An individual who manages a hedge fund’s operations is the hedge fund manager. They make a trade and investment-related decisions on the investor’s behalf. Their responsibilities include overseeing fund performance and safeguarding investors’ interests and assets. But that’s not all. Read on to get an overview of a hedge fund manager’s roles and responsibilities.
A hedge fund refers to a private investment funds pool that uses complex and varied proprietary strategies to trade and invest in multiple products. These complex products include unlisted and listed derivatives.
In other words, a hedge fund is an investment pool, which takes both long and short positions, sells and buys equity, trades derivative products, commodities, convertible securities, currencies, bonds and initiates arbitrage to earn returns at decreased risk. By applying innovative investment approaches, these funds try to mitigate risks arising from market volatility.
Hedge fund managers must have a sales and marketing plan, risk management strategy, clear investment goals and strong market knowledge. They manage and oversee the overall functioning of a hedge fund. Following are some of the major tasks of hedge fund managers:
These managers reconcile the values of investments periodically (usually every month). Hedge funds aren’t managed like mutual funds. Hence, it is not mandatory to announce the fund’s NAV (Net Asset Value) at regular intervals.
A hedge fund manager oversees teams of advisors, accountants, traders and investment analysts. He/she administers all the tasks that the teams perform.
They provide investment advisory facilities to the clients through continuous monitoring of their portfolios. Besides, they offer information related to the latest financial products.
Take vital investment decisions is a hedge fund manager. They work towards hedging the risk factor without disturbing the returns. For this, they incorporate multiple investing and trading strategies.
A hedge fund manager effectively communicates with their clients to better understand their risk appetites and needs. He/she does so to align the fund’s goals with the client’s goals.
They perform constant and comprehensive market research. They examine the market trends and use various software tools to scrutinise multiple investment metrics.
Such a manager is responsible for strategizing and chalking out profitable investment plans. Other than this, he/she has the following duties:
A hedge fund manager utilises a client’s funds for investment in several asset classes through the implementation of multiple strategies. He/she needs to consider customers’ interests while using their funds. Further, he/she must ensure that the assets of investors are well protected.
The basic duty of these managers is to manage risks and deliver favourable returns efficiently. They work towards raising an investor’s yields and ensure that a fund’s value grows.
The Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 of SEBI regulates hedge funds. The managers must ensure that their investment decisions are in accordance with such regulations.
According to SEBI’s guidelines, a hedge fund manager has to report a fund’s strategies and objectives. These managers are usually associated with hedge fund firms, private equity firms and investment banking firms.
These managers usually offer aggressive investment strategies and get rewards when they fetch enough returns for the investors. They receive payments by way of share in gains and fees. They earn above-average compensation compared to the industry. These managers generally adhere to a 2-20 compensation strategy. They get a 20% (maximum) share in gains and levy 2% as management charges.
Hedge fund investors usually comprise banks, insurance companies, pension funds and endowments, families and HNIs (high net worth individuals). This fund functions either as offshore investment corporation or a private investment partnership.
It doesn’t need registration with the regulator of the securities market and isn’t subject to timely disclosure of Net Asset Values.
A hedge fund manager performs continuous and extensive market research in order to locate multiple investment opportunities. They possess strong communication and interpersonal skills. Besides, they have a detailed knowledge of relevant financial instruments. So, before investing in hedge funds, you must choose a highly experienced hedge fund manager. Happy investing!
Ans: A hedge fund manager mostly requires master’s and bachelor’s degrees in finance. However, he/she may possess professional qualifications such as CAIA (Chartered Alternative Investment Analyst) and CFA (Chartered Financial Analyst). These managers spend a substantial amount of their time in analysis, research and meeting clients.
Ans: Hedge denotes offers protection against risk. These funds invest in numerous asset classes to safeguard a client’s funds against risk. They’re highly volatile in nature. To benefit from market fluctuations, they keep both short and long positions in unlisted and listed stocks.
Ans: Hedge funds are ideal for individuals with a strong knowledge of risk since they’re highly volatile. Investors with a high-risk appetite can invest in these funds. Additionally, the minimum amount of investment is more for these funds.
Ans: A hedge fund is not as common as a mutual fund scheme in the Indian market. At present, it may borrow 200% (maximum) of the fund volume. However, these funds are a little bit costly.
Ans: Yes, hedge funds follow certain market-neutral strategies. In this case, the objective of a hedge fund manager is to mitigate market generated risk through investments in fixed income products, arbitrage funds, convertible bonds and short/long equity funds.
Want to put your savings into action and kick-start your investment journey 💸 But don’t have time to do research? Invest now with Navi Nifty 50 Index Fund, sit back, and earn from the top 50 companies.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
20 Best Large Cap Mutual Funds to Invest in India (February 2023)Large cap mutual funds are those equity schemes that invest a major portion of their assets under m... Read More »
10 Best Nifty 50 Index Funds in India to Invest in February 2023What is the Nifty 50 Index Fund? Nifty 50 index funds are a type of passively-managed equi... Read More »
15 Best Mid Cap Mutual Funds in India to Invest in February 2023A mid cap mutual fund is a type of mutual fund that invests in the stocks of mid-cap companies. As ... Read More »
5 Best Technology Mutual Funds in India (February 2023)Technology mutual funds are sectoral mutual fund schemes that primarily invest in the stocks and de... Read More »
What are Mutual Fund Returns and How to Calculate it?Mutual funds are gradually becoming a popular investment option in India because of their many bene... Read More »
What is Midcap Index – Features, Types and Why Should You Invest in 2023?What is Midcap Index? A midcap index is a stock market index that has companies ranked between 1... Read More »
20 Best Liquid Funds to Invest in India (February 2023)Liquid funds are debt funds that invest in short-term assets with a maturity period of just 91 days... Read More »
15 Best Multi Cap Funds to Invest in India (February 2023)Multi-cap mutual funds are the kind of funds which invest their corpus in stocks of large-cap, mid-... Read More »
Index Fund – Types, Benefits, How does It Work and How to Invest in 2023What is Index Fund? An index fund is a passively-managed mutual fund with a portfolio built to t... Read More »
Best SIP Mutual Funds To Invest In India (2023) – Its Types And TaxationA Systematic Investment Plan (SIP) is a convenient way to invest a fixed sum in mutual funds. For i... Read More »
All information is subject to specific conditions | © 2023 Navi Technologies Ltd. All rights are reserved.