It's not easy to become a hedge fund manager - you need passion and instinct

Nice work: John Paulson, who earned £1bn in a year © Reuters

Hedge fund managers – hedgies for short – hit the news last week when new standards were announced for an industry that rakes in vast sums but operates in a shroud of secrecy. But just what do they do and is it something that anyone can get into?

The answer is, yes – and rich rewards lie in wait. One hedgie, John Paulson, recently bagged himself £1bn for a year's work. But getting into this fiercely competitive market takes brains, dedication, and above all, passion.

"The hedge fund manager is the person responsible for physically managing the monies, and it isn't the type of role that you can pick up straight from university," says Peter Elliott, director of Emerson Chase City, a recruitment firm specialising in hedge funds. "A fund management position is nigh on the pinnacle of the industry."

Sarah Butcher, editor of eFinancialCareers.com agrees. "You can't just be someone off the street and set up a hedge fund," she says. "Investors want to put their money with someone who has a track record."

This is because the investors are entrusting large amounts of cash to hedgies who promise an "absolute return" – profits regardless of whether markets rise or fall. They do this by using various investment tactics, one of which involves literally hedging their bets on two different commodities.

It's a job that relies on being one step ahead, so you need to be bright. A 2:1 or a First from one of the better universities – usually in something relevant such as maths, science or even engineering – will get you over the first hurdle. "An MSc would help," adds Butcher, "or advanced maths. A maths-related PhD can also be beneficial."

Firms are reluctant to reveal any information that might give a competitor the edge, so the second hurdle is just hunting out these companies. "It's difficult to find out exactly what funds are out there as many don't even have a full website," says Elliott. Most hedge fund websites just have a holding page, displaying the most basic company information. Beyond that, it's members only. The way to get around this is to register with one of the industry websites, such as Hedge Week, Hedge Fund Review or Hedge Fund Intelligence.

The London School of Economics students' union recently ran its second annual alternative investments conference, with over 30 prominent firms represented, which proves that there is some information available to graduates.

Otherwise, just get yourself down to the City. "A lot of them have been traders in investment banks," says Butcher. "Many have worked on the proprietary trading desks – trading using the banks own money. If you've worked there and have a strong track record, you can go in that way."

Professional qualifications can help too. A good way in is to become a market analyst, and according to Andrew Lodge, managing director of Nedgroup Investments, which works with and funds hedgies, the Chartered Financial Analyst qualification is becoming an industry standard.

But there's more to it than just impeccable academics. "If it were just pure maths we'd get a computer to do it," says Lodge.

Indeed, as a hedgie you must be furiously competitive, and have nerves of steel. After all, you're dealing with unimaginable sums of money belonging to powerful investors. You need to be confident in your own abilities. You must also have a feel for the markets – insiders say some can just "smell it": they can read the markets and pick a winner like a seasoned gambler betting on a horse.

But the most important thing, says Butcher, is credibility. "After all, you've got to get people to give their money to you," she says.

In return you must give of yourself. Stories of 100-hour weeks are common. But, says Lodge, that's not the whole picture. "[Hedgies] have a passion for what they do and some do work long hours. But they're not chained to the desk. We like our managers to have a social life and social skills, because it's healthy."

It's a career that has its rewards. It allows a greater level of individuality than other areas of the City. As hedge funds are generally smaller than investment banks, it gives hedgies greater intimacy and control. "There's nowhere to hide; you're not just a number," says Elliott, "which means, if you're doing well, you get noticed quickly. But also if you're not doing well, that's like a beacon."

So, do you want to be a City-type in an immaculately tailored suit with a flashy car? Then, I'm afraid you're exactly the person that won't make it as a hedge-fund manager.

"I'm not saying that these guys don't enjoy all the benefits," says Lodge, "but the real buzz is how they make their money. They trade on small imperfections in the market and that little bit of expert knowledge. That's what turns these guys on."

Tips for becoming a hedgie

* You need a good degree, preferably in a numerate subject. An MSc could also help as could a CFA (chartered financial analyst) qualification.

* Show an interest in the stock market by trading your own stocks

* Get yourself a job in the City to sharpen your teeth as a trader, analyst or by trading with the banks' own money.

* Be successful, passionate and incredibly driven – but try to find room for a private life too

* Be reliable and trustworthy

* Keep your eye on the websites Hedge Week, Hedge Funds Review or Hedge Fund Intelligence.