A few recent clippings from the press.  And this article is worth a quick gander for some timely tips on career management.

UBS restructuring compensation.  A “phantom equity” scheme would reward employees according to the performance of their unit within the firm.  And the firm’s budget for employee compensation will shrink by one-third this year.

Investment banking jobs outsourced to India.  “How much of Wall St.’s work force could be shipped overseas for pennies on the dollar?”  A consultant in this blog report claims, “as much as 40%, mostly from the investment bank and trading divisions.”

Merrill Lynch freezes hiring through 2008.  Here is The City reproduces an internal memo.

Hedge funds continue hiring.  Citadel, SAC Capital and others, despite ongoing fund closures.

The range of functional roles at a hedge fund is variable across the lifespan of that fund, and also variable for different funds in the industry. Just as a new fund must often start small in terms of assets under management, typically there are few people on the initial team as well, with every partner or employee wearing multiple hats. Some funds keep it that way for their entire life span; organization at a small fund tends to be informal.

One manager of a small fund remarked to us, “I give titles because people in the outside world need them. But titles create a certain hierarchy, and while there is always one person who makes the final decision, if you treat people like we’re all equal, people appreciate it and have a vested interest. Everybody knows they have a vested interest here; that’s why they’re loyal.”

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The hedge fund industry is arguably doing better in Europe than in the USA, and better still in Asia. In an article entitled “Hedge-fund Mania Hits Asia”, BusinessWeek reports: “From Tokyo to Singapore, hedge funds are as hot as Thai chili peppers.” Jim Rogers, co-founder of the Quantum Fund, says: “I am told a new hedge fund is being set up in Asia every other day.” So after last week’s report of strong hiring at European and American hedge funds, it is appropriate to consider the hiring picture in Asia.

Matthew Hoyle International (MHI) is a financial recruiting firm with offices in the UK, the Netherlands and Hong Kong. It’s a boutique-style firm, with a small-feel, personal touch and strong flow of mid- to senior-level positions in Europe and Asia. Hedge Fund Search Digest publishes a steady run of its prop trading jobs, portfolio manager jobs, and quant jobs in Singapore, Hong Kong, Seoul and elsewhere. Earlier this year we asked for Matthew’s views on the Asian hedge fund industry, especially from the point of view of candidates in Europe and the USA. In a nutshell: the Asian industry is very robust, but mobility at a global level is not easy even for very talented candidates.

On industry growth:

“More hedge funds are moving into Asia, particularly from Europe. We see special situations, distressed funds and funds involved heavily in private deals as being especially aggressive in 2008. We also expect the Asian convertible space to remain particularly attractive.”

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Growth of the hedge fund industry in 2008 from the point of view of AUM is still an open question, but as far as jobs go, there is no doubt that we’re in a boom period. The financial press continues to report widely on the migration of talent from banks to hedge funds, and on the readiness of hedge funds with capital at hand to create room in their organizations. Hedgeweek, citing Bloomberg, writes: “More than 45 traders, bankers, analysts and other executives have left major investment banks this year to join hedge funds and private equity firms … not including people who have left to start their own companies.” The emphasis here should lie with “major investment banks” — the number 45 estimates hedge fund hires from just a few companies alone — and that was one month ago. Hedgeweek sums up: “The time is right. Hedge fund managers have never had it better in terms of having access to the best available talent to boost their business.” The thought applies equally well to intra-industry moves by hedgies at an underperforming fund.

Two other London papers, the Times (”Traders head for hedge funds“) and the Financial Times (”Hedge funds hit troubled banks with a hiring binge“), report the same story, and binge really does appears to be the right word for it. FT reports several prominent lift-outs of entire teams from hard-hit banks. A manager of one large London hedge fund remarks: “You can get whomever you want.” It’s not just Europe either. TheDeal.com has “noticed an uptick in the volume of jobs posted in the hedge fund sector” in New York and Connecticut to its job board (just one of hundreds of sources of hedge fund jobs covered by Hedge Fund Search Digest). A recruiter quoted by the Times: “My job at the moment is to take people out of banks.”

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Yesterday we noted the report from Financial News Online that hedge fund launches are in a slump. That was based on the First Quarter 2008 Industry Report from Hedge Fund Research, a Chicago firm. Acutally, fund launches during the first quarter, last year, just barely surpassed this year’s figure, but an eight-year low is still something to notice. An even more telling observation, though, is that the number of fund liquidations is 23% higher than during the same period last year, as London’s Times reports. A spectacular quantity of hedge fund assets did indeed vanish in the the early months of this year.

Poor performance isn’t the only factor at work; fund raising now is more difficult than formerly. (Executive recruiters have noted on this blog that 2008 is a good year for talented hedge fund marketers, and that has been clearly manifested in the hedge fund marketing jobs posted to Hedge Fund Search Digest’s database of opportunities.) However, as we noted last week, some of the larger funds are not only avoiding struggles that face start-ups, but positively thriving; it is a time of consolidation. (From the Reuters article linked below: “The decline in hedge fund launches also shows the preference shown to industry’s largest funds, which tend to be favored by institutional investors.”) Also, since hedge fund strategies differ so widely, there remain ways in which the overall state of the industry defies generalization, almost by definition. Some strategies are thriving precisely because of conditions adverse to others.

