8 ms·

I work at a hedge fund (as a dev for an average Dev salary). The pay for head manager seems roughly right, and we're 1bn between about five-ten analysts with on

I work at a hedge fund (as a dev for an average Dev salary). The pay for head manager seems roughly right, and we're 1bn between about five-ten analysts with one making most of the calls. ( I give a range because some are kind of apart from the fund proper, working on starting new funds by building a performance record. I think the article might have some survivors bias, you can't say "I'm going to be a hedge fund trader" and equate that to the average income if you survive thirty years. It's cut throat and people burn out or get unlucky, we need the drop out rate. Also quant funds are getting bigger and must have a pretty different compensation scheme.

curiousDog 9y ago
What qualifications do the traders usually have? Economics,s tatistics, math degrees?
- lunchladydoris 9y ago
  Luck.
  - kamaal 9y ago
    This reminds me of a saying my boss used to tell me. During a mass hiring event, they wouldn't even bother to pick up a resume if it fell down on the floor by mistake. When questioned about the practice and asked if those candidates were just unlucky to not make it, the hiring manager replied- He didnt want to hire unlucky people.
    - deleted 9y ago
      [deleted]
- drrob 9y ago
  A friend of mine is an analyst, he has a business studies degree.
- zimablue 9y ago
  The big man was maths and engineering. Others I dunno, they're normally pretty sharp and focused and good looking ( I guess it's intrinsically client facing)
- lloyd-christmas 9y ago
  My undergraduate degree was in Math and Economics with a minor in Applied Statistics. I used little to nothing of my Math degree. It all depends on the fund strategies.
  - illuminator 9y ago
    I am about to enter my last year studying Economics with a minor in CS. What steps do you think I should take if I want to enter the field?
    - whatok 9y ago
      Totally depends on what type of fund/strategies you're interested in.
headmelted 9y ago
Right, but isn't the compensation a bit of a waste from a commercial perspective for what's been proven repeatedly to be a roll of the dice? Am I seeing it wrong? Is the compensation really for convincing Joe Public to part with his money for a really terrible deal?
- Kluny 9y ago
  It's slightly different when you get into the range of millions and billions of dollars. If you're investing 100,000, you're better off with an indexed mutual fund that charges .03%. If these funds can consistently return 10%, that is actually better than what index funds can get you, which is more like 7% on average over the course of decades, but with a lot of year-to-year variation. But then the expense ratio is 3.6% so the hedge fund clients only get 6.4%... but if that's consistent, it's a pretty decent return.
  - losvedir 9y ago
    > If these funds can consistently return 10% Well, yeah, that's the point, isn't it? I thought these funds can't.
    - JumpCrisscross 9y ago
      Some of them can, have and do (e.g. Point72, Renaissance, Soros, et cetera). This extends to many more funds [1]. Furthermore, some institutions (e.g. Yale) are consistently good at picking those funds [2]. The average hedge fund seems to eat all its excess returns in fees. But around a third of all hedge funds, mostly upstarts, die in the first few years [3]. By analogy, if you can understand that Kleiner and Google create excess returns while most VC funds do not, you can understand why a similar exponential dynamic is at play with hedge funds. [1] http://www.investmentreview.com/files/2009/12/18-241.pdf http://www.investmentreview.com/files/2009/12/18-241.pdf [2] http://m.pionline.com/article/20141222/PRINT/312229982/big-public-pension-funds-hedge-fund-portfolios-outperform-their-indexes http://m.pionline.com/article/20141222/PRINT/312229982/big-p... [3] https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/katinastefanova/2015/04/25/the-looming-talent-crisis-are-hedge-funds-due-for-a-wake-up-call/&refURL=&referrer= https://www.forbes.com/forbes/welcome/?toURL=https://www.for...
BenjaminTodd 9y ago
Thanks for the extra data point. I totally agree you can't easily use these figures as your expected earnings, since you need to adjust for the chance of drop out. (And also future industry prospects and many other factors.) Also agree about quant funds being different.
fiftyacorn 9y ago
do people get unlucky? or are the winners just lucky?
- losteverything 9y ago
  Have every reason to believe this story: My instructor in a corporate decision making class talked, ironically about luck in this way He and his college friend just received PhDs. He was hired by a consulting firm. His friend took a job in wall street. At Christmas they got together. The friend told him of the time his "firm" manager called him into the office. The manager handed him an envelope and said this is your bonus. The friend said he was so new he didnt think he would get one. He thanked his boss and left his office. The friend returned to the bosses office shortly after opening the envelope. He said to his boss "there must be some mistake." The boss said no, there isn't. We have a small group [of 13 he said later] and this is your share. My instructor wondered out loud if he should have taken a job in wall street too. The check in his friends envelope was for $5,000,000
eiliant 9y ago
Eli5 quant funds vs. hedge fund or vs. say like jane street?
- MagnumOpus 9y ago
  - Hedge funds can be quant (i.e. computerised models) or non-quant (humans analysing and making judgement calls). - Prop-trading shops or family offices do the same things as hedge funds, but are not open to the public, benefiting from less oversight or compliance requirement. Jane Street is an example, better (actually successful) examples are Renaissance Technologies and Soros Fund Management. - Quant funds can be prop shops, hedge funds or mutual funds (or something in between like managed futures/CTA funds).
GrumpyNl 9y ago
I like the statement: "or get unlucky" like its a casino.

