From the category archives:

Hedge Fund Jobs

Investors began 2018 with a cautiously optimistic view, duly supported by 2017’s positive returns, which paralleled the market rally. Hedge fund managers, broadly speaking, shared this hopeful vision and looked forward to improved performance and enhanced fundraising opportunities in 2018.

A Look Back

The year 2018 opened with a robust January HFR asset weighted composite index score of 2.74 percent, but by the end of the first quarter, negative gains in February and March had whittled that down to a meager 0.48 percent gain. Worth noting, is the fact that the Dow Jones Industrial Average (DJIA) fell 2.49 percent in the same period, allowing hedge fund investors to continue to hold their heads high.

2018’s second quarter continued to be marred by losses in April and June of -0.05 and -0.14 percent respectively. May, 2018 turned in a positive result of 0.65 percent, bringing overall second quarter gains to 0.65 percent, which translated into first half gains of 1.23 percent.

Meanwhile, the DJIA turned positive in Q2, gaining 0.7 percent. However, first half gains for the DJIA were deeply into negative territory at -1.8 percent, once again providing cover for those investors so bold as to allocate to hedge funds.

Quarter 3 was an overall positive one for hedge funds, with positive gains posted in July and in August of 0.18 and 0.48 percent respectively. However, October slipped into negative territory, falling -0.05 percent. Nonetheless, overall Q3 gains stood at 0.61 percent and, year-to-date, the HFR asset weighted composite index had achieved 1.68 percent.

Concurrently, