AIMA and KPMG survey: Industry remains resilient during pandemic, with hedge funds “actively hiring” throughout market dislocation

Tree growing from a cliff face

The global hedge fund industry is successfully weathering the global coronavirus pandemic, with firms continuing to build talent and utilise technology to adapt investor relations and ops functions, according to extensive new industry research by the Alternative Investment Management Association and KPMG.

The report, titled ‘Agile and Resilient: Alternative Investments Embrace The New Reality’, quizzed some 144 hedge fund managers globally, representing around USD840 billion in assets under management.

The wide-ranging study explored how hedge funds’ hiring strategies have been shaped by the coronavirus pandemic, along with how operating models, core processes, cost structures and work environments have been affected.  AIMA and KPMG also sought to gauge how hedge funds’ investor relations functions have been altered by the Covid-19 crisis.

The report’s findings indicate that larger, more established firms are better placed to attract increasing amounts of talent and capital. However, the smaller, less established players in the industry could be gaining certain competitive advantages from less complicated operating models and greater flexibility.

Overall, 57 per cent percent of all managers interviewed said they have hired or are trying to hire new talent since the pandemic began. Larger hedge funds – specifically those running more than USD1 billion – are more likely to be taking on new talent: in North America, 64 per cent of managers with USD1 billion in AUM have hired additional staff compared to 53 per cent of managers with  under USD1 billion. The numbers are more stark elsewhere: in the EMEA region, 50 per cent of USD1 billion+ fund managers have hired new staff, compared to only 23 per cent of smaller managers. In Asia-Pacific, meanwhile, the numbers are split 44 per cent (larger funds) to 27 per cent (smaller funds).

“We are seeing a lot of talent migration,” said one prominent New York hedge fund lawyer quoted in the study. “Those hedge funds that are prospering in the current volatility and market dislocation are actively hiring, with some talent moving from firms that have endured a more challenging period.”

The report also delved deeper into how the decentralised work environment has shaken up hedge funds’ performance culture, with face-to-face interaction and collaboration seen as vital not only for firms’ success, but also for the mental-health and well-being of staff.

More than half (55 per cent) of hedge fund managers surveyed said diminished team building and dilution of culture was a key concern, with both larger (USD1 billion+) and smaller (under USD1 billion) managers ranking this their number one challenge overall.

Almost two-thirds (61 per cent) believe the flexibility gained by employees working remotely is a positive, with 46 per cent highlighting the benefits to employees of commuting less.

Elsewhere, the Covid-19 crisis appears to be further accelerating outsourcing trends within the hedge fund industry, with 71 per cent of respondents pointing to the success of the remote working environment as a catalyst to further outsource certain operational and technological solutions in order to bolster efficiency and lower costs.

Additionally, 58 per cent of hedge fund managers have been upping their use of digital tools such as video conferencing and data rooms to strengthen their investor relations model in light of social distancing measures and the absence of face-to-face meetings.

Similarly, more than 80 percent of respondents are investing more in digital infrastructure and IT capabilities, while half of all firms are investing in cybersecurity measures.

Tom Kehoe, AIMA’s global head of research and communications, said the Covid-19 lockdown has created new opportunities for hedge funds, driving industry participants to adapt to “a new reality.”

“The Covid-19 experience has proven that hedge fund managers operations’ and their ecosystems are robust and fully adaptable, even during the most severe of lockdowns,” Kehoe said of the report’s findings.

“Investment in smart sourcing and enabling hybrid working practices will not only improve efficiency but also prioritises employee wellbeing. Ultimately this should benefit an industry that will emerge stronger and more diverse to sustain its future growth.”

“The hedge fund industry has been innovative, agile, and resilient through the pandemic,” said Andrew Weir, global head of asset management, KPMG International. “Our research shows that a good number of hedge funds see this as a time to attract new talent to their firm. They are evaluating their existing operating model and adjusting their core processes, cost structures and work environments so they are positioned to grow and meet the changing needs of investors.”