curiousDog 9y ago

What qualifications do the traders usually have? Economics,s tatistics, math degrees?

lunchladydoris 9y ago
Luck.
- kamaal 9y ago
  This reminds me of a saying my boss used to tell me. During a mass hiring event, they wouldn't even bother to pick up a resume if it fell down on the floor by mistake. When questioned about the practice and asked if those candidates were just unlucky to not make it, the hiring manager replied- He didnt want to hire unlucky people.
  - deleted 9y ago
    [deleted]
drrob 9y ago
A friend of mine is an analyst, he has a business studies degree.
zimablue 9y ago
The big man was maths and engineering. Others I dunno, they're normally pretty sharp and focused and good looking ( I guess it's intrinsically client facing)
lloyd-christmas 9y ago
My undergraduate degree was in Math and Economics with a minor in Applied Statistics. I used little to nothing of my Math degree. It all depends on the fund strategies.
- illuminator 9y ago
  I am about to enter my last year studying Economics with a minor in CS. What steps do you think I should take if I want to enter the field?
  - whatok 9y ago
    Totally depends on what type of fund/strategies you're interested in.

headmelted 9y ago

Right, but isn't the compensation a bit of a waste from a commercial perspective for what's been proven repeatedly to be a roll of the dice? Am I seeing it wrong? Is the compensation really for convincing Joe Public to part with his money for a really terrible deal?

Kluny 9y ago
It's slightly different when you get into the range of millions and billions of dollars. If you're investing 100,000, you're better off with an indexed mutual fund that charges .03%. If these funds can consistently return 10%, that is actually better than what index funds can get you, which is more like 7% on average over the course of decades, but with a lot of year-to-year variation. But then the expense ratio is 3.6% so the hedge fund clients only get 6.4%... but if that's consistent, it's a pretty decent return.
- losvedir 9y ago
  > If these funds can consistently return 10% Well, yeah, that's the point, isn't it? I thought these funds can't.
  - JumpCrisscross 9y ago
    Some of them can, have and do (e.g. Point72, Renaissance, Soros, et cetera). This extends to many more funds [1]. Furthermore, some institutions (e.g. Yale) are consistently good at picking those funds [2]. The average hedge fund seems to eat all its excess returns in fees. But around a third of all hedge funds, mostly upstarts, die in the first few years [3]. By analogy, if you can understand that Kleiner and Google create excess returns while most VC funds do not, you can understand why a similar exponential dynamic is at play with hedge funds. [1] http://www.investmentreview.com/files/2009/12/18-241.pdf http://www.investmentreview.com/files/2009/12/18-241.pdf [2] http://m.pionline.com/article/20141222/PRINT/312229982/big-public-pension-funds-hedge-fund-portfolios-outperform-their-indexes http://m.pionline.com/article/20141222/PRINT/312229982/big-p... [3] https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/katinastefanova/2015/04/25/the-looming-talent-crisis-are-hedge-funds-due-for-a-wake-up-call/&refURL=&referrer= https://www.forbes.com/forbes/welcome/?toURL=https://www.for...

BenjaminTodd 9y ago

Thanks for the extra data point. I totally agree you can't easily use these figures as your expected earnings, since you need to adjust for the chance of drop out. (And also future industry prospects and many other factors.) Also agree about quant funds being different.

fiftyacorn 9y ago

do people get unlucky? or are the winners just lucky?

losteverything 9y ago
Have every reason to believe this story: My instructor in a corporate decision making class talked, ironically about luck in this way He and his college friend just received PhDs. He was hired by a consulting firm. His friend took a job in wall street. At Christmas they got together. The friend told him of the time his "firm" manager called him into the office. The manager handed him an envelope and said this is your bonus. The friend said he was so new he didnt think he would get one. He thanked his boss and left his office. The friend returned to the bosses office shortly after opening the envelope. He said to his boss "there must be some mistake." The boss said no, there isn't. We have a small group [of 13 he said later] and this is your share. My instructor wondered out loud if he should have taken a job in wall street too. The check in his friends envelope was for $5,000,000

eiliant 9y ago

Eli5 quant funds vs. hedge fund or vs. say like jane street?

MagnumOpus 9y ago
- Hedge funds can be quant (i.e. computerised models) or non-quant (humans analysing and making judgement calls). - Prop-trading shops or family offices do the same things as hedge funds, but are not open to the public, benefiting from less oversight or compliance requirement. Jane Street is an example, better (actually successful) examples are Renaissance Technologies and Soros Fund Management. - Quant funds can be prop shops, hedge funds or mutual funds (or something in between like managed futures/CTA funds).

GrumpyNl 9y ago

I like the statement: "or get unlucky" like its a casino.