Why Do Hedge Fund Managers Make So Much? - The Highest Paying Job - YouTube

whenever you think about the highest paying  jobs in the world you probably think of CEOs  

or Hollywood actors the you guys make tens of  millions of dollars a year and really the only  

way to surpass their incomes would be a star your  own business but there's actually a job that pays  

much higher than these which is being a hedge fund  manager that top hedge fund managers in the world  

actually make several billion dollars a year but  a high-level hedge fund managers still often makes  

hundreds of millions dollars a year but the top  25 hedge fund managers averaging six hundred and  

fifteen million dollars in 2017 granted these guys  are the 25 best hedge fund managers in the world  

but the point still holds as they make far more  than the top fortune 500 CEOs who didn't create  

their company for instance Tim Cook made fifteen  point seven million Satya Nadella earned forty  

two point nine million Jamie Dimon made thirty  one point five million and so on and so forth  

the only CEO that even comes close to hedge  fund managers is sundar Pichai who makes over  

two hundred million dollars a year so what the  hedge fund managers even do and why are they paid  

so much but before we jump into that let's get a  better understanding of what a hedge fund actually  

is so a hedge fund is simply a pull of money that  has been created using contributions from several  

wealthy investors and/or institutions this pull  money is then invested by the hedge fund manager  

and his team into various assets to try to make a  return the reason these pools of money are called  

hedge funds is that originally hedge funds would  be structured in a way to hold both long term  

and short term investments this way investors  are hedged to reduce risk in other words even  

if the long term investments performed poorly the  short term investments could provide a return and  

vice-versa as average people also have a similar  option to invest in which are mutual funds the  

premise of mutual funds is nearly identical  except they don't have minimum salary and net  

worth requirements for investors like hedge funds  do so basically hedge funds are just mutual funds  

for rich people but the barrier for entry into  the average hedge fund isn't too extreme generally  

hedge funds were required income of 200 to 300  thousand dollars with a net worth of at least 1  

million dollars while a lofty requirement with  the right job and good saving and investment  

habits it's not too far off for the average person  however the top hedge funds are only accessible to  

a handful of people along with big institutions  taking a look at Bridgewater associates which  

is the largest hedge fund in the world with 160  billion dollars in assets under management led  

by the famous Ray Dalio requires investors to have  at least 7.5 billion dollars and investable assets  

to participate in the fund so clearly top hedge  funds take in tens of billions of dollars but how  

much of this actually goes a hedge fund managers  well the general rule for hedge fund managers is a  

standard two-and-twenty this means that hedge fund  managers get 2% of a net worth of the assets per  

year along with 20% of the returns that produce  above a certain threshold you can see how this  

could lead to a lot of money very quickly even  if you're controlling a small hedge fund of a  

hundred million dollars just by meeting the return  threshold you'll be making 2 million dollars a  

year if you move up to managing a mid-level fund  of a few hundred million dollars or a few billion  

you'd be making 10 to 30 million dollars a year  which is the average amount top CEOs make and  

though it's hard to become a hedge fund manager it  is significantly easier than becoming a CEO there  

are only 500 fortune 500 CEOs in the world but  there are 10,000 to 15,000 hedge funds to manage  

as a result being a hedge fund manager is much  more attainable than many other top paying jobs  

so how exactly does one even go about becoming a  hedge fund manager well if you have some sort of  

a large-scale reputation a financial world you  can open your own hedge fund but that would be  

opening in business rather than getting a job  so if you pursuit the job pathway you would  

probably start off with a degree in finance or  a reputable College followed up by a couple of  

years of experience as a finance analyst given  good performance you can generally land a job  

as a hedge fund analyst in your late 20s which  already pays $175,000 with the five to seven  

years of experience you can jump up to being  a senior analyst and make 500,000 to 1 million  

dollars a year and finally with 7 to 10 years of  experience as a senior analyst you can usually  

become a portfolio manager who makes several  million dollars a year this is the only job in the  

world that allows you to start off with a college  degree and quite reasonably work your way up to  

millions of dollars a year by the time you're 50  with that being said aside from the money this  

is a pretty terrible job hedge fund managers  generally work at least 70 hours a week and as  

you're working off the corporate ladder he'll  often find yourself working over 90 hours not  

only are the hours extremely long but the hours  will be extremely stressful as well the financial  

industry is one of the most stressful industries  as you can imagine given the large amounts of  

money and high levels of return they're targeting  but that's just a reality of any high paying job  

and that's why hedge fund managers make so much  if you thought this video explained how hedge  

funds work well then make sure to drop a like and  consider subscribing in fact the more questions  

just like this one logically answered but until  then I'm Hari I'll see you guys on the next one