Demand for hedge fund professionals is bouncing back, even as compensation is down from a year ago and bonus guarantees remain the exception.
That mixed picture emerges from a report issued last week by worldwide search firm Heidrick & Struggles, focusing on hedge fund search and recruiting trends.
On the good news side of the ledger:
- The past summer was "active" in new fund launches and hiring. H&S attributes much of the activity to new fund firms started by senior traders who left banks to escape pay and trading constraints. However, the size of new funds launched this year is just a fraction of the typical 2008 launch.
- Firms the report cites as actively hiring include Soros Fund Management, Paulson & Co. Brevan Howard, Citadel and SAC Capital.
- Demand for experienced sales and marketing professionals has picked up thanks to an "asset-building frenzy," as funds pursue sidelined assets, new assets, and assets from poorer-performing funds.
- Hiring for proprietary desk trading roles picked up last quarter after being "dormant" through this year's first half.
- The greatest candidate opportunities lie in credit, distressed, equity long/short and macro strategies, says Claude Schwab, a H&S partner and co-author of the report.
- Commenting on the report, Schwab told Bloomberg News that H&S is "extremely busy" filling slots for marketing and investor relations pros, and also received at least 10 mandates for portfolio managers in the last few weeks.
- During the third quarter, funds attracted new money from sidelined capital and endowments, sovereign wealth funds, and retail investors. That's important in the aftermath of widespread investment losses, because funds can levy performance fees on new money without having to meet a "high-water mark" (recoup past losses first).
High-Water Marks Restrain Compensation
Pay expectations, however, remain in the doldrums across much of the industry. "With more fund closings expected this year, and about half of funds still near their high-water mark or underwater, compensation bands are broken, and, on average, 2009 will be a down year for compensation," the report says.
While pay guarantees for new fund hires are much less likely than in the past, they do exist for "the best senior level marketing talent," according to H&S. The strongest 5 - 10 percent of senior marketers are securing "significant guarantees," and the second tier comprising (the next 20 - 30 percent of mid-to-senior level hires) are securing minimum floors.
Hedge funds' own HR and recruiting staffs are considerably smaller than a year ago. Many groups laid off all but their most senior HR/recruiting personnel, the report notes. Some HR/recruiting staffers were shifted to other roles, such as investor relations.
Overall, a reported 10,000 hedge fund jobs were eliminated over the course of 2008 while a broad index of fund returns compiled by Hedge Fund Research sank 19 percent. In the first nine months this year, that index has recovered 17 percent.