Bob Olman is a noted speaker on careers in capital markets and the founder of Alpha Search Advisory Partners (www.alphasearchadvisory.com), a top recruiting firm to the alternative investment community, based in NYC with offices in London and Singapore. This is the second of a two-part discussion with him.
Do you see fund performance affecting employee loyalty?
In two cases: If a PM has been making great returns, his compensation may be adversely affected if the rest of the fund is not performing as well and he has a discretionary bonus that is linked to the fund’s overall profits. In addition, a good PM might not have the opportunity to manage the amount of capital that he desires, if his fund can’t raise money from investors due to poor performance.
In both of these cases, the PM who is performing well may look to leave the fund for one that performs better. A scenario we are faced with most often is the PM who runs an “also-ran” strategy at a hedge fund. Here, perhaps the fund’s core or legacy strategy is not doing well, and they have had some redemptions. Often, the allocation to the PM in a bolt-on strategy is reduced, to boost the size of the core strategy. An excellent performer may find himself managing a reduced book in this case.
What advice do you give on handling resignations?
Candidates should handle a resignation with professionalism. They should not burn any bridges at the fund they are resigning from, and should give the fund ample time to close out the portfolio they manage.
What about compensation negotiations?
Compensation negotiations require a great amount of skill and experience. What we do at our firm is massage the negotiation process so that there is one offer made by the client that the candidate will accept, in order to prevent a situation where there is a volley of offers and counteroffers. Candidates should not try to highball or lie about their current or past compensation, as in most cases the truth will inevitably come to the surface.
What is one especially unusual career path you’ve seen?
We had a candidate who was a medical doctor in the People’s Republic of China. In order for him to practice medicine in the United States he was required to attend medical school for one year. While at medical school he became friends with a number of people at the B-school who told him he should quit medicine and work in financial services. He actually dropped out of medical school to pursue an MBA from the business school. He was hired by an emerging hedge fund upon graduation from business school. Within five years, he became one of the top traders in equity-linked products.
How might the credit crunch affect hedge fund hiring?
In many ways: Hedge funds will be able to cherry-pick from an outstanding crop of candidates who are in need of a second shot. Hedge funds in distressed trading strategies will be looking to hire over the next few months to take advantage of trade opportunities that still exist due to the credit crisis. This will put distressed credit PMs in high demand, but may lead to a drying up of the market similar to what happened in the convertible bond arbitrage market in 2004.
Finally, many fixed income and credit-related hedge funds may seek to expand horizontally. They may seek to hire senior investment professionals to lead expansion into non-correlated strategies beyond the founder’s area of expertise. This is exactly the primary goal of Alpha Search Advisory Partners. Our core competency is bringing existing alternative asset managers into new strategies, asset classes and geographies.