Despite being trounced by the S&P last year, investor fervor for hedge funds has never been stronger. It comes as a bit of a surprise then to learn how brutal the environment is for most newly launched funds.
More than 900 hedge funds closed in 2013 during a year when the market made a major rebound, according to Hedge Fund Research. That’s the most since 2009, when the economic collapse sent more than 1,000 firms packing. Launches are down too, with just 1,060 firms opening their doors in 2013, the lowest since 2010.
The problem is that small and medium-sized hedge funds can’t compete with bigger, more established firms when it comes to fundraising. They simply don’t provide the same infrastructure, competitive fee terms and employee talent as bigger firms, according to the report. Plus, hedge funds now need to spend millions on compliance, something they didn’t need to do a decade ago. It’s been estimated that hedge funds now spend as much as 10% of their operating budget on compliance.
“Despite the modest and encouraging normalization of data on capital inflows by firm size though year end, data on launches and liquidations suggests the capital raising environment for mid-to small hedge funds continues to be challenging,” stated Kenneth J. Heinz, President of HFR.
Unfortunately for aspiring hedge funders, the current environment may be as good as it gets. Hedge funds should attract as much as $171 billion in new investments in 2014, which could push total industry assets to a record $3 trillion by the end of the year, according to a new Deutsche Bank survey. All those dollars are going to established firms, it seems.
If you want to work in the hedge fund industry, logic says you should ignore the appeal of the sexy new startup. Target a big name with a track record.
Risk Pros Seeing Massive Comp Packages (eFinancialCareers)
If you want a middle office job with a fat paycheck and great job security, risk management appears the place to be. Banks are desperate for experienced risk professionals and are making big offers to candidates while also doling out hefty bonuses to keep current staffers from jumping ship.
A Horrendous Investment Banking Resume (eFinancialCareers)
It’s happened again – an over-zealous Gordon Gekko wannabe has applied for an intern position at a bank, presenting himself as a new master of the universe and, once again, the recruitment team has leaked it out.
You Down with UAE? (Bloomberg)
If you’re a junior banker, the United Arab Emirates appears the place to be. Analysts and associates there make nearly 40% more than their London counterparts. However, directors and managing directors in the UAE don’t fare nearly as well.
$23 Bowl of Cereal (Business Insider)
Business Insider had a Power Breakfast at the Loews Regency on Park Avenue alongside all the Wall Street bigwigs. Long story short, bankers spend a ridiculous amount of money on simple breakfast.
A Dollar Short and a Day Late (Bloomberg)
SAC Capital is eliciting the help of a CIA-backed software maker to better detect improper trading. It probably would have been helpful if they thought of this idea two decades ago.
Duck Bonus (Bloomberg)
Aflac awarded Chief Investment Officer Eric Kirsch with a $3.4 million pay package for 2013, a bump of 62%. Kirsch, a former Goldman Sachs exec, has been doing plenty of hiring from banks and asset management firms since joining Aflac.
Spilker Leaving Apollo (WSJ)
Marc Spilker is stepping down as president of Apollo Management and will be leaving the firm's executive committee. He’ll stay on as a senior adviser.
Buzz Around the Office
Full-Body Workout (Gawker)
In the latest episode of Rob Ford Rules the World, the embattled Toronto mayor does some high-knees running in only the way that he can.
Quote of the Day: “It’s incredible that a bank should not know that traders having unmonitored access to private chat rooms to talk to a bunch of mates that they’ve had relationships with or worked with over the years.” – Martin Wheatley, CEO of the Financial Conduct Authority