According to a recent Gallup poll, more than 60% of Americans own stock in at least one company. Stock has been one of the most critical ways to save, invest, and generate income for decades. But how can you get the most out of your investments?
One of the best ways is by hiring an operations research analyst, or ORA. These analysts are skilled professionals at managing your investments and ensuring you’re placing your money in safe hands.
If you’re curious to learn more about operations research, we’re here to guide you. Read on to learn more about the benefits of using an ORA for your crypto hedge fund.
What Is a Hedge Fund?
To start, what is a hedge fund? There are countless terms to memorize when looking into investing, and hedge funds are rarely first on the list.
A hedge fund is a limited partnership made up of private investors. These investors have their money managed by professional fund managers who invest their money with a variety of strategies.
Hedge funds are known as one of the riskier types of investments. These funds use risky strategies like trading assets or using borrowed money to try to beat the average investment returns.
Due to the difficulty, hedge funds have independent managers. Instead of managing their investments, investors put their money into the fund and allow these managers to treat the money as they see fit.
Hedge funds do not guarantee a positive return on the capital placed into them. They also tend to have a much higher “buy-in” than other types of investments, such as traditional stocks.
Hedge funds also come with fees. The most common model is the “2 and 20” system, which translates to a 2% management fee and a 20% performance fee. The fee is based on the net asset value of the investor’s share.
To summarize, hedge funds are risky endeavors wherein private investors trust the fund managers with their money. The managers then use risky tactics to grow those investments and collect a modest fee on any profit.
Crypto Hedge Funds
What makes a crypto hedge fund different from a “traditional” hedge fund?
Crypto hedge funds are exceptionally easy to understand. Very simply, they’re hedge funds that consist entirely of crypto-based stocks.
Some hedge funds may mix in stocks that are related to crypto, but not strictly a cryptocurrency or coin. For example, some crypto hedge funds may invest in NFTs.
These hedge funds will often invest in many cryptos at a time. Some are more focused on the larger coins, like Ethereum and Bitcoin.
Others may focus on smaller cryptos or “meme stocks” like Dogecoin or Shiba Inu Coin. By focusing on these coins that are worth fractions of a scent, hedge fund managers hope to capitalize on potential explosive gains.
Hedge funds are often upfront about what sort of stocks and coins they intend to invest in. Discuss what crypto avenues the manager is interested in before investing.
Operations Research Analyst Roles
Now that we understand more about hedge funds, what’s an ORA do?
ORAs are responsible for analyzing the market. They’re experts who help to give more in-depth advice and guidance in the tumultuous markets.
Here are the primary roles of operations research analysts.
Perform Detailed Research
Companies aren’t added to hedge funds on a whim. The manager of the hedge fund needs to exercise extreme discretion on what companies they invest in.
Hedge funds are not meant to be purely speculatory or to go out on “hail Mary” investments. While these are good ways to make a sudden payday as an independent investor, it isn’t suited to the task of handling someone else’s money.
Once a company or stock is identified, the analyst will start their research. The research they’ll conduct will help the manager decide whether the stock belongs in their portfolio.
Research will include looking into the current and future financial well-being of the company. They’ll also explore the potential economic factors or market changes that could affect the company.
Furthermore, these analysts use their tools and experience to perform a financial analysis of the company. By doing so, they can work to uncover the company’s true value. Knowing this true value helps them make a better choice on whether the stock is worthwhile.
If there’s a difference between the true valuation and the company’s stated valuation, the ORA will look into why this is the case. They’ll conclude by identifying potential risks to the company’s value and the market as a whole.
To summarize, ORAs perform in-depth expert research on any company. Their research helps a fund manager make the final choice on whether a company is worth investing in.
Monitor Ongoing Investments
Another primary role of the ORA is to keep tabs on a company once it’s been added to the list. These hedge funds don’t simply put money toward stock and then turn a blind eye while they search for more companies. It’s the ORA who will keep that stock under “surveillance,” so to speak.
ORAs continually monitor companies for any hints that the information they’re working with may no longer be relevant. For example, an ORA will notify the manager if the company’s CEO has been ousted, or the company is filing for bankruptcy. Such information can help the manager decide if it’s best to avoid the stock.
Provide Recommendations
With their monitoring and analysis, ORAs function as advisors to hedge fund managers. Their input is often considered heavily on whether a company is worth including in the fund. Similarly, an ORA’s assessment can decide if a company is removed from the fund’s sights.
However, an ORA rarely has the authority to make such choices on their own. It ultimately falls to the manager of a hedge fund to make the choice of abandoning or picking up a stock.
It’s important to note that this is the case regardless of what type of hedge fund is in question. Crypto hedge funds operate nearly identically to hedge funds, and so their ORAs operate identically as well.
How to Find an Operations Research Analyst
Are you considering hiring an ORA? These professionals are integral for any hedge fund, but some investors will hire them for their independent portfolios. Here are two ways to help you in your search for an ORA.
Successful Listing
The first is to use a good job listing. Giving a vague or unprofessional listing won’t attract good, qualified, or certified ORAs.
Make sure your listing highlights the job conditions and what sort of hedge fund you’re interested in. Some traditional hedge fund ORAs may not want to be the ORA for a crypto hedge fund. Primarily, this is because it’s a new market to learn, which can lead to inadequate advice.
Healthy Salary
The second step is to offer a healthy wage and salary.
ORAs are not casual or unprofessional employees. Your ORA is one of your most trustworthy and expert employees. They perform market research day in and day out to ensure you’re getting the most out of your investment.
Look into what an ORA is paid in your area, as the prices vary heavily depending on location and industry. You can often attract the best employees by offering above the general “minimum wage” salary.
Crypto Fund Analyst FAQ
Crypto fund analysts are a complex topic, and there are often many questions we ask ourselves. Here are some of the most frequently asked questions about finding a specialist for crypto operations research.
Is an Operations Research Analyst Mandatory?
For a successful cryptocurrency fund, yes. An ORA will guide you toward healthy investments and steer you away from bad financial choices.
Nothing is forcing you to have an ORA if you don’t want one. While not strictly mandatory, it’s widely considered a necessary advisor.
How Many Analysts Should I Have?
Typically, one analyst should suffice. However, if your investment portfolio or hedge fund is particularly sizeable, you may want to hire more than one. Ensure they work in tandem instead of providing conflicting information.
How Do I Find the Right Crypto Hedge Fund?
If you’re looking to invest in a crypto hedge fund, you should perform extensive research to see which is worth your time.
Look through the markets of many different hedge funds. Compare and contrast their growth and the feedback of other private investors.
You should also look into what sort of staff the funds keep. Are you finding crypto hedge funds that don’t employ ORAs to help them keep tabs on the market? In most cases, you may want to keep looking.
Making the Most of Your Investment
A skilled operations research analyst is critical to a hedge fund getting the most out of its investments. A crypto hedge fund needs these professionals as severely as a traditional hedge fund will.
For more information on how to master the markets, we recommend looking into our book, Cryptocurrency Risk Management: A Guide for Family Wealth Managers. You can also contact us at TrueCode Capital to discuss your first steps into the investment world.
