Quora Answer: Do Hedge Fund Managers Make Investment Decisions, or Make Strategic Decisions?

The following is my answer to a Quora question: “Do hedge fund managers ever make investment decisions, or do they make more long-term strategic decisions?” 

It depends on the size of the fund.  Unless this is a boutique fund, of minimal size, where the fund owner and investment manager is the same person, fund managers are subject to oversight by an investment committee.  In fact, unless it is personal funds, this is a requirement.  The fund manager is supposed to manage the funds to achieve specific target.  In a very large fund, there will be many sub-funds, and there are fund managers for each fund.  Every fund focuses on a specific sector, geographic region, or is tailored to a specific investor need.  The fund manager makes decisions within the scope of the fund parameters.  This applies to hedge funds as well. 

Macro-decisions such as fund weightage, type of asset class, or even regional focus, are made before the fund is created, and any pivot away from this is beyond the authority of the fund manager alone.  This is a major strategic decision affecting the portfolio of an entire client base.  The investment committee is involved, and paperwork needs to be filed with the central bank in some cases.  Funds are not created in a vacuum.  Whether the fund is open or closed end, the type of investment horizon, the compensation structure – all this is decided at the very beginning.  The only major strategic decision is weightage.  Fund focus on specific areas or counters within the ambit of the fund are tactical decisions, not strategic.  They fall under the call of the fund manager.