Monkeys,
Have an interview this week with an investment management group. I was just hoping someone could help explain the difference between a hedge fund and an investment management group. Cant find too much info about this online.
| +69 | If and when to move to a pod? | 16 | 59m | |
| +68 | Pod Shop Regret | 23 | 1d | |
| +55 | Best SM seats in 2024? | 50 | 6s | |
| +31 | Fastes PM progression ever seen? | 39 | 20h | |
| +23 | Understanding pod shop leverage & cash usage | 2 | 18h | |
| +16 | Are you making money these days? | 9 | 3d | |
| +12 | Point72 Academy Case Study | 13 | 2d | |
| +12 | Mid to Low Frequency Quantamental | 1 | 4d | |
| +10 | Track record to start a small hedge fund? | 6 | 5d | |
| +9 | Suggestions for market structure analysis & better trades | 1 | 4d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Investment managers that you are probably thinking about are the asset managers, which are for long term investments. Hedge funds are a type of investment manager but are shorter term generally.
The asset managers invest for someones retirement account for example, where a hedge fund is for some guy with excess cash looking to potentially get huge returns one year that doesn't care if he loses the money. Someone wouldn't put all of their retirement in the hedge fund because its too risky generally.
There are a few more differences, but the main ones are time horizons and volatility, along with the fact that there are loads of different strategies specific to each type of manager.
As a 2nd year IB guy I'm surprised how little (nothing) you know about Asset Management. Every point above is generally incorrect.
HF try to deliver outstandish returns to wealthy or institutional investors by taking a lot of risk and investing in swaths that nobody would touch (think greek debt). Asset managers receive mandates from regular folks, rich folks, endowments, pensions funds, etc to manage a certain amount of money in a certain way. These are the people that take care of your 401k, your life insurance, stuff like that. It can range from : "I want you to invest my money so that it grows at the same rate as the S&P500" to "I want you to try to beat the market by at least x basis points". The more work it requires the more expensive it is
Basically: - hedge funds target wealthy investors (think more than 5 million investable assets) while asset managers advertise to everyone (btw hedge fund are not allowed to advertise). - HF are not allowed to take regular folks as clients because they are not financially sophisticated enough and because it is not interesting for the HF manager - HF are very loosely regulated, on the opposite of AM. Basically if you are rich you don't need the gvt to protect your ass. Hire an advisor - Rich folks have a high tolerance and willingness to take risk, so hedge fund managers promise them that they can deliver returns that are both uncorrelated and above the market by taking a lot of risk. Some funds deliver, others don't. Overall HF don't necessarily beat the market. - It has been proven that HF add diversification to an already diversified portfolio. The problem is that the due diligence necessary to select a manager can be prohibitive for a small investor - Another difference is that hedge fund use a lot of derivatives, way more than a simple asset manager. Derivatives are good for leverage/risky behaviour. Basically it's investing on steroids: Go big or go home. They usually go home - HF jobs are generally more sought after that asset manager jobs. They pay more, are more demanding, prestigious but also more volatile. Asset managers jobs are safer.
The main point is just regulation. A hedge fund is just a legal wrapper where you are limited to sophisticated / accredited investors (i.e. institution and rich people). That frees hedge funds from some of the constraints that other regulated investment funds have to operate under, such as the ability to use leverage and shorting.
Strategy-wise, being a HF doesn't mean anything. Some HFs are market neutral, some aim to make absolute returns, some aim to beat the market, some are very diversified, some run very concentrated books, etc. You can't really generalise. In terms of pay and prestige, you'll get a lot more of both by being the PM of one of the big Fidelity funds than at some no-name $100m HF, so again, it depends.
Quae earum qui esse omnis. Iste distinctio harum officiis vel aut est facilis. Voluptatibus reprehenderit autem tempore enim voluptatum autem. Labore ducimus sit corporis fuga. Temporibus unde quia aut natus molestias in. Veritatis in eveniet dolore temporibus dolorum molestiae aperiam error.
Et est consequatur deserunt eum consequatur inventore porro. Qui sed voluptas aspernatur illo eaque officiis et. Iusto quis rem et perspiciatis unde ut dicta. Sint alias hic ad.
Earum sed ullam animi. Sequi et reiciendis consequuntur. Ut minus sint beatae aperiam aut dolores expedita labore. Suscipit eos voluptas culpa.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...