A hedge fund manager who ran money for one the world’s biggest funds has a warning for those considering following his path: Don’t bother.
“It’s a pretty miserable industry,” said Raoul Pal, who comanaged the GLG Global Macro Fund in London for GLG Partners and retired at 36 in 2004. “People are fed up.”
Pal made the comments in a Facebook Live interview with Business Insider’s Matt Turner on Monday.
Pal said he gets emails “all the time” asking how to get into the industry. His answer: “Don’t bother.”
Managers “don’t get paid anymore,” he said. “They work really hard hours, the stress is ludicrous, the amount of assets you are able to raise is not easy any more.”
Many of these issues are tied to a feeling that the industry has passed its golden years. Hedge funds generally are not posting the out-of-the-park returns they used to, and many worry that the investors are moving their money elsewhere.
“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 plague the industry. Smaller startups have a hard time raising money from investors, while too many funds are chasing 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’s a young person to start a career? Data analysis is one of Pal’s suggestions. The other is 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.”
Watch Business Insider’s full interview with Raoul Pal below: