Top 30 HF Firms Report


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Hedge funds compete with endowments, traditional asset managers for top talent

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Hedge funds are now competing for talent with endowments, foundations, traditional asset managers, and asset management and proprietary trading desks of banks, according to a report issued by Heidrick & Struggles International, Inc.

The report, which details hedge fund search and recruiting trends, as well as compensation activity and salary and bonus ranges, for the first three quarters of 2009, also notes that the summer of 2009 was active in fund launches and hiring as pay and trading constraints have driven a number of senior traders from banks to launch their own funds.

Due to an asset-building frenzy, there is now a greater demand for experienced sales and marketing professionals as funds hope to capture sidelined assets, new assets, and assets from poorer-performing funds. However, with more fund closings expected this year, and about half of funds still near their high-water mark or underwater, compensation bands are broken, and, on average, 2009 will be a down year for compensation.

While “prop desk” trading and hiring was dormant in Q1 and Q2, Q3 saw increased activity, according to candidates interviewing for these roles.

“Except for funds with USD2 billion or less that are still trying to reach their high-water mark, there is no more fence-sitting when it comes to picking up the top talent,” says Claude Schwab, a partner at Heidrick & Struggles and one of the report’s authors. “The greatest candidate opportunities are in credit, distressed, equity long/short and macro, given the dislocation in credit markets and preference for more liquid assets.”

Schwab points out that while guaranteesare much less likely than in the past: “They still exist for the best senior level marketing talent, especially in instances where a candidate has multiple offers.”

The strongest 5-10% of senior marketers are securing significant guarantees, with another 20-30% of mid-to-senior level hires securing minimum floors. “But, in general, factors other than compensation are having tremendous influence on individuals for all roles,” he adds.

Q3 saw fresh money with a high-water mark re-set from sidelined capital and endowments, sovereign wealth funds, and retail. By Q3 2008, the competition for HR and recruiting talent among hedge funds had slowed considerably, and by Q2 2009 the number of dedicated HR/recruiting personnel within hedge funds had significantly contracted. Many funds laid off all but their most senior HR/recruiting personnel, and, in some cases, valued HR/recruiting personnel have shifted into other roles (such as investor relations).

Hedge fund fees are not changing materially for survivors who are performing well.

“Changes for the hedge fund business model are generally incremental, not revolutionary, regarding fees,” says Schwab. “There are more substantial changes around liquidity, leverage, redemptions/gating, and transparency, and key decisions are being made regarding outsourcing versus self-administration of back- and middle-office processes, especially in attempts to attract and keep investors.”

There was a shift from 2008’s multi-billion dollar launches to 2009’s hundred million dollar launches. “The largest fund launch in 2008 was bigger than twenty largest fund launches in 2009 combined,” says Schwab.

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