Hedgies run lean as market stays mean

15 May 2009

2 minute read

Hedge funds aren't in the mood to hire as investors continue to give the alternative sector the cold shoulder.

Many investors, both institutional and high-net-worth, remain cautious and don't want to give their money to hedgies, especially with the short-selling ban still in place.

"There are a number of factors which are affecting hedge funds at the moment and the difficulty in finding new investors is one of them. The employment situation is tough across the industry," says Michael Pretty, director, Metropol Executive.

Anton Murray, director of Anton Murray Consulting, is also downbeat about recruitment. "Most Australian hedge funds are small and have been hit with redemptions, I can't see much hiring happening until investors return."

The employment situation is especially tough for smaller funds, with between about five and 10 staff. "For some firms, business has been so bad that they've cut back to their principles and are running really lean. When AUM drops to $50m or below, it's barely enough to cover costs. You have to cut back and only rebuild when confidence picks up," adds Murray.

But hedgies might in the future welcome back their former employees. Murray explains: "Some funds have asked people to take unpaid leave for a few months and return when things improve. Hedge funds generally prefer to deal with people they already know."

Large traditional fund managers which also sell alternative products - such as Colonial First State, BT and AMP Capital - are carrying out selective hiring, according to one headhunter who asked not to be named.

Pretty says there is some opportunistic recruitment at a senior level. "But it tends to be a slow and very selective process. It is mainly large international funds that have identified a requirement, whether for a new product or replacement within a team, but have a lack of urgency due to the current market climate."

AUTHORSimon Mortlock

Content Manager

og
ogie
16 May 2009
Where investors should be careful is more on alternative investment on complicated credit related fixed income and structured products particularly the use of credit default swaps and hedge funds with exposure to asset backed securities, CDO, and CLOs. I guess given market condition other alternative investments outside these products is now sharing the same sentiment. While new regulatory reforms on global market and asset management is also happening.
I guess selective hiring is also happening because no one would like to hire a trader or a portfolio manager from any fund manger or investment bank who were involved in reckless trading practices.
Management particularly within global investment banks are cleaning their front desks and operation from.....
1. Reckless traders and portfolio managers
2. RMs /product managers that created complicated products that is harmful to the brand name of the comapany
3. Most of all IT and operation staff that did not really performed well in supporting the front office in the past hence adding as barrier to growth in the past 3 to five years.
Reply
og
ogie
16 May 2009
Brands that were known in the past in the investment banking or wholesale space will emerge as new players in the asset management, private banking, an retail business. They will be leveraging in thier global capabilities.
So watch out new big fish in the block is about to emerge.
Reply
og
ogie
16 May 2009
Where investors should be careful is more on alternative investment on complicated credit related fixed income and structured products particularly the use of credit default swaps and hedge funds with exposure to asset backed securities, CDO, and CLOs. I guess given market condition other alternative investments outside these products are now sharing the same sentiment. While new regulatory reforms on global market and asset management is also happening.
I guess selective hiring is also happening because no one would like to hire a trader or a portfolio manager from any fund manger or investment bank who were involved in reckless trading practices.
Management particularly within global investment banks are cleaning their front desks and operation from.....
1. Reckless traders and portfolio managers
2. RMs /product managers that created complicated products that is harmful to the brand name of the company
3. Most of all IT and operation staff that did not really performed well in supporting the front office in the past hence adding as barrier to growth in the past 3 to five years.
Reply
og
ogie
16 May 2009
It will be more stringent process as well for hedge funds and alternative fund managers to get credit lines from investment banks because the risk management process in global IB's is being cleaned since early last year.... apparently they did not have a robust risk management process in the past 5 years and there were also traces of trading desk (traders and portfolio managers) and operation (back room,IT, BAs) conniving and covering up on highly risky trades to the expense of the company's balance sheet health. These trades were not reported with transparency to the head office. As a result illiquidity in the balance sheet and they were left with toxic asets that needed to be written off which cost the banks a lot and they need to explain this to share holders back to head office. Hence global IBs are pulling their operation out from Australia.
Maybe you will see them coming back when all of these staff are already out and they can start fresh with good people and also if they regain trust and confidence in operating in Australia.
Reply
og
ogie
16 May 2009
Even Colonial First State have expsoures to toxic assets.
Reply