Did ExodusPoint over-hire and over-pay?

If you were reading eFinancialCareers last year, you will be familiar with ExodusPoint Capital Management. It's the hedge fund founded by Millennium Management alum Michael Gelband. It did a lot of hiring in 2018 across both the front and the back office. 

More recently, there have been a few departures and some possibly spurious claims by rivals to the effect that Gelband's creation hired more people than were warranted, particularly after a not-so-great performance in the first half of 2019. 

Today's release of ExodusPoint Capital Management's UK accounts for the year ending 31 December 2018 offers an insight into the situation inside the London operation. Last year, it seems that ExodusPoint was operating on very slender margins.

The London business of the fund generated 'revenues' (effectively gross trading profits) of £21.6m last year, but it also incurred administrative charges of £19.2m, leaving a slender margin of just 12%. That's fine in a good year, but not when your strategy underperforms.

Staff costs accounted for much of the £19m in expenses. ExodusPoint ended 2018 with 22 people and spent £15.7m compensating them. Excluding social security costs, this amounted to £627k ($774k) per head, which is a lot more than any other hedge fund in London pays its non-partner employees. 

Can ExodusPoint keep this up? 2018 was the first full year of the fund's existence and it should probably be cut some cost slack on the grounds that it's always expensive to get things off the ground. The fund seems to have continued hiring in 2019, though, and now has 47 registered employees in the UK according to the FCA Register - a big increase on last year.

If Gelband comes calling, it's almost certainly worth picking-up. Some things are too good to miss; they can also be too good to last.

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