Competition for Talent at Event-Driven Hedge Funds

Despite weak to negative performance as of late, event-driven or “special event” hedge funds are selectively adding personnel, and more importantly, scooping up senior talent from competing funds. With the European financial crisis and continued economic woes stateside, hedge fund managers are betting that in the long run, bottom feeding is probably the safest strategy, according to Barrons.

And while event-driven funds performed poorly in June, the overall long-term performance is still outpacing the S&P 500 Index. The Hennessee Group, an advisor to hedge fund investors, calculates an Arbitrage/Event Driven Index, consisting of merger arbitrage, distressed debt, liquidations and spin-offs, in addition to value-driven special situation equity investing. The annualized compound return for January 1993 to December 2011 was 11.44 percent for the Hennessee Event Driven Index vs. 5.74 percent for the S&P 500 Index. The Hennessee Arbitrage/Event Driven Index advanced 0.70 percent in July and 4.17 percent year-to-date.

Adding Top Performers

Whether it’s a pure event-driven hedge fund or a multi-strategy fund expanding its special event investing, hiring is picking up, says Jeanne Branthover, managing director and head of the global financial services practice of Boyden Global Executive Search. Speaking with eFinancialCareers, Branthover explains, “We’re seeing movement, and there are new funds coming up, but mostly existing funds are stealing the best talent. Talent is a huge cost, and the hedge funds are looking for top performers.”

But don’t look to support staff increases. “Capital raisers are what’s needed—relationship builders and business development people,” says Branthover. Some IT positions are also opening up, but as they relate to and move front office operations. And, unlike the heyday of hedge funds, only those with direct event-driven expertise need apply. Notes Branthover, “Every firm wants as little risk as possible in hiring. You need a proven track record. Six years ago, we could find a hedge fund superstar who was learning a new area, but that’s no longer true. We need a round peg for a round hole.” Firms simply don’t have time for a learning curve.

Hedge Fund-like Mutual Funds Also Interested

And as private equity funds open up hedge fund-like mutual funds, including ones with an emphasis on special event investing, the competition for experienced talent is ever increasing. Even KKR is entering the fray. The bigwig private equity firm registered with the Securities and Exchange Commission to launch two hedge fund-like mutual funds, including the closed-end KKR Alternative Corporate Opportunities fund, which will target special situations across the globe.