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Raoul Pal, who comanaged the GLG Global Macro Fund in London for GLG Partners and retired at 36 in 2004 commented: “It’s a pretty miserable industry.”
Pal said he is getting mails on a daily basis asking how to get into the industry. His answer is “Don’t bother.”
He said that managers “don’t get paid anymore. They work really hard hours, the stress is ludicrous, the amount of assets you are able to raise is not easy anymore.”
Many of these concerns are associated with the feeling that the industry golden years have passed. Hedge funds generally are not showing the out-of-the-park returns they used to, and some are concerned that the investors will start seeking other ways to put their money to good use.
“The lower returns are by design,” he said. “When I left the industry it was at that moment that the hedge fund industry started switching to taking pension-fund money, and the pensions wanted it to look like a bond. They want low volatility, 8% returns. So that makes the big mangers get really rich, like Bridgewater, Brevan Howard and all these guys that have billions and tens of billions of assets. But nobody else can make money.”
Other issues are undermining the industry. Smaller startups are facing a hard time raising money from investors, while too many funds are pursuing the same trades, he said.
“So everyone wants to a move to a family office,” Pal added. “That’s the new thing. But the problem is there’s not that many rich families that have investment offices that let you invest in German real estate versus whatever it may be.”
So where should a young person begin a career? Pal’s suggestions was entrepreneurship.
“The highest return on capital right now is not investing — it’s building a business,” he said. “You can make 20% a year owning a coffee shop, but you can’t make 20% easily, you’d have to beat all the best hedge fund managers in the world, in the stock market.”
“Start businesses,” he said, “and that will make you money.”