This may not be the time. While it is true that hedge fund starts are outpacing closures, the fact is, new hedge fund firms are not likely to be in the market for hedge fund professionals in the middle stages of their careers.

Why?

Because the majority of startups are firms seeded by established funds, senior colleagues are brought over to the new fund and the focus, necessarily, is on junior level hires. This is the reason most newly launched firms are usually on the hunt for experienced, early-career-stage professionals, although there are opportunities for senior level people who have the ability to draw clientele…rainmakers.

Operational hires typically come from the ranks of experienced professionals that have proven their ability to generate revenue and are not overly risk averse. This means senior level people who then hire junior level staff to mentor. Hedge funds are more inclined to hire less expensive junior staff that they can rotate as necessary rather than hiring mid-level staff with specific sector/industry experience.

This staffing philosophy holds true with back and front office staffing. Hires will include senior managers and junior staff, but mid-level staffing is deferred.

Where Are the Best Opportunities?

As stated earlier, opportunities for junior level staff abound, but perhaps the best opportunities in the industry at present are for those with hard-science degrees, which include mathematicians, engineers and developers. Quantitative traders and analysts are in high demand, as are programmers with expertise in MatLab, SQL, Java, Hadoop, Q, kdb+, C#, C++, HTML5, Python and R, and other programming languages such as Julia, whose growth rate is impressive, with hedge funds being foremost among early-adopters.

It is important to recognize the developing interest fundamental hedge fund firms are showing in artificial intelligence, machine learning and big data. A number of funds pursuing a fundamental investment strategy have shown a keen interest in blending quantitative strategies with existing fundamental strategies, which creates an even larger market for the skill sets identified earlier. These blended strategies have been dubbed ‘quantamental’.

As greater numbers of hedge fund firms launch hybrid quantamental funds, there has been a substantial increase in data science hires from academia and from Silicon Valley. Quantamental firms are also showing interest in candidates with artificial intelligence and/or machine learning experience, capable of helping portfolio managers make investment decisions.

Final Thoughts

While mid-level hedge fund professionals may be best served by concentrating their efforts on earning a promotion at their present firm, those at the junior level, those with hard-science degrees and those with programming skills are currently in the best position to find placement in a hedge fund firm.

The hedge fund industry has witnessed extraordinary growth in quantitative strategies and now appears poised to see similar growth in quantamental strategies. The result is that in the current job market, opportunities for employment are peaking for junior level professionals and for those with hard-science skills.

For those with a combination of junior level and quantitative skills, the world is your oyster.

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Several events, which occurred just this month, should have stock pickers quaking in their Salvatore Ferragamo’s.

According to the July 11, 2018, edition of the Financial Times, Facebook faces its first ever fine, which is a result of the Cambridge Analytica data scandal. Regulators in the United Kingdom’s Information Commissioner’s Office (ICO) accused Zuckerberg’s company of  breaking the law by failing to safeguard user data, coupled with its lack of transparency regarding third party sharing policies. Under UK law, the maximum fine allowed is 500,000 Pounds, roughly equivalent to 656,000 US dollars and the ICO is seeking the maximum penalty. Facebook has 28 days to appeal the ruling.

While this sounds like a steep penalty, it is around one thousandth of one percent of Facebook’s market cap…in short, much less than a slap on the wrist.

Ethical Investment Strategies

On the rise are funds with so-called ethical investment strategies. A recent example is Norway’s $1 trillion oil fund which dumped the bonds of PacifiCorp, a U.S. utility, and placed parent company, Berkshire Hathaway Energy on a watch list that has the potential of excluding them from the portfolio.

Warren Buffet’s companies are not alone. This fund is on its fourth iteration of exclusions for companies that earn more than 50 percent of their income from coal. Another U.S. (and Buffet) casualty is Tri-State Generation and Transmission, an electricity seller.

Coal is not the single criterion for exclusion. The world’s largest meat packer, Brazil’s JBS, was also dumped by the fund due to extensive corruption allegations. Norway’s oil fund is not unique in following an ethical investment strategy, and its approach is followed closely by many other investors.

Another Stock Pickers Nightmare

The European Union, citing antitrust violations, fined Google’s parent company, Alphabet, 4.34 billion Euros, or just north of $5 billion. That is roughly 40 percent of 2017 earnings. The EU has given Google 90 days to comply with its ruling. Failure to comply will result in fines that equate to around 5 percent of Alphabet’s daily turnover.

Of course there will be an appeal, but the handwriting is on the wall. Globalization has consequences, and they can be extremely costly.

What about Hedge Fund Jobs?

The events outlined above should make it clear that hedge fund jobs will become more diverse than ever before. Expertise in international law will be in great demand, as will expertise in the political and social sciences. While the events discussed here are unlikely to have a consequential impact on the value of these companies’ stock, the potential of this occurring in future cases is clear.

Laws promulgated by the EU, ethical investing strategies such as those practiced by the Norwegian oil fund, and punitive actions such as the one taken by the UK’s ICO are the tip of the spear. Another excellent example of foreign legislation with the potential to impact U.S. firms can be found here.

The important take away is that the hedge fund industry will increasingly require the services of the best and brightest from a variety of disciplines, which enhances opportunities for a variety of people to work in a hedge fund. The stock pickers will be relying on that expertise.

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Great Results Depend Upon Superior Hedge Fund Talent

July 9, 2018

Ten days into the second half of 2018, what are the prospects for a banner year in the hedge fund industry? After all, unemployment is at record lows, optimism for the manufacturing sector is at an all time high, and market volatility has increased, which traditionally provides an edge to hedge funds, yet HFR reports […]

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Is this the First Hedge Fund “Man Bites Dog” Story?

June 25, 2018

Hedge Funds, long the whipping boy for the financial ills of the country, are witnessing one of their own grow a spine. Last Wednesday, Davidson Kempner Capital Management LP, politely informed Kentucky Retirement Systems (KRS) to withdraw the $68 million it has invested with the firm. Why? According to the statement given to the Lexington […]

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Hedge Funds Shine, Though Not As Brightly As Predicted

June 11, 2018

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 […]

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Investors Look to the Stars

May 28, 2018

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 […]

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Hedge Funds Rise to the Challenge

May 14, 2018

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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