Funds of hedge funds still have very generous six figure packages to offer operational due diligence people
Everything may not be totally great in investment banking, but it is definitely worse in funds of hedge funds.
Poor returns, falling fees, pressure for consolidation, and investor dissatisfaction are conspiring to create a nasty combination of lower pay and harder work.
According to Alex Pigault of Allenbridge HedgeInfo, 90% of fund of funds are currently below their high water mark. Last week, Sal Oppenheim closed its Paris office which ran funds of hedge funds, and Reuters ran an article claiming many smaller fund of funds will close.
How bad is bad?
Bad
Stuart McLaren, a partner in Deloitte's investment management business says it's not good.
"Basically, funds of hedge funds will have work harder, for less," he offers. "They do have a future, but it's not as promising as it was. After Madoff, investors are looking at lot more closely at the type of due diligence that they do, and funds need to be a lot more professional about the way they deal with investors.
"This costs money at a time when investors are less willing to pay the fees," he muses.
Phil Irvine, a director of PiRho Investment Consulting says most institutions pay, "nothing near," the headline fees charged by funds of funds - they're all being negotiated down, and that there are plenty of "zombies" in the fund of hedge funds sector.
Slightly nasty
Despite this, one headhunter with a hedge fund focus says there's not an outpouring of people from the fund of hedge funds sector and that some roles are still surprisingly popular.
"There's still plenty of hiring going on in the fund of hedge funds space, and they're still prepared to pay well for operational due diligence roles, which are massively in demand," she says.
Such roles, which require a fusion of legal, accounting, prime broking, and organisational skills, and often go to a team of people rather than a single individual, can apparently pay up to 'high six figure' packages at (successful) funds of hedge funds.
If the worst comes to the worst, you can't get into operational due diligence and your f-o-hf does under, fund of hedge fund people can get rehoused at pension funds according to Irvine.
"As the industry matures, institutions are buying into hedge funds directly," he says. "Pension funds are building up inhouse expertise to help identify hedge fund investments. There will be a transition away from working in the fund of funds industry to working with end clients." Whether they will also offer generous six figure packages remains to be seen.
