It is an irrefutable fact that new hedge openings reached their most brisk pace in four years in the first quarter of 2012. On the surface, that would appear to be bright sign for those looking to secure employment with hedge funds of any size.
However, there is no such thing as a free lunch on Wall Street and that is especially true when it comes to landing a hedge fund job. Not only is the hedge fund landscape ruthlessly competitive for job seekers, there are still issues facing prospective hedge fund employees. That is just the lay of the land in this post-financial crisis environment.
Redemptions Cannot Be Ignored
Arguably at the top of the list of the issues that could serve to confound the hedge job seeker is the mediocre performance of hedge funds this year. Simply put, the chasm between the performance of hedge funds and the S&P 500 is so wide this year (in favor of the latter), that it is almost questionable as to why investors would want to be involved with hedge funds.
Add to that, redemptions are on the rise. Hedge fund clients pulled money from these funds at the second-most rapid pace of 2012 during August. Hedge fund administrator SS&C GlobeOp’s forward redemption indicator, a monthly snapshot of clients giving notice to withdraw their cash as a percentage of its assets under administration, measured 3.34 percent in August.
A Sign of Things to Come?
Fortunately, the redemption indicator still rests well below the levels seen during the financial crisis and it is not uncommon for clients to withdraw some of their capital from hedge funds during the summertime. So to this point, there is no evidence to suggest the hedge fund industry is crumbling. Nor is there compelling evidence that hedge fund job seekers should seek other employment avenues.
Some may even argue a contrary point. As stated earlier, openings of new hedge funds remain robust and high end clients such as endowments and pension plans continue throwing billions of cash into hedge funds, offsetting the specter of redemptions in the process.
Importantly, there are still signs of life regarding hedge fund hires going forward. As one anecdotal example, Ray Dalio’s $120 billion Bridgewater & Associates, one of the world’s largest hedge funds, has received a tax break from the state of Connecticut. That tax benefit will help Bridgewater nearly double in size, bringing as many as 1,000 new employees to a new corporate campus.