Hedge funds want investment bankers big time.
Money is pouring in and hedge fund assets have more than doubled, to $1.1 trillion, since 2000, according to Chicago-based Hedge Fund Research, Inc. Much of this new money comes from institutional investors, and the funds are expanding the ways they invest their assets under management. They have moved into private equity and other forms of direct capital, providing financing for acquisitions, recapitalizations, LBOs, bridge financing, growth and distressed situations.
The result? "There is a big demand from hedge funds for people with strong sourcing, valuation, modeling, structuring and negotiation skills," says Mary O'Gorman, Managing Director of Snelling Search in New York City. "Investment bankers from top firms have this experience and training."
The demand fits with the aspirations of many investment bankers, who want to move to the buy side so they can "act as a principal and not simply as an adviser," O'Gorman says. She says compensation at hedge funds is "highly attractive," with base and bonuses comparable to, and sometimes exceeding, compensation at investment banks. In addition, many opportunities offer a "carried interest," or a share in the fund's net profits, she says.
At junior levels, hedge funds look for people who have completed an investment banking analyst program or associates with a few years experience - with or without an MBA. At more senior levels, hedge funds seek bankers who have already made the jump to the buy side "because they need the instincts and experience of an investor"
With a few years of investment banking experience, associates are being offered cash packages exceeding $300,000 and more senior people are commanding significantly higher amounts, O'Gorman says.