Flexible working, virtual fundraising and recreating that ‘water cooler’ environment

In his latest blog Joel Press, formerly a senior partner and Head of the Global Hedge Fund Practice at Ernst & Young, and a leading voice on hedge fund operations and co-ordination services, considers the ‘new normal’ of flexible working, virtual fundraising and the challenge of recreating that all-important water cooler culture…

In his latest blog Joel Press, formerly a senior partner and Head of the Global Hedge Fund Practice at Ernst & Young, and a leading voice on hedge fund operations and co-ordination services, considers the ‘new normal’ of flexible working, virtual fundraising and the challenge of recreating that all-important water cooler culture…

Greetings and I hope you’ve all been able to stay safe with your families over the summer period.

As we settle back in to work after Labor Day, I’m writing this latest blog still cocooned away from Manhattan in Westchester County.

Many hedge fund managers are doing the same, operating in ‘business as usual’ mode from the likes of Westchester, Greenwich, the Hamptons and in many locations in the US and around the world. This has doubtless been easier to achieve for smaller hedge fund managers than those HFs that have significant headcount.

Many firms are not looking to return to the office until late Fall, some the beginning of the new year, while others are not planning to return to the office until Spring of next year.

It’s been an unprecedented year. As they move forward organisations will have to deal with issues of staff commuting, attending conferences and events, utilisation of office space, compliance in a remote office structure, firm culture, recruiting and hiring over Zoom, and capital raising in a world where physical meetings may not be commonplace. Business operations as we knew them will change dramatically over the next few years.

Will the hedge fund community need to be centred in big cities? Will there be a need for physical space for every employee every day? Will there be need for as much research travel as there was before? Will there be a need, and will employees be willing, to travel nearly as much for capital raising and due diligence?

The answer is clearly no, but how this evolves will take time.

I believe that the entire Financial Services sector has been, and continues, to work well virtually. Trading operations are working well. And that’s despite the likes of Morgan Stanley and Goldman Sachs still operating with around 10 to 20 per cent of their staff rotating in the office.

I believe the long-term trend will result in the traditional five-day week we’ve all become so accustomed to, becoming a thing of the past. It’s not inconceivable that offices will move to a two- or three-day week and people working the remainder of the week from home. The only downside to this, however, is that there’s no clear disconnect when working at home. Work time and personal time tend to blend together and the tendency to spend additional time at one’s desk when commuting time no longer factors in the day is high and you pass your screens every time you walk past your home office. Employees will need to build the discipline to separate their work and personal lives in order to achieve a balance.

Using an office rotation will allow hedge funds to maintain a sense of community. What it might also do, though, is exacerbate the disconnect between investment and non-investment staff. It’s always existed, but staff rotation could make it worse.

The investment team needs to brainstorm and challenge one another’s research ideas and doing so in person has value. It is often thought that the back office teams do not need to be as connected to each other, and to the investment team, but they do need to be integrated into the process and made to feel as important as anyone else.

One issue in relation to remote working is compliance. How that is now vocalised in a remote environment is not easy nor is remote training. Management cannot let their guard down on the compliance process to enforce the highest standards of integrity.

Ultimately, if, as looks likely, remote working becomes a more permanent feature of how we work, the trick for hedge funds will be to try to create a sort of virtual ‘water cooler’ environment.

This could be especially helpful for firms who have onboarded new talent over recent months who may never have even met their colleagues in person. It is essential to impart the firm’s culture even when staff is physically apart. Many firms have been creative in this area by encouraging staff to share personal stories and events during video conferencing, rather than focus purely on work-related issues. The firms that have promoted connectivity during this time see more engagement which is important as this remote life can wear on all of us.

Bringing the water cooler mindset to the virtual office helps individuals to settle in, while also learning the firm’s culture and creating a sense of community.

Then there’s commuting.

Some people will feel isolated and/or anxious, and others may not want to admit to colleagues that they are nervous about using public transportation to go back to the office. Others cant wait to get back to their old office routines and away from trying to carve out a physical space in their home to work efficiently. The needs of each individual must be met, Costs of retrofitting offices and risks to employees must be evaluated. It is believed that once there is a vaccine it will easier to work with each person’s needs and desires.

And what about industry events?

Prime Brokers are doing a great job hosting virtual Cap Intro events. Will people spend money travelling to attend physical events over the coming years when they can attend virtually? Will millennials value the sense of community that comes from building in-person relationships, in the same way that those in their 40s and 50s value it? Probably not.

Those in senior management today built the relationships in their careers with social interactions around breakfast, lunch and dinner sharing ideas and building trust. Today, it’s more about building virtual relationships online. I am definitely old school and believe that personal relationships are important and will further develop a connection developed on line through LinkedIn.

Arguably, this pandemic has accelerated a longer-term trend for how young hedge fund managers approach capital raising and communicating with investors. Cap Intro and other such events will remain a cornerstone of the industry, but perhaps they will no longer continue to be viewed as the default way to build relationships.

The changes we will see as a result of this pandemic will be far-reaching and impactful. Will we have different ways to assess people? Will working hours become more flexible? Will hedge fund salaries be reduced if people continue to work remotely? Will we be wearing masks on a permanent basis when we commute using public transport? Will we need masks even if there is a vaccine?

No-one can yet know the answers to these questions.

Encouragingly though, the hedge fund industry feels vibrant. Performance this year has been strong; equity hedge funds are up 6 per cent, on average, through August. And in the bankruptcy realm, there could be a lot of opportunities for distressed and credit managers.

There are positives in the chaos that this pandemic has brought upon us all – less commuting, maybe working harder to connect with colleagues and collaborate more with investors. They just might not be obvious to see while we continue to process a year of extraordinary upheaval.

Stay healthy and safe.