Hedge funds are seeking candidates with experience in fundamental analysis to help them develop initiatives in private equity and venture capital. While it's not new for investment bakers to migrate to hedge funds, recruiters say the funds' interest in candidates with investment banking or private equity backgrounds is notable.
At the same time, hedge-fund investors and funds of funds show increasing interest in investment bankers. The reason? As the sector matures, it's becoming more scientific in its investment approach.
For fund investors, investment bankers offer the education and experience needed to drill down on hedge fund managers and their track records. "Before an investment is made, the investors are doing real analysis" using the investment bankers' expertise, says John Mazzei, a recruiter at New York-based Rand Thompson.
"In the beginning, alternative investments were a more qualitative business: There weren't a lot of hedge fund managers, and investors were sophisticated," Mazzei says. "As that world got bigger, manager selection has gotten more scientific. Investors are interested in real track records."
For investment bankers, this interest on the part of both funds and their investors offers the opportunity to earn equity on the deals they create. Whichever side investment bankers pursue - a sell-side position with a hedge fund or a buy-side position with an investor - their key role will be as "the interface between the fund and investor," Mazzei says.
Anthony Cowell, KPMG International's senior manager of alternative investments, recently told MARHedge.com that funds need "Einsteins who can identify investment opportunities" as they navigate "premature maturity." He believes the industry is facing a dearth of "star" managers, and so offers opportunities for traditional money managers. "Investment management houses are looking for ways they can generate absolute returns," he said.