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Starting a Hedge Fund Is Easier Than You Think


A fund manager without a bachelor's degree shares the secrets to making it big in the hedge fund business.

Don Conrad has come a long way. As a teenager in the small Long Island hamlet of Port Washington, Conrad worked the night shift at a factory. He operated a pinion, which is best described as a machine with toothed gears.

Conrad spent a year in Boston pursuing his dream of becoming a professional percussionist. He attended night school at Nassau Community College in Long Island, never earning a bachelor's degree.

Now a successful hedge fund manager, how has Conrad thrived in an industry chock full of Ivy League pedigrees and advanced degrees?

"I have a PhD from the school of hard knocks," Conrad said.

Do not be mistaken - succeeding as a hedge fund manager is not easy. But for readers who have the chops to beat the market and the skills to pitch new clients, the barriers to entry are not as high as one might think.

Really, anyone can start a hedge fund.

The payoff can be lucrative. The standard fee structure for hedge fund managers, known as "2 and 20," delivers 2% of assets under management and 20% of gains to fund managers every year.

So a very small hedge fund with $10 million under management will net the manager $200,000 even in a down year. And if the fund returns 12%, the manager will earn $440,000. And if you can grow the size of your fund, those numbers can balloon into the billions. 2011's highest earning fund manager, Bridgewater Associate's Ray Dalio, reportedly received $3.8 billion that year. That's pretty good for a business where a man like Conrad can work his way to being a market-beating fund manager based on skill and grit rather than fancy credentials.

Conrad began his financial services career in 1981. His golden hair is slicked back, revealing a receding hairline. He has kept up with his other passion, the drums, playing in Latin music and R&B bands and studying at a New York music school. He speaks with the aura of a man who has earned his keep without any shortcuts.

His first job was in sales, hocking a corporate bond income fund. Conrad was then recruited to a firm called E.F. Hutton Company, later known as Shearson Lehman Hutton, where he worked his way up to a Senior Vice President position. There, then at Lehman Brothers, and finally at PaineWebber, which was acquired by UBS (NYSE:UBS) in 2000, he built a track record advising high net worth clientele.
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