Brands I May Have Heard of?

When people seek another party to manage their investments on their behalf, a few brands may come to mind.

Edward Jones, Raymond James, they are investment managers that serve the most basic level of people seeking investment management services. Anyone can invest with them so long as they can summon the minimum investment required to establish an account.

New clients fill out a risk tolerance profile and the investment manager recommends stock/bond investments based on that profile’s preferences.

They manage investors’ investment accounts with stockbrokerages they may have previously established, such as Fidelity, TD Ameritrade, or even Robinhood.

What Type of Investment Manager Is a Good Fit For Me?

The purpose of hedge funds are to deliver risk-adjusted, high investment returns. However, not everyone is simply searching for high-performance risk-adjusted returns, oftentimes different people value different elements of investment management differently. You must ask yourself the question: What is important to me in an investment manager? To some, they decide finding a manager through someone they already know is important. Others may decide that they want a large company for the perceived security, or perhaps a small one for the personal attention. Others may focus their search for risk-adjusted impressive-performance, it depends on the preferences of the client.

Hedge funds can be difficult to qualify for, a second-best option is a high-quality mutual fund that has proven performance. Click here to learn about hedge funds vs mutual funds.

If top performance is the most important factor in your search, selecting a top hedge fund is an appropriate choice for those requiring high-performance if you are an accredited investor.

If obtaining accredited investor status is not possible, you do have options. There are a few top mutual funds that have delivered good results over time and are still worth investing in if your own personal investment management skills fall short of the investment track record of some of the top mutual funds over the previous five years.

Well-Known Fund Managers

Warren Buffett

Warren Buffett began his career as a stock analyst and eventually opened up his own hedge fund in the mid-’50s. Originally employed by Benjamin Graham as a securities analyst, he developed a talent for stocks and founded his own fund.

Ray Dalio

Founder of the world’s largest hedge fund in 2021, currently about $140 billion in AUM. He started the fund in 1975 and grew the fund, mainly through institutional investors such as pension funds, institutions, and sovereign wealth funds.

Hedge Fund Manager Designations

Hedge fund managers must generally be sanctioned by the United States Securities and Exchange Commission or FINRA. There are a few common designations in the finance sector that are commonplace, but not essential for hedge fund managers. The world’s most skilled, famed, and wealthiest investor has obtained no industry designations, Warren Edward Buffett, CEO of Berkshire Hathaway.

CFP

The proper name of the abbreviation CFP is Certified Financial Planner. Individuals with this particular designation essentially help people explore their financial options and make plans for the future. The CFP designation indicates a certain standard of industry knowledge but makes no suggestion about experience or skill held by its holder.

Series 63

The Series 63 is a common designation in financial services, formally known as the Uniform Securities Agent State Law Examination. A common designation held by stockbroker representatives, such as when you may call your broker (for example TD Ameritrade) with a simple question about a stock. Although common to stockbroker representatives, other professionals in the finance industry may hold this designation.

CFA

The Chartered Financial Analyst is one of the most coveted designations in the finance sector due to its difficulty in passing it, and its prerequisite requirements. Holders of this designation have a good deal of analytical abilities and knowledge.

CFS

Certified Fund Specialist is a designation given to individuals who pass the exam to become a CFS. They are specialists in mutual funds and in the mutual fund industry. If they wish to buy or sell securities to clients they must hold additional designations in conjunction with the Certified Fund Specialist designation. The Institute of Business and Finance provides training for the CFS.

CRM

The Certified Risk Manager designation is an industry designation administered by the Global Association of Risk Professionals (GARP). The main focus focus of this designation is to analyze risk (how much and the different types) in the global financial markets. Although the designation exists, it has yet to reduce or eliminate stock market corrections, or full-blown bear market crashes.

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