Although net new cash flowing into U.S. hedge funds hit a three-year low in the quarter ending June 20, hiring has only picked up, and the new jobs are not all in compliance.
Every week it seems another new fund pops up. Keith Mann, manager of the alternative investment division at Dynamics Associates in New York, says newcomers are looking for everything from accounting and operations to traders and associates.
The biggest requirement is a passion for investing. Mann says, "They are looking for the guy who wakes up in the morning and puts on Bloomberg or CNN Money to check what has happened in Asia overight, someone who puts in 15 or 16 hours a day at the office and still has time to find stocks to invest in for himself."
Fund managers are keen on people who have played sports in school and are not only competitive but resilient, he says. "If you go belly up on a trade, do you crawl under your desk or get back up to knock them dead on the next one?"
Base salaries won't blow anybody away, however, and Mann is leery of sending out candidates who ask about them. 'The base is irrelevant; you work for the bonus,' he says. A candidate with two years experience might command $75,000 to $120,500, but the bonus can be several times that.
Jim Houston, managing director at Russell Reynolds, seeks candidates who have have a strong sense of market direction and marketing timing, although not the sort of after-hours market timing that has caused so much trouble for a few hedge funds and mutual funds.
Houston says, "We want people who have demonstrated an understanding of shorting securities, someone who has a good sense of when to get into the market, and when to get out."
Personality matters, too, since even firms running very sizeable assets can have relatively few staff. "It's not only how you get along with the founders, but with other people in the firm that's important," says Houston. "In addition to knowing the trading strategies, it's important to know what the firm is like as an environment."
With more than 6,000 hedge funds out there, styles and employment demands vary widely. Multi-billion dollar funds running multiple strategies will need managers to run an institutional quality business with first rate management and operations.
Andrea de Cholnoky, a consultant at Spencer Stuart, says, "As the industry has grown and added managers, we are recruiting people beyond the investment side to provide a more mature and sophisticated infrastructure." With more regulatory requirements looming, and the larger funds improving their reporting to attract money from big pension funds and from fund of funds managers, de Cholnoky expects that compliance will continue to be a strong area of hiring.
The best way to find a good job? Work with someone at an asset manager or prime broker who leaves to start a fund and wants to take you along. But forget big salary guarantees, says Mann. It is what you can do now, and you have to prove yourself.
Houston says, 'It is really about having proven yourself and having developed relationships with people who made the move to a hedge fund, and it is still an area that relies on personal referrals, even more so with hedge funds than with other asset managers.'
Competition for jobs will be tough. With pay packets that can go into the millions, more people want to get into hedge funds than the business will accommodate. Funds are trying to get people with proven track records, but their reward will depend on what they do tomorrow, rather than what they did yesterday.
Still, Mann is convinced hedge funds are where the action is. With their high pay they are draining the best brains out of the investment banks. As he puts it, however, 'If you are shy, you are not going to work out.'