The changing face of talent at hedge funds
By Samer Ojjeh, Principal at EY – Technology continues to be a major driver of change within the hedge fund industry, with a marked effect on hiring practices. Managers are realising that to survive in today’s highly competitive and innovative environment, they need to look beyond the traditional talent pool of portfolio managers, analysts and quantitative or algorithmic fund managers that have built the foundation for decades.
Managers want and need talent in every function and at every level that embraces and understands digital technology. Not just programmers in the back office – yes, those too – but across the spectrum from PMs and risk to finance.
Hedge fund managers are deploying new technology such as machine learning, artificial intelligence and robotics to manage routine tasks, including data reconciliation and controls, expense reporting, client reporting, internal management reporting and shadow accounting. Freeing staff from these rote processes opens more time and resources to design, deploy and utilise new strategic, analytical solutions.
However, finding the right talent and hiring capable candidates is proving to be a hurdle for managers. EY’s recent hedge fund survey found that more than half of them are having difficulty hiring executive investment professionals. Add on this growing need for staff with the technology skillset to manipulate vast amounts of data and finding the next great employee becomes even more challenging. Managers are competing for them not just among themselves, but against tech giants, FinTechs and enticing startups. It’s just a hard environment out there to hire the right tech job candidates when they have such a wide array of employment choices.
This new normal for finding talent has led hedge fund managers to change their hiring profile. They’re now looking for a variety of professional and educational backgrounds, in addition to tech and data skills, and are onboarding roles that are new to the hedge fund world, such as programmers; physics, math and electrical engineering PhDs; and those with computer science degrees with backgrounds in Machine Learning. Even roles such as chief data scientist -- a newly defined function in the executive suite -- are being filled in the front office to provide data-driven insights.
For example, leveraging big data and advanced analytics is fast becoming a strategic necessity. More managers are parsing non-traditional data such as social media posts, private company information and credit card data to find new opportunities that generate alpha. In fact, the EY survey found that nearly half of managers say they are using this type of data to support the investment process.
Additionally, culture is a key driver of change when identifying talent. Keeping cultural alignment front of mind is crucial, and creating a team of diverse professionals with a variety of educational backgrounds is a must. Research supports that employee engagement is linked with lower turnover. This points to the strong need to provide competitive compensation and a purpose-driven workplace culture. Many managers are surveying and employing consultants to understand what employees are looking for in the workplace. They found that collaboration, compensation and work-life balance are priorities to employees. This is particularly important when competing for tech-savvy talent with Silicon Valley giants that might have significant resources to put behind workplace culture programs.
Ultimately, hedge fund managers need to seek talent with tech and data analytics skills because they know this is increasingly important to investors. The EY survey showed that nearly 40 per cent of investors expect to allocate more of their assets to managers who are using next-generation data, so the need for talent to handle this data will likely continue to escalate. This new talent pool may also have the added benefit of helping to solve the big data challenge in the hedge fund industry. Hedge funds will need to continue to employ and continually improve robust talent management strategies in this highly competitive environment.