Quarterly Review, Q2 2011 – Hedge Fund Recruiting: Uptick in Hiring Trends and Options
Posted on: Tuesday, July 12th, 2011
Hedge fund industry hiring continues to show signs of strength amid the heat of summer. Nearly 300 new hedge funds were launched in the first quarter of 2011, assets under management tipped the $2 trillion mark, employment opportunities widened, and last but not least, two major league baseball teams, the Mets and the Los Angeles Dodgers, turned to hedge funds as possible saviors.
Long/Short Equity Funds continue to show hiring strength. The equity sectors for which investment professionals are most in demand include commodities, basic materials, and TMT (technology, media and telecommunications). Global macro funds have also been active on the recruiting front for both discretionary and systematic strategies. Within these strategies there has been particularly high demand for interest rates and FX traders (who employ macro strategies). We find many event driven managers focusing on Europe as they seek to take advantage of dislocation in sovereign bonds and other opportunities.
When it comes to fund of funds hiring trends, it is clear that they are finally joining the party, albeit late. In fact, the funds of funds’ hiring activity has been greater in the first six months of 2011 than we have seen at any time over the past two years. However, there has been some consolidation in this space. Arden Asset Management LLC and K2 Advisors LLC are two prominent examples of funds of funds that have been in the news for, in Arden’s case, looking to make acquisitions, and shopping for a buyer in the case of K2.
Geographically, the U.S. still leads the way in terms of number of hedge funds and total AUM. Latin America has seen some hedge fund hiring growth this year with most of it being in macro and credit strategies. Moreover, new wealth creation is fueling hedge fund growth in China and other parts of Asia. In Hong Kong, in fact, funds seem to have an insatiable appetite for new people. Many prospective portfolio managers with whom we have spoken are indicating to us that they are absolutely inundated with new opportunities.
As it is typical to see in the third quarter, recruiting of investment and marketing professionals tend to be more reactive than proactive. At this time of the year, many hedge funds look to fill the seats vacated by earlier departures. Historically, this trend reverses in Q4 and Q1 when funds look to create new positions as opposed to just filling prexisting vacancies. Other trends we have noticed include:
- There is increased hiring on the investment side with continued demand for portfolio managers and senior analysts.
- Startups are launching with higher asset bases, ranging from $50M to $200M versus the previous $10M to $25M.
- Investment banking analysts are leaving programs earlier and many analysts are receiving offers well before the end of their first year.
- Base salaries are up. Salaries that were previously between $150,000 and $200,000 are now in the range of $200,000 to $300,000. We find that salary increases are more reactive to what is happening with the sell side.
As the hedge fund industry continues to selectively expand and assets pour into these investment vehicles, the accompanying demand for investment, marketing, and infrastructure professionals has more than kept pace. Candidates across multiple geographies and especially here in the U.S. are highly in demand. Many find that, at the end of their search, they are able to choose between multiple, competing offers.