Hedge funds remain in positive-gain territory through May, as reported by HFR. Aggregate net gains for the year are unimpressive, standing at 0.39 percent, just one basis point above April’s 0.38 percent gain. This fact highlights the quagmire the hedge fund industry is locked into at this point in time.

Changes Are Afoot

Market volatility has been on the increase since the Dow fell from its January 26, 2018 high of 26,616.71. This volatility has been at the core of the hedge fund industry’s return to investor favor. As we know, hedge funds perform at their best in a volatile market. Volatile markets are the necessity that breeds hedge fund innovation.

One example of hedge fund innovation is apparent in their strong preference for so-called growth stock. While it may be seen as common knowledge that growth stocks will outpace benchmarks, hedge funds understand that this is only true in certain economic environments, such as the one we find ourselves in now, an economy that is healthy and enjoying modest growth.

Such an environment, while great for hedge funds, is anathema to value investing because the valuation dispersion in the current market is a precursor for weak returns in value stocks. As stocks move up or down independently of one another, actionable trades arise for stock pickers.

Hedge funds are once again venturing into the energy sector. Oil found its bottom mid-2017 and prices since then have been trending upward. As a result, hedge funds took an overweight position in energy through the first quarter of 2018.

These, and other factors, are working in concert to make the hedge fund industry a formidable force for investors once again.

Investor Confidence

Early in 2018, investors anticipated hedge fund 2018 returns to be north of 7.5 percent. While this is a goal that is unlikely to materialize, investor confidence in hedge funds is unabated. Hedge fund starts are outpacing closures and assets under management are on the rise.

While gains are not as high as anticipated, hedge funds continue to outperform the broader markets and until we see the DOW above 26,600, this level of hedge fund performance is likely to persist.

What about Hedge Fund Jobs?

Despite low rates of return, the industry is performing well in comparison to other investor options. As stated, this has resulted in a growth in assets under management as well as growth in the number of hedge funds.

Growth such as this bodes well for job opportunities in the hedge fund industry. Clearly. Opportunities are greatest for experienced stock-pickers and those with energy sector expertise. In short, the planets are aligned for those with aspirations to become a hedge fund professional.

Rest assured, hedge funds will not be content to simply beat the market. Now that their stock-picking bona fides have been confirmed, innovators in the industry will be striving to exceed the next bar. Anyone with the talent and experience to help make that happen will find countless hedge funds holding out open arms.

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Billions of investment dollars are pouring into the hedge fund industry and, unsurprisingly, investors are supporting well-known industry figures that are striking out on their own. Stephen Cohen, for example, recently opened his family office to outside investment and raked in more than $3 billion.

According to a recent article in the Financial Times, the four largest hedge fund launches thus far in 2018 have raised north of $17 billion in capital, while during the same time-frame, existing funds raked in a comparatively modest $13.7 billion.

Hedge Fund Starts

For the first time in three years, hedge fund starts are outpacing hedge fund closures. Notably, many of these launches have been ushered into existence by the industry elitewell-known Wall Street stars such as Michael Gelband or David Sundheim, Generally speaking, these start-ups are not the small multi-million dollar funds usually associated with new hedge fund firms. Rather, they are firms with investor commitments in the billions of dollars. The leading example of such a fund is the one started by Michael Gelband, formerly a fixed-income trader at Millenium Management, whose fund secured $8 billion in investment capital and earned it the distinction of being the largest launch in the history of hedge funds.

A Resurgence

The hedge fund industry is experiencing a post-financial-crisis rebirth, fueled by increased market volatility, under performing markets and innovative investment strategies. While many investors previously welcomed the decline in the number of hedge funds, they are demonstrating a keen interest in start-ups managed by the best and brightest in the industry.

While it is true that under-performing funds resulted in a series of closures in recent years, it is apparent that investor appetite for well-managed funds that offer innovative investment strategies, remain very much on the radar of savvy investors.

Lessons from the Past

Investors have learned harsh lessons in the years subsequent to the great financial crisis, the most significant of which is that true investment talent is a scarce commodity. As a result, proven talent is able to draw substantially larger pools of investment capital than was the case with past start-ups, frequently controlled by less vaunted managers whose track records lacked the luster necessary to attract billion dollar commitments. Clearly investors are looking for proven performance.

What this Trend Means for Hedge Fund Jobs

Larger hedge fund firms mean greater opportunities for employment. Larger firms earn more management fee dollars. This translates into the ability to hire more and better talent than small firms with fewer assets under management and correspondingly fewer dollars with which to hire talented staff.

Investor momentum clearly favors the hedge fund industry in 2018. The natural result of this momentum will be hedge fund jobs. In short, this is the best of times in which to seek a career as a hedge fund professional.

Keep an ear to the ground for start-ups such as Michael Gelband’s ExodusPoint and David Sundheim’sD1 Capital. Funds such as these have the wherewithal to pay for IT infrastructure, lawyers, regulatory compliance, staff and other back-office functions. Therefore, they offer the most robust opportunities for employment…if you have the right-stuff.

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Hedge Funds Rise to the Challenge

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Although a small number of investors view hedge funds as too great a risk of pension fund investment, the majority understands that hedge funds are the only option for reducing risk while at the same time providing uncorrelated returns. For example, Raphael Arndt, the Chief Investment Officer (CIO) of an Australian sovereign wealth fund has […]

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Does an MBA Provide a Fast Track to a Hedge Fund Job?

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Let’s begin by saying that no one should be discouraged from pursuing an MBA. However, it is important that one is clear on the motive for doing so. If the motive is to fast track employment with a hedge fund, one might be in for disappointment. Some Harsh Facts According to the 2018 Hedge Fund […]

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