From the category archives:

Hedge Fund Careers

As 2017 marches to its close, thoughts inevitably turn to the promise and challenge of the New Year. The hedge fund industry is on track to achieve its most successful year since 2013 in terms of gains and assets under management.

Year-to-date gains, by most reports are 7.5 percent and assets under management have reached $3.25 trillion, a record high. Although hedge fund closures have outpaced new starts in 2017, many view this as a positive…market forces at work, weeding out the non-performers and strengthening the overall industry.

How Do These Metrics Affect Jobs?

Hedge funds suffered a significant series of redemptions, beginning with the September 2014 CalPERS announcement of its withdrawal from hedge funds. In 2016, the industry bled more cash than in any year following the financial crisis.

Unquestionably, a strong finish in 2017 will enhance job prospects. Many of the investors that fled hedge funds may re-think their positions with regard to hedge fund investment. Obviously, top-performing hedge funds will receive the lion’s share of investment from those returning to the hedge fund fold. As a result, we are unlikely to see hedge fund starts outpacing closures in the New Year.

That said, significant gains in AUM, almost certainly, would increase the number of job opportunities in the industry.

Passive vs. Active Investing

As many are aware, passive investment has been promoted by the likes of Warren Buffet and others of his ilk. Passive investment also received favorable treatment by many in the financial media.

As a result, passively managed AUM has grown from 12 percent in 2010 to 18 percent in 2016, according to the McKinsey Global Asset Management Report. Interestingly, despite this 50 percent jump in AUM, revenues remained constant throughout this period at 3 percent.

Consequently, any rational person has reason to question the viability of continued growth in this sector. Naturally, if AUM growth in passive investment does decline, hedge funds should position themselves to acquire the lion’s share of the reinvestment that will necessarily occur.

A Paradigm Shift in Portfolio Construction

The bull run, having celebrated its ninth birthday, is causing many investors to contemplate what happens when it ends. Hedge fund managers are no exception. As a result, we are beginning to see a transition of focus— a focus toward risk and performance drivers and away from asset classes. Just as retooling for a new model creates job opportunities in the auto industry, job opportunities will arise in the hedge fund industry as it “retools” for portfolio construction favoring risk and performance drivers.

Final Thoughts

Greater employment opportunities in the coming year are almost a certainty in the hedge fund industry. The level of human capital required by active investment is greater than what is required for passive investment.

Investor faith in hedge funds has been, to some extent, restored. Assets under management are likely to grow as a result. That, in combination with widespread concerns regarding the bull run’s end, is certain to drive investors in the direction of hedge funds as their interest in preserving capital is going to exceed their contempt for the hedge fund fee structure and diminish their interest for out-sized returns.

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People of diverse backgrounds have found a home in the hedge fund industry – lawyers, computer scientists, investment bankers and public accountants, to cite a few. According to the 2017 Hedge Fund Compensation Report, the previous professional backgrounds of about 14 percent of hedge fund professionals are lumped into an amorphous category termed “other”, which may well include the writing profession.

Are You Joking?

In a recent survey conducted by Kurtosys Systems Inc., a leading provider of fund marketing systems,  it was disclosed that almost two-thirds of asset managers regard content marketing as their single most effective marketing tool. It follows that professional writers must be engaged to supply this content. Of course, asset management is a broad category, of which hedge funds are but one component. Nonetheless, the importance of content to hedge fund marketing should not be underestimated.

Late to the Party

Hedge funds were among the last to adopt a client-facing web presence, in part due to regulatory prohibitions. However, the hedge fund industry can benefit from not having pioneered this marketing segment, and come away from the experience with far fewer arrows in its back.

As the digital revolution matures, hedge funds have learned that simply having a website is not enough. Engaging content is a critical factor that ensures visitors to a website return repeatedly. After all, there isn’t much point in creating a website that fails to attract visitors and, once visited, doesn’t provide them with an incentive to return. Hedge funds are very tuned-in to return on investment (ROI) so this is a point that will not be lost on our industry.

A lucid content strategy is essential to winning new clients and retaining existing ones. Countless studies have demonstrated that companies with high-quality content marketing generate increased traffic, boost engagement, produce more leads and drive higher conversion rates than many other marketing strategies. This is no less true with hedge funds.

What about Hedge Fund Jobs?

Hedge funds are on track to achieve 11 straight months of positive gains. This fact alone is encouraging to hedge fund job seekers. More to the point, hedge fund opportunities are available to individuals whose background and experience may, at first blush, seem unsuitable to the industry. However, the hedge fund industry is always innovating and with innovation comes change. These changes are opening up new opportunities of which this is but one example.

Similarly, opportunities arose in the field of mathematics as hedge funds explored technology-based algorithmic modeling in quantitative hedge fund strategies.  Computer science took on new significance for hedge funds as they began to pursue automation and artificial intelligence, and, as we’ve just read, hedge funds have more recently opened the door to the writing profession.

How soon will hedge funds be demanding the services of SEO professionals, proofreaders, editors and social media experts? Hedge funds have survived through innovation and this invariably creates opportunities in the hedge fund industry for people with the most unlikely professional and educational backgrounds. Regardless of profession, if one keeps his ear to the ground, he may hear a hedge fund opportunity calling.

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NYC Job Seekers Need to Prepare for a Change in the Law

October 2, 2017

Have you heard? In an effort to close the wage-gap between men and women in the workplace, New York City Mayor Bill de Blasio (D) signed an amendment to the New York City Human Rights Law. This law takes effect on Halloween. Commencing October 31, no employer may inquire into the salary history of prospective […]

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Investor Confidence in Hedge Funds Continues to Soar

September 18, 2017

Prequin reports the hedge fund industry has achieved gains in positive territory for 10 months in a row, with aggregate August gains of 0.97 percent. This is the longest streak of month-to-month gains since the financial crisis, and suggests the hedge fund industry has finally found its feet. Investors Are Taking Notice As has been […]

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Are You a Woman Struggling to Snare a Job in Hedge Funds?

August 21, 2017

Male portfolio managers outnumber women 20 to 1. This might suggest gender bias on the part of hedge funds. However, it might also suggest that women aren’t seeking this line of work. How can the facts be known? For example, 34 percent of doctors in the United States are female, about one in three. According […]

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What Career Paths Lead to a Job in the Hedge Fund Industry?

July 10, 2017

Contrary to popular opinion, earning an MBA will not necessarily earn you a spot in the hedge fund industry. According to the 2017 Hedge Fund Compensation Report, just 4 percent of those surveyed were hired by a hedge fund as students graduating with an MBA. This is not to minimize the value of an MBA in […]

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What Will Be the Upshot of MiFID II on Hedge Fund Jobs?

June 26, 2017

Just as the regulatory mists were beginning to dissipate under President Trump’s Sharpie and the House’s legislative action, a new fog is rolling across the financial sector—MiFID II. Although driven by European regulators, it cannot be ignored by any financial organization that engages the European markets, and this includes the hedge fund industry. What Is […]

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