What I do

(Warning: non-food related)

A bunch of people have asked me things about the job and the industry, and to be honest I couldn't really give a complete answer until recently. Having finished a big chunk of my training though, I'm comfortable running through it now. I'll try to make it brief but as complete and simple as possible; some of the below may be obvious but don't take it as condescending.

Hedge funds. Kinda like the big brother of mutual funds, where a bunch of people pool in their money and an investment manager is responsible for turning that into more money. A few of the key differences: hedge funds are less regulated, they're allowed to use more strategies, they're harder to get into, and the managers take a cut of the proceeds. That's a pretty high level overview but it should suffice.

There are a lot of people involved in running a hedge fund. Roles can vary based on structure but there are a group of essential functions that need to be taken care regardless. You obviously need the people who are going to be researching and making the decisions as far as how to invest, and people who are throwing in the money. There are a lot of legal costs matters to address, and infrastructure costs like with any other business. Then a prime broker (often an investment bank) provides a bunch of services related to the actual  flow of money. There's other stuff too but I don't feel like thinking too hard at the moment. Anyway, the part where KRFS comes in is Fund Administration.

Fund administration involves a lot of things, the bulk of which (at least in the scope I work in) seem to be accounting related. Hence my title, fund accountant. This doesn't mean tax (though KR has a hedge fund tax department) or anything that a CPA does or anything related to that. Fund accountants are more or less responsible for keeping the books for hedge funds and making sure everyone's working with the same numbers-- the fund managers, the brokers, the investors, etc. Consistent and accurate books are vital when you're dealing with all that money, and it's pretty common for a fund to outsource the whole process to add 3rd party legitimacy to the whole thing.

So to clarify, I'm not working for a hedge fund. I'm working for a company that provides accounting related services for hedge funds. It's not exactly accounting, but it's not exactly finance. The job on a day to day basis involves tracking the funds' asset movements, valuing securities and portfolios, investigating discrepancies, and maintaining the records all so these people know exactly how much money they're raking in and that their vision is actually being executed on the books. Given all that, we're not compensated based on the performance of the fund-- it's a flat rate for these type of services, with a slight scale depending on the size/complexity factor of the fund. So regardless of how the economy is doing, the compensation for fund administrators will be stable.

Last note: the above is especially true because hedge funds intend make a consistent return regardless of the market, where mutual funds just try and lose less money when things are bad and make a bit more money when things are good. The people who get into hedge funds tend to be very knowledgeable and good at driving a consistent profit (albeit often with more risk, and the advantage of more tools to work with).

So you may be asking, why not invest in a hedge fund? Well first of all, since they're not all that regulated there's a lot of research that goes into picking a successful one. Of course, there can also be a lot of risk, because the managers can pull some wacky techniques to try and make a ton of money if they so choose. Also, there are minimum investment requirements, usually in the ballpark of, say, $1,000,000.

If you can get there though, it's fairly reasonable to grab a few % return per month when things are going well. So on a $1 million investment (which is very low, maybe below the minimum actually now that I think about it-- lots of people carry $10+ mil), if you're pulling 5%, that's $50,000 per month. Of course, they're going to charge you 2% just to manage your investment, which cuts you down to $30,000 per month. And then they're going to take 20% of the profit, which brings you down to $24,000 per month. These are all rough numbers, but you get the idea. If you can throw $10 million into even a decent fund, there's a good chance you pull in a million dollars profit over a year. Of course, you could also lose it.*

Still though, not bad if you can get into it.

*Side note: there's a type of hedge fund called a "fund of funds" which is a hedge fund that only invests in other hedge funds. The bad news is, you're basically paying your performance and management fees twice. The good news is, you're investing in a diverse portfolios of diverse portfolios so there's really a very high percent chance of making a small, positive return and very little chance of losing anything. It seems to me like pretty much the easiest way for rich people to stay rich with zero effort. So if you fall into $100 million or so and don't mind netting say $5 million per year, investing in a conservative FoF might be a good move... at least as far as I understand things.