There are some cold, hard facts facing hedge funds and those that are searching for hedge fund jobs. Hedge funds tracked by Hedge Fund Research were up just 2.3 percent in 2012 through early August. Over the past five years, hedge funds tracked by the Hedge Fund Research Index have returned negative 0.6 percent.
Said another way, investors could have just put money to work in a low-cost index and done better than if they had given their capital to a fee-loaded hedge fund. Despite the mediocre performance statistics, hedge funds are sprouting up at a brisk pace, indicating there are potentially more job openings for job seekers looking to land an alluring hedge fund position. In fact, hedge fund openings in the first quarter of 2012 reached their most brisk pace since 2007, before the global credit crisis, according to Job Search Digest, which maintains a database of hedge fund jobs.
Another point in favor of hedge fund job seekers is that despite the lukewarm industry-wide performances, clients such as pension funds, endowments and affluent families have shown few signs of running away from hedge funds. The case of John Paulson’s eponymous Paulson & Co. hedge fund is a prime example.
To say Paulson & Co. suffered through a dreadful 2011 is an understatement. To say the hedge fund has not been much better this year is a fair statement. Despite all that, the firm is not lacking new client interest.
Here Come the Young Guns
In a way, the mediocre returns being offered by mega hedge funds such as Paulson & Co. is another plus for the hedge fund job seeker. Yes, the likes of Paulson, Steve Cohen and Eddie Lampert have stellar reputations on their sides, but hedge fund clients have been growing tired of the tepid performances offered by bulkier funds.
According to the New York Times, “New funds are also in vogue as investors tire of bigger, more established managers who have demonstrated lackluster performance.”
Assuming large clients such as endowments and pension plans move to distribute their assets among multiple hedge funds, some of those assets could fall to the new kids on the hedge fund block, in turn creating the opportunity for additional hedge fund job hiring.
There are cautionary tales. Just as few, if any, new retailers that pop up will be the next Wal-Mart, not all new hedge funds will be the next SAC Capital. Though 304 funds were started in the first quarter of the year, 232 were liquidated in the same period. Most of them are anonymous funds, largely managing the money of friends and family, the Times reports.