If I could have my time again I’d have been a windsurfing instructor at an 18-30 holiday camp in Magaluf for the first twelve years of my adult life. If I’d managed to get out alive, I would surely have had ample stories to bore my 86 grandchildren with!
But enough of my childish fantasies. More realistically, if I could have my City career all over again, which path would I have chosen? Doing the job I did during the ‘boom times’ was a lot of fun but I was never much good at research or analysis – which may have been OK in certain corporate roles but not when you’re a research analyst.
Well, I can say without any additional contemplation that I know which career path I should have followed: I should have become a hedge fund manager. These boys always seemed to have the fastest cars, the prettiest females and the most money. Call me old fashioned, but those are the kind of considerations most young men might be vaguely interested in!
Being a hedge fund manager strikes me as a lot more fun than working at a conventional pension fund or at an investment bank. Most of these firms are small so you don’t have half as much tiresome admin and tedious compliance to deal with. There’s less office politics because there are fewer people involved and your performance is more transparent so you do genuinely get to ‘eat what you kill’.
You are also often not tied to a specific sector for your whole career and you can usually invest in all sorts of different asset types (derivatives, commodities etc) which makes the job far more interesting. Hedgies can also, of course, go ‘short’ which means that their fund can make good money even during bear markets (whilst the best a conventional fund manager can do is not lose as much as the market does).
Then there’s the remuneration. As long as their fund isn’t underwater, hedge fund managers tend to be paid using the ‘two and twenty’ system. This means that a £1bn fund receives £20m a year whatever the weather just to cover ‘normal costs’ and they also get 20% of the outperformance they generate over a pre-specified benchmark. Since that benchmark is usually something like a 10-year gilt yield we’re often talking about merely having to make a return above c.2% before the real money comes in. If you manage to shoot the lights out, let’s say make a 30% annual return, you and your ten or so workmates get to split up about £56m come December! That makes the kind of salary I used to earn look like small change.
So what’s not to like about a job which is more exciting and dynamic than nearly every other occupation in the City whilst also being better paid and more varied? The only problem is that if your fund underperforms then it tends to quickly lose all its investors and subsequently you get fired … but surely that’s a price worth paying taking into account the job’s obvious virtues? What’s more, if you’re any good you just move to another hedge fund and pretend your previous firm’s failure had nothing to do with you!
Unfortunately, I was never a hedge fund manager and I doubt I ever will be. However, I am now a novelist and have written a new novel about involving a gang of City types and a hedge fund manager. The hedge fund manager is me, vicariously exploring my hedge fund fantasies. Read it to see what you, and I, have been missing.