Job vacancy: Head of hedge fund risk management

The editorial team of eFinancialCareers.com analyses a current job vacancy that looks significant, intriguing or otherwise of interest: Hedge funds are mysterious entities, adopting complex and secretive investment strategies. There is growing concern about the level of risk involved. Funds are responding by boosting their in-house risk teams.

Tom Marden, manager of the risk division of Michael Page, said hedge funds are increasingly concerned about internal risk management. This is not only due to increased regulatory interest, but because the large prime brokers that provide services to hedge funds may be willing to reduce fees if risk is managed effectively, said Marden.

Lynn Muirhead at the Rose Partnership, agreed that hedge fund managers are keen to commit more resources to managing their risk exposure.

The best known example of a hedge fund that went wrong is Long Term Capital Management (LCTM). LCTM went under after the Russian currency devaluation in 1998, creating a market crisis that nearly jeopardised the entire financial system.

The advertised role involves setting up a risk management function in a fund employing 20 investment professionals. It specifies an individual with five years' experience of working closely with either proprietary traders, hedge fund managers, or portfolio managers. Pay is unspecified.

Marden said risk managers in hedge funds tend to be of a very high caliber. 'People need a good comprehension of complex trading strategies. They also need to be able to communicate the fund's risk appetite to clients. This is unlike risk management in an investment bank, which is an internally facing role.'

Similar advertisements, which include a risk analyst for a UK based hedge fund, also neglect to mention pay, which Marden says can be very variable. He says a small hedge fund looking for a technical risk manager may pay a basic salary of 70,000. But people running risk in large hedge funds can receive salaries of 100,000 plus.

Bonuses can be generous, particularly if the fund is doing well and the risk manager is actively contributing to the flow of new business. Marden says multiples of salary are not unusual.