Junior hedge fund portfolio manager: How much am I worth?

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Hedge funds have hardly received good publicity recently, with returns across the industry hovering near negative territory and expected to be generally unimpressive for 2005, with fund of funds performing worst.

A recent report by US-based Grail Partners - saying a period of hedge fund consolidation is inevitable, with many going to the wall by the end of the decade - suggests the writing is already on the wall for some operations.

Yet for now pension funds continue to pour money into the sector: for junior professionals eager to make their mark in asset management, this is proof enough that hedge funds are still very much where the action and rewards are.

"Hiring by hedge funds has remained buoyant, particularly within merger arbitrage, which has been taking advantage of the increase in M&A activity," says Emily Ayre, a consultant at Morgan McKinley.

Richard Fraser of RJF Global Search says, "The hedge fund industry continues to grow despite recent relatively mixed performances, and despite suffering from misperceptions about high risk and volatility, much of which has been fuelled by the media."

Do you have what it takes to become a junior portfolio manager at a hedge fund? Good maths are vital: most individuals will have at least a maths component to their university degrees and a respectable CFA/IMC qualification as well.

"Junior hedge fund portfolio managers must be strategic thinkers with a broad knowledge of the financial markets, have excellent analytical and numerical skills and use these to convert funds under their management into high performers," says Ayre.

However, even with all these attributes under your belt, you do not simply move, wet behind the ears, straight into the industry. Most junior portfolio managers have three or four years of prior investment bank experience behind them, with hedge fund credit portfolios requiring managers with leverage finance experience and equity funds typically attracting people from a corporate finance background.

Many individuals make the move for lifestyle reasons - hedge funds do not generally work you as hard or as long as investment banks, whilst the West End, where most are based, beats the City for fun any day of the week - and of course, because they feel they can make more money.

So how much?

Fraser suggests a junior could expect a base of between 50,000-75,000 with what he calls a "large upside" on the bonus; Ayre suggests an individual with three years investment-banking experience is looking at a base between 45,000-65,000, with a performance based bonus that often makes up a large proportion of the total package.

But perhaps the most appealing aspect of becoming a junior hedge fund portfolio manager is the eventual opportunity of an equity stake in the business. If all goes well - and the hedge fund naysayers are proven wrong - this could mean more moolah than you have ever dreamed of.

Figures and commentary by Morgan McKinley and RJF Global Search

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