Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Hedge Fund Manager

What it is:

A hedge fund manager is an individual responsible for directing all activities associated with the operation of a hedge fund.

How it works (Example):

The role of a hedge fund manager is similar to that of a mutual fund manager. Hedge fund managers are primarily responsible for running a hedge fund's daily affairs and for making ongoing investment decisions regarding the composition of the fund's portfolio. A hedge fund manager manages a fund's risk and return, marketing strategy, and capital funding from unit sales.

Why it Matters:

Hedge fund mangers are compensated handsomely, but they also face tremendous pressure because of the high risk of the portfolios that they manage. It is debatable how much influence the actions and skills of a hedge fund manager have on the long run return of the fund's portfolio. The difference between the return of the hedge fund and a predicted rate of return is called "alpha." In other words, alpha is a measure of the skills of a hedge fund manager.