For Hedge Funds, After Punishing 2011, Time to Win and Recover Individual and Institutional Investors’ Confidence

The Speed Traders Workshop, High-Frequency Trading Strategies with Edgar Perez

As the industry takes off again, managers and analysts have begun to enjoy the benefits

Hedge funds are an investment vehicle typically used by larger investors, such as banks, pension funds, and large foundations. Investment in a hedge fund is limited by law and by regulation, but in return, the hedge fund is allowed broader freedom in its choice of investment vehicles. Hedge funds also utilise advanced trading strategies, such as short sales, leverage, and forex or foreign exchange trades.

Managers of hedge funds are typically compensated via not only a management fee, similar to a salary, but also a performance fee based on the performance of the hedge fund. Of course, hedge funds have many more employees than just the manager. Analysts, accountants, portfolio managers and many other junior and clerical employees are paid well, but nowhere near the level of the fund manager. Of course, the fund manager is ultimately responsible for the end result, and his or her job is usually on the line if the fund does not perform well. The fund manager needs to have exceptional knowledge of several areas of the market and to be able to time investments and leverage money. The compensation of fund managers has come under increasing scrutiny in recent years.

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