The success of a hedge fund firm is highly dependent on the proficiency of its fund or portfolio manager. But behind every hedge fund manager is a hedge fund analyst who ensures that only the right investment moves are undertaken.
With large amounts of money being moved, it is the task of the hedge fund analyst to minimize risks and maximize returns. It’s an all-important position that actually charts the income generating potential of the organization.
The job of a hedge fund analyst
Prior to making an investment move, the hedge fund manager would seek the green light from the hedge fund analyst. In effect, it’s the analyst who has the power to influence the decision of the hedge fund manager. The role practically dictates what should be done.
Here are the key functions of a hedge fund analyst:
Conducts a comprehensive review of investment proposals
When an investment proposal comes in, the hedge fund analyst begins an in-depth and exhaustive analysis. All pertinent information or data are gathered and more research is performed.
Once the hedge fund analyst formulates the investment thesis, a recommendation is made. The results of the extensive research and analysis form the basis for the endorsement or rejection of an investment proposal. Hence, there’s always a solid foundation.
Formulate strategies & structure portfolio
A hedge fund analyst works in close coordination with the hedge fund manager. They brainstorm together to come up with the best possible strategy to implement. Part of that is discussing how to structure the fund or portfolio hedge while studying the ways to mitigate the identified risks.
Monitors the investment
When the hedge fund manager approves the transaction, the duty of monitoring a particular investment or portfolio rests with the hedge fund analyst. There’s a possibility that the results from earlier research have changed there’s a need for constant tracking. The changes would prompt the analyst to performs more research to update information.
It’s hard to find a hedge fund analyst who can do the herculean tasks mentioned. The candidate should be knowledgeable in many areas such as market and economic factors, financial analysis, valuation, risk assessment, and timely reporting among others.
In short, a hedge fund analyst is the indispensable partner of the hedge fund manager. All actions taken is anchored on the opinion and estimation of the analyst. The critical nature of the position essentially makes it the backbone of the hedge fund firm. Every decision is well-informed and that’s reassuring to investors.