And the funds that are in a position to do so are taking advantage of the generally severe financial job market, and hiring. Bloomberg (”Hedge Funds Hire From Wall Street as Jobs Disappear, Pay Falls”) and Reuters (”Investment banking’s pain is hedge funds’ gain”) report on this amplification of a traditional dynamic: a big grab for talent out of investment banks by stable hedge funds, made possible by the cuts that have left many thousands unemployed and many others increasingly willing to leave positions that may not be secure. Traditionally, the potential for much higher pay at a hedge fund had to be set against the greater risk of the more entrepreneurial environment and the relative stability of employment at a bank. But that stability has been comprised, even as shrinking bonuses at investment banks suggest the pay gap will increase where hedge funds are successful. It’s not a bad time to get in touch with your recruiter.

Today the Wall Street Journal reported that the Hedge Funds are feeling the employment pinch and the rich are getting richer.

Just a few years ago, Wall Street players could leave their investment banking jobs and easily start their own hedge fund or join an existing fund and enjoy a much better quality of life. “[Hedge Fund] investors beat down the doors with eagerness reminiscent of the late-1990s dot-com frenzy. It took only a decade for the industry to grow to 8,000 funds from a few hundred.”

The article goes into the increasing number of smaller hedge funds that are closing and how it has become more difficult to open a new fund. The investors simply are not as willing to fund new projects. In 2007, 1,152 new funds were launched. That number is down almost 50% from its 2005 peak. Now, that said, the upside is that the hedge fund industry expanded by 589 funds last year - so, it’s not all gloomy news.

David McCarthy, a 20-year hedge fund veteran, recently closed his fund - even though his fund beat the market last year. Why shut the doors? “Investors kept telling him the $300 million firm was too small.”

Perhaps the most interesting point brought up by the report was about the dominance by the largest funds. By the end of last year, 87% of all the money in hedge funds was handled by funds managing $1 billion or more. A full 60% of that was held by managers sitting on $5 billion or more. Of course, the largest public hedge fund is Man Group PLC. It increased its assets to $78.5 billion. Now, THAT’s some capital! (and yes, they are trying to fill hedge fund jobs.)

An exclusive Hedge Fund Job brought to you by Job Search Digest.

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Last year’s Hedge Fund Compensation Report by Hedge Fund Search Digest was based on hundreds of responses to the 2007 Survey, representing small and large firms including startup shops and the biggest banks. With turmoil in the markets and the employment picture rapidly evolving, the 2008 Report will be a must-read.

The 2008 Survey will be out by early summer, and all hedge fund employees are encouraged to participate. It’s quick to complete, participation is free, and all qualified respondents will have access to the aggregated results — critical information to manage your hedge fund career and your fund, perhaps, as well. Keep an eye on this column for the announcement of the Survey launch sometime within the next two months.

We followed up directly with finance recruiter Kathy Graham about her 2008 Financial Services Career Forecast (about which we posted a few days ago) to hear more about where hedge fund employment will head this year. Her are some of her thoughts.

How can someone evaluate job security in an uncertain environment? Can you suggest “Five Questions To Ask Yourself”?

Yes, here are my “five questions hedge fund professionals should ask themselves to evaluate their job security in an uncertain environment.”

(1) How diversified is your firm? The more diversified the strategies, the more likely there will still be funds performing well enough to keep the firm viable (and hopefully your position) if one or more funds are especially impacted by a market movement.

(2) Does your firm have some very liquid funds? In March 2008 a number of hedge funds closed, all of the same type of strategy. They were outstanding firms run by experienced professionals that had their positions in almost every single strategy impacted by the markets (i.e., mortgage-backed real estate, fixed income derivatives, munis, distressed debt, etc.). They had very few liquid strategies like a quantitative fund that could be closed out to generate needed cash for increasing margin calls, etc.

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Speculations and casual soothsaying about the markets abound. Seasoned finance recruiter Kathy Graham puts her job forecast down in writing, in five pages of detail. The 2008 installment of her annual Financial Services Job Forecast (now in its seventh year) examines upwards of a dozen indicators to produce a sector-based analysis of the likely developments this year in financial services employment.

The overall picture for hedge funds jobs in 2008 is down, with the exceptions of accounting and compliance positions. (This site has also reported on sales and client service as possible strong areas.) Since the Forecast covers the financial services industries broadly, hedge fund employment is only one of many areas discussed. But the big picture should be of interest. First, for someone who hasn’t yet broken into the industry, how to best position oneself never stops being a consideration. Second, someone who finds himself out a hedge fund job this year has to consider what to do while waiting for another shot.

The Forecast not only describes the leading positive and negative indicators and their import for various sectors, but also discusses personal strategy in a section entitled, “What To Do If You’re In A Potential Non-Growth Area.” As Kathy writes: “Winter can be a lovely season if you’re prepared for it…” Key points: review your resume and rethink your employment history; consider whether additional training or education will be an asset; consider where your skills can transfer; network, network, network.

Kathy Graham (kathy at hqsearch.com) is a financial recruiter and consultant via her several Chicago-based firms: Highest Quality Search, HQ Seminars, HQ Scripts, and HQ Services. The complete version of the 2008 Financial Services Job Forecast is available via her website, www.hqsearch.com, or from Kathy by email.