Does Bad News for Hedge Funds Equate to Personnel Changes?
The headlines have been pretty bleak for the hedge fund space, as of late. Between ongoing big-time investigations into insider trading at SAC Capital Advisors, growing investor suits, multiple convictions for Galleon Group's Raj Rajaratnam, and the liquidation of funds at FrontPoint Partners, it would seem that there would be less of an interest in a hedge fund job.
FrontPoint is in the process of liquidating most of its funds, post the insider trading investigation and subsequent redemption run. Given the odd state of affairs, it's easy to understand why someone might be hesitant to put up with the odd personalities, increased scrutiny and Wild West atmosphere.
Actually, all of this has not had as much of an impact on those looking for a hedge fund post, as many might believe. It seems prospective candidates are still taken with the prestige and big bucks associated with the hedge fund space. Interestingly, comp packages grew 23 percent in 2010 as compared to 2009, despite the less than favorable market conditions.
Plus, compliance pros continue to benefit from the bad news. Funds are scouring for former SEC officials to deal with their compliance efforts.
So, what's a bigger fear for the industry? If the sizeable losses and underperformance of funds continue, it could create more of a change in personnel and less of a demand for new hires. According to Lee Hennessee, managing principal of Hennessee Group, a hedge fund advisor firm, "Hedge funds are underperforming for the year as the investment environment remains challenging for alpha generation."
With currency volatility and the commodities shakeup, fund managers are facing difficult times. Expect some shuffling of fund managers and poaching of more successful peers, if economic conditions remain the same.