Those looking for positions with a hedge fund should consider: You may face increased regulation, job insecurity, and a move to Connecticut.
First, let's put hedge funds in perspective. While fallout lingers from the recent meltdown of Amaranth Advisors, hedge fund flameouts aren't necessarily new. Just look back to 1998 and the near default of Long Term Capital Management. "There's always shakeup, but you only hear about the negatives," observes Keith Mann, managing director of the New York search firm Dynamics Associates. "The industry is very secretive. When the returns are 20 percent, you simply never hear about that. There will definitely be blowups, and it's certainly never good when a large fund like Amaranth liquidates."
So it's worth asking: If you're in pursuit of a job with a New York City hedge fund - as a risk-management executive or CFO, say, or elsewhere in the back office - how can you know which is the right one to work for, especially when most fund information is private?
First, do as much homework as you can on hedge funds you're interested in, advises Mitch Feldman, president of A.E. Feldman Associates, an executive search and consulting firm in New York. You want to determine the stability of your prospective employer. In particular, find out the job history of the fund's principals. "If you can, meet with the director of risk management," Feldman adds, though he notes you have to be an in-demand candidate to get that sort of audience. "You can't kick their tires unless they're very interested in you," he says.
Unfortunately, the leadership's pedigree may not help you determine a hedge fund's overall health. Long-Term Capital Management, after all, had finance legends Robert Merton and Myron Scholes on its board. Those working at a fund - or looking to break into the business - should remember that no job is ever guaranteed, Mann points out. "There's risk at each and every firm that you could work for, in or out of the hedge fund industry," he notes.
The change in Washington's political landscape could be an even bigger concern for those in the field, Mann believes. While pressure to further regulate hedge funds hasn't reached a fever pitch, the demand could grow as university and employer pension investment managers put more of their money in hedge funds. If the Securities and Exchange Commission does increase its regulation of hedge funds, Feldman thinks it could mean changes for job prospects.
In addition, a lack of qualified talent recently has kept the market strong in and around Manhattan. But candidates may want to be ready to uproot and head to Greenwich, Conn., Feldman says. Given the concentration of fund operations in Greenwich and the surrounding area, hedge fund professionals may soon find more opportunities there than on Wall Street.
Because of that, his firm plans to establish an office nearby. "Many of the people that live in Connecticut and work in the field simply don't want to deal with the commute anymore," he says.