<p>
</p>
<p>Not that it hasn’t been tried. 
:p</p>
<p>A few things.</p>
<p>Being successful and getting a 500% return in 24 months in a bull market using an individual brokerage account with high bid/ask spreads and commission is impressive, but is almost exclusively luck. No amount of research is going to provide consistent returns like this. “Trading” is just gambling that you feel good about. Investing over a longer term the commission and bid/ask will eat up any potential profits.</p>
<p>Hedge funds typically take 2% of your assets and 20% of any profits every year. With this fee structure, something absurd like 99.4% of all funds have been inferior to dumping your money into SPY over the last 10 years or so, especially the big name ones. The last 5 years none of the brand names have beat S&P I think.</p>
<p>There are a lot more jobs than hedge funds in finance. I think Venture capital and Private Equity or big consulting firms are more interesting than asset management with questionable value add.</p>
<p>To answer your question, not that smart. Its more about being able to both meet people and network and then differentiate yourself from all the other above average type A new grads they meet. I’d focus on finance instead of accounting as well for a major.</p>
<p>Focusing on finance does not preclude getting a degree in accounting.</p>
<p>I’d focus on math first, if you can hack it. Math is the absolute.</p>
<p>Accounting is good because getting your CPA offers you a career, and as far as trades go, this is a nice thing to have in your pocket.</p>
<p>Deciding on working at a fund as a teenager is a nice goal, but it’s got little to do with reality. Accounting is a good, solid trade, and you can make a good living. If you can stand the tedium, do it.</p>
<p>Hedge funds represent only 1.1% of total US investments held by institutions, according to Wikpedia. It is ONE of the investment vehicle that big investors used to diversify their investment holdings. It does not appear to be beating the market in recent years based on their performance and fee structure, but it still has a seat in the investment community, although it is more regulated now.</p>
<p>As a young man, you can work for hedge funds although just like private equity and venture capital, pedigree is important, you most likely need to attend a top 20 schools with impressive academic credentials.</p>
<p>A degree in accounting will mean you spend a lot of time going over (functionally useless) rules and stipulations that don’t really matter and employers will wonder why you arent trying to use your specialized degree. Any relevant accounting statutes are picked up quickly in finance (ie FAS XX) so the coursework isn’t nearly as good as the financial coursework in developing you as a business professional. Case studies and speaking the language specifically to make yourself presentable.</p>
<p>Same issue with Math. Some funds (AQR comes to mind) are based around math, but most are more financial analysis.</p>
<p>Pedigree is very important for hedge funds.</p>
<p>Now, to your point of a reasonable degree that guarantees solid employment, I agree with you on the accounting/CPA route versus trying to specifically find a hedge fund. However, while their unemployment is low, people forget most accountants (esp big 4) don’t make as much anymore, the attrition is high, and the work is drudgery.</p>
<p>Above all else, hedge funds look for people with breathtaking intuition about the interaction of math and the real world (not quite the work that Quants do, but in that direction). It’s a combination of quantitive reasoning and people skills.</p>
<p>I am young and obsessed with economics like you. I’ve been studying economics and investments and business/politics on my own since 7th grade, and investing since that time too. I’ve been networking with the Council on Foreign Relations, inside the Sf Federal Reserve (many see it as irrelevant to hedge funds, but believe me, central banking not), and have been invited to internships at Dow Jones and Rothschild Investment Trust at the age of 17. I’ve also had many mentors.</p>
<p>From what I can tell, you want to start your own investment institution. Here is what I can tell you:
-Everybody is a genius in some way, but you have to make your genius work for the hedge fund. By genius, if you mean a blazing combination of observant, intuitive, and communicative skills, then yes, you need to be a genius.
-You do not have to be extremely gifted in math. In fact, overreliance on math is deadly (e.g. ever heard of LTCM?). However, you must be good at technical analysis. Technical analysis will give you the timing and discipline that is so often missing from fundamental investing.
-If you want to start a hedge fund, YOU NEED CREDIBILITY. Unless you have connections, and a publicly recognized genius, you must get experience and reputation before people trust you with money! Credibility is the most important currency on Wall Street. Could you get this job? Maybe you could talk yourself into it, but be prepared for blood, sweat, and tears, and possible termination of employment (it happens).
Some other revelations:
-Don’t diversify excessively – after around 20 or 30 stocks, you are just setting yourself up for average returns. Plus, 20+ stocks is the threshold that diversity itself can protect you from risk.
-If you are starting a fund, you, or your partner, must be one hell of a marketer. Most startup funding for the fund’s management operations come from the fund’s investors themselves. You must be prepared to spend a couple years travelling like hell, marketing like hell, and schmoozing like hell. If you are not a marketing genius, I suggest you find someone.</p>
<p>PM me so we can share tips and resources. I’m interested to see where you’ll go.</p>
<p>
</p>
<p>This. I recommend reading Nassim Taleb’s “Fooled by Randomness”, which argues that we too often confuse luck with skill and how this can be deadly in finance (John Paulson is a perfect example…made it big with a huge gamble in subprime, currently getting destroyed in gold…IMO he got very, very lucky). No doubt that you have skill, but we don’t know how much luck was involved - and the market has been absolutely great the past couple of years. </p>
<p>From what I’ve experienced, 1) hedge funds are usually pedigree-obsessed, and 2) starting your own hedge fund is much harder than people make it out to be. I think only Wharton/Harvard are heavily recruited by larger funds straight out of UG, and even those recruits are just a handful. Also, we’re approaching the end of the golden age of hedge funds - you can’t start out trading in your bedroom and end up managing a $10bn fund anymore, and many funds do not outperform the market. And raising funds is a hell of a lot harder than most people realize. </p>
<p>Do well in school, go through the typical finance recruiting for IBD/S&T, and work your way up. If you are passionate and good at what you do, you will succeed.</p>
<p>I agree fully with TheBanker.
