From the category archives:

Hedge Fund Jobs

Who are these four horsemen? Pitiful performance, available alternatives, reduced fees, and impatient investors.

Abysmal hedge fund performance has been the norm for the past five years. Hedge Fund Research reported the global hedge fund composite to be down almost 1.2 percent when averaged over the past five years. Contrast this with the S&P 500, which is up more than 11 percent over the same period. Then there is the US bond aggregate which, according to Barclay’s, has seen gains of 3.6 percent over the same 60 months.

Hedge funds are not the only game in town. Liquid alternatives, the aforementioned bond market, and private equity firms are among the many investment opportunities prepared to usurp hedge funds as the investment vehicle of choice.

Incredibly, most available investment vehicles sport lower total fees than those charged by hedge fund firms.

Lastly, investors of all stripes are beginning to lose patience with underperforming hedge funds. Hedge funds that receive hundreds of thousands, if not millions of dollars, in management fees and earn nothing by way of performance fees are becoming the norm rather than the exception. Examples of this impatience include public pension funds like CalPERS and NYCERS. New Jersey legislators are contemplating a prohibition on alternative fund investment, which would include hedge funds. Massachusetts and Illinois are pursuing a similar path. However, insurance giants such as AIG and MetLife are also fleeing hedge funds. Pension funds and other large institutional investors represent 43.1 percent of hedge fund assets under management. Three years ago that number stood at 47 percent.

Is This a Trend?

Although these numbers suggest a trend, it is by no means confirmed to be one. The most telling story to follow is the one that reveals the eventual outcome of these high profile redemptions. Will these entities achieve superior results with other investment vehicles or will they discover that they zigged when they should have zagged?

What Is Certain?

Hedge funds are under enormous pressure to boost performance. Hedge fund fee structures, under attack for years, are also an increasing concern for potential investors. While the 2 and 20 model succumbed to pressure years ago, (1.3 and 15 is the current average) hedge fund fees remain at the apex in the investment world.

If hedge funds are to survive and thrive in the current economic climate, they must develop strategies that produce the gains investors will accept, coupled with fee structures that are reflective of fund performance.

What about Hedge Fund Jobs?

Many in the hedge fund industry predict dramatic reductions in the total number of hedge fund firms over the coming years. This is not an unreasonable forecast given recent events. However, diminishing numbers of firms does not automatically translate to fewer opportunities in the industry.

The 2016 Hedge Fund Compensation Report offers unique insights into the mindset of hedge fund professionals. One of the most telling sections of the report deals with job security concerns. Remarkably, only 27 percent of those responding cited performance as an issue and just 52 percent expressed any concern about job security.

Unless the aforesaid 52 percent wake up and smell the coffee, those predicting an apocalypse may be proven correct.

{ Comments on this entry are closed }

Anyone following the primaries will recognize this phrase, used frequently in the context of Donald Trump’s foray into presidential politics. For example, in the recent South Carolina contest, the phrase was employed ubiquitously by talking heads in the mainstream media, who were largely incredulous regarding the margin of Trump’s victory in the wake of his dust-up with Pope Francis and his stinging remarks about former President George W. Bush. Conventional wisdom suggested that Trump’s remarks would have negative repercussions with voters and diminish his chances for victory in the primary.

What Does This Have to Do With Hedge Funds?

The mainstream media misunderstands voters in the same way it misunderstands investors and therein lays the parallel. Hedge fund performance has been the subject of widespread media criticism and hedge fund fee structures are often mischaracterized as everything from despicable to shameful, yet hedge fund assets under management continue to climb.

Hedge fund performance has been disappointing and many wince at 2015’s results in the same way many wince at some of “the Donald’s” remarks. However, hedge funds appear to defy financial gravity in much the same way Trump has defied political gravity, as both continue to enjoy widespread support.

Those Contemplating a Hedge Fund Career

Despite the negative press, one cannot lose sight of the fact that hedge funds have proven to be a worthy investment for several decades. While this is not, in itself, sufficient to justify continued interest in a hedge fund career, it is noteworthy. Even more persuasive are the success stories that abound in the industry. For example, Conquest Macro Fund LTD has gains of 21.7 percent through February 16, 2016, Horseman Global Fund is up 15.53 percent as of February 10th, Brevan Howard Systematic Trading Fund boasts gains of 12.09 percent through February 12th and AAM Absolute Return Fund reported gains of 11.02 percent through February 12th. Incidentally, AAM Absolute Return Fund returned more than 58 percent in 2015, an astounding result by any measure, earning the fund honors for top performance among hedge funds. This list is by no means inclusive and other examples of stellar performance can be found here.

Just as Jeb Bush and Hillary Clinton were presumed by the pundits to be the standard bearers of their respective parties for the 2016 presidential election, the greatest names in hedge funds were tarnished in the crucible that was 2015. Examples include Larry Robbins’ Glenview Capital Partners which lost more than 18 percent and Bill Ackman’s Pershing Square International which fell 16.5 percent.

The Take-Away

Media pundits are not the best source of advice as to whom one should vote for or with whom to invest. More to the point, pundits are certainly not career counselors. In short, don’t allow yourself to be discouraged with regard to a career as a hedge fund professional by the talking heads. For trusted insights regarding a hedge fund career, consider utilizing the information supplied by the 2016 Hedge Fund Compensation Report, which does an outstanding job of lifting the veil of secrecy that conceals the intricacies of hedge fund pay practices and more.

{ Comments on this entry are closed }

What Is the Best Professional Background for a Hedge Fund Job?

January 4, 2016

Many aspiring to a career in the hedge fund industry ask this question in the broader context of career path. It is an excellent question but, like so many others, has no single answer. The truth is there are many paths to a career in hedge funds. Hedge fund employees come from a multiplicity of […]

Read the full article →

Competition for Hedge Fund Jobs Heats Up

November 30, 2015

Hedge fund performance tends to suffer in a bull market and the current bull market is on the cusp of moving into second place for longevity, unseating the 1949 through 1956 run, which currently holds that distinction. The bull market has taken the lion’s share of the blame for the havoc wreaked on hedge fund […]

Read the full article →

Are Headhunters on the Path to Extinction?

November 16, 2015

Technology and innovation have disrupted countless industries over the past several years, not the least of which is the recruiting industry. In the recent past, headhunters, the proactive agents of recruiting firms, would be on the front lines and phone lines seeking the best talent for the clients they represented. Frequently, headhunters reached out to […]

Read the full article →

Hedge Funds: An Appetite for Data

December 1, 2014

No one in the hedge fund industry would challenge the proposition that data is a crucial factor in meeting these primary hedge fund manager objectives: Investor transparency with respect to risk and performance Accurate and timely compliance information for regulators Adherence to operational best practices to enhance performance The challenges of sorting, storing and utilizing […]

Read the full article →

Many UK Hedge Funds Setting Up US Operations

July 28, 2014

Sensing a favorable environment for hedge funds among US institutional investors, a number of UK-based hedge funds are setting up operations in the US to grab a slice of the growing institutional money moving into hedge funds. Well known UK funds such as Winton Capital, Odey Asset Management and Cheyne Capital are among a large […]

Read the full article →
Real Time Web Analytics