To understand hedge funds, one has to understand how money is managed. The nature of the hedge fund industry is such that managers come from all areas of Wall Street and beyond. There is no one career path that a budding manager takes. Managers come from existing investment firms, brokerage houses, exchange floors, and the back office. Managers come from reading a series of books on investments, as former day traders, doctors, lawyers, and cab drivers. The path to the hedge fund industry is not necessarily paved with gold but once one arrives, the gold is there for the taking.
Over the last 15 years, I have met doctors, lawyers, professional athletes, and mechanics who have traded in their chosen professions to launch a fund. In some cases it makes me nervous, while in others I want to get the fund's wire instructions ASAP. The diversity of managers allows for varying models of success.
Some managers launch with next to nothing in assets under management and grow to billion-dollar funds while there have been managers who launched with billions of dollars and fizzled out a few years after they opened the fund.
I believe the recipe for success comes down to three things:
2. Conviction in one's ability to manage money and sticking to it
3. A sense of humor
Over the years, I have met literally hundreds of people who call themselves hedge fund managers, and my research, albeit unscientific, shows that to be successful one needs to have all ...