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A hedge fund sponsor, also referred to as a fund manager, is a person who invests shareholder assets associated with the funds that he manages or sponsors. Investment strategies are created for funds to gain the greatest return. Hedge funds do not have industry-set minimum investment amounts. Sponsors generally set fund investment minimums that can range from $250,000 to over $1 million. You must have an entrepreneurial mindset and a solid understanding of shares, debt, commodities, short selling and money and emerging market spreads to be an effective hedge fund sponsor.
Performance-Based Fee Structure
Salaries for hedge fund sponsors are based on the performance of the funds they manage. Sponsors can be paid as much as 20 percent of a fund's profits. Management fees based on the percentage of assets under management, typically set at 1 percent to 2 percent of the fund's net asset value, are also included in the overall fund asset amount. Average hedge fund managers or sponsors can receive over $250,000 a year. Top-performing sponsors make millions a year. For example, according to a New York Times March 25, 2009, article, talented hedge fund managers can earn well over $250 million a year.
Fund Manager is General Partner and Limited Partner
Hedge fund sponsors are general partners at financial investment firms. They are also limited partners at the firm because they
often contribute a sizable portion of their personal wealth toward the health of the funds that they sponsor. Hedge fund sponsors are typically required to have a four-year degree from an accredited post-secondary school. They are also required to have a certified public accountant or chartered financial analyst license and several years' experience working with capital markets. Jobs are available for hedge fund sponsors in the United States and abroad at organizations including M.S. Howells and Co. TCI and J.P. Morgan Chase.
Diversified assets allow hedge fund sponsors to diminish investor risks. Because the funds are not as heavily regulated as mutual funds, sponsors can incorporate a variety of strategies to grow the funds. These leveraging and hedging strategies are applied to stocks, bonds, currencies and commodities. The direct connection between the sponsor's salary and fund performance encourages hedge fund sponsors to get the greatest return on shareholder investments for the funds that they manage.
According to Hedge Fund World, in 1990 there were approximately 600 hedge funds in the world. The funds held about $38 billion in total assets. Less than a decade later, more than 3,000 hedge funds existed. Together, the funds had about $375 billion in assets. Significant market downturns affect fees earned from fund account transactions. However, hedge sponsors continue to generate sizable salaries, even when compared to other financial advisers in the investment industry.