(nice name btw. I wish I could get a username like TheFinancier/TheStatesman/TheRockefeller etc)</p>
<p>Hedge Funds: A Compensation Scheme Masquerading as an Asset Class</p>
<p>Not that there is anything wrong with 2 and 20.</p>
<p>EM1994, you are off to a better start than me. I remember taking 1000 and doubling it in a year. Then I doubled it again. Doubled it again. In 5 years I was up 20 to 30 times my money. Made most of the money because of the movies Star Wars, Close Encounters of the Third Kind, gold and silver. </p>
<p>I remember sitting in my bedroom and thinking if I double my money every year, I will have more money than God. </p>
<p>Then I lost it all. Margin requirements were increased in silver. I started buying call options. Didnt know what I was doing in options so I lost. Final loss was RCA call options. </p>
<p>Hope that doesnt happen to you EM1994.</p>
<p>I ended up an option market maker. Kind of ironic. </p>
<p>I see EP1994 that you are getting advice from young people which is good. I dont know what the opportunities are going to be in the future. </p>
<p>I wanted to work on a trading floor so I took a menial job on a trading floor to start. That worked for me. I am not sure but just getting a job where you want to work may be a good step eventually unless things have changed.</p>
<p>Making contacts is huge. You can have more shortcomings and still get a job if somebody likes you.</p>
<p>There are firms besides hedge funds and things change. You are young. Keep an open mind.</p>
<p>If you have a passion for something you should go for it. You cant get where you want to end up if you dont try.</p>
<p>Good point dstark. People’s careers in finance shouldn’t be based on positive experiences gambling in common equity. You hear a lot of stories about how much people made or are making and very few of the reverse, so the perception is heavily skewed.</p>
<p>In this age of quantitative easing, ‘technical analysis’ is out the window too. No DCF model has any sort of predicatability right now when all of the market moves are predicated on fed sentiment</p>
<p>
</p>
<p>I think fundamental analysis is out the window is a more correct status for this market.</p>
<p>Turning 500 to 2500 in 18 months means around 10 percent compounded gain each month-- it’s not that great. You know that you are serious in trading if you understand risk management, and if you can achieve consistent profitability each month (e.g. average of 10% each month, and not like -5% this month, then 25% next month). </p>
<p>You must have records of your PnL each day, and analyze your successful and losing trades. You must have a reason for each position, and most importantly, you know your target exit and stops. </p>
<p>Hedge funds are not just interested on your profit. You must also show some sort of system, and that you can scale up. Understanding portfolio management is a must!</p>
<p>Post 34 is ridiculous.</p>
<p>10 percent a month compounded is huge…</p>
<p>You would be the best investor of all time if you could keep this up over time…</p>
<p>Of course…this is the first and only post written by that poster…</p>
<p>^it’s decent for that much capital being managed.</p>
<p>Think about it. If your base capital is 500, achieving 10% compounded gain each month is not that difficult. First month, you only need to be up $50, next month $55, until the 17th month which is about $230. </p>
<p>Ideally, you need start with really high returns for your small capital, maybe 25-30% a month and turn that 500 to 2500 in 8 months. </p>
<p>I only find 10% a month impressive if your capital is at least 50K.</p>
<p>Em1994 – I should mention my nephew is not doing trading or anything financial – he is a member of the executive team which I believe means they’re involved in long range planning, growth strategy, and some HR issues. I know that’s not what you’re interested in but I’m just trying to say there are other roles at hedge funds that are not purely trading/money making.</p>
<p>Another possible pathway could be working at an investment bank that runs its own hedge fund. I believe Fortress does this.</p>
<p>Good luck.</p>
<p>To get a return of $2500, I really think you were investing in speculative stocks, such as biotechs. Anyways, that’s a phenomenal return. Whoever keeps ranting on how it’s average, is quite incorrect. However the people who see a chance of luck, are possibly right. With the given bull market of the past few years and the stock market’s strength, it seems doable. I’m really interested in the “pedigree” that most people are saying it takes to get into a renowned financial institution. Also, could others provide people like us with information regarding the background that is usually held by these first time financial individuals. All of the posts about internships are great, anything else to add?</p>
<p><a href=“nice%20name%20btw.%20I%20wish%20I%20could%20get%20a%20username%20like%20TheFinancier/TheStatesman/TheRockefeller%20etc”>quote=Ractogon</a>
[/quote]
</p>
<p>Thanks 
you could always make a new account…or better yet, CC could make a feature letting us change usernames. </p>
<p>
</p>
<p>Check out WallStreetOasis, but keep an open mind while you’re there. I will say that the level of recruiting at the largest firms for each school pretty closely follows USNWR, with some exceptions based on geography.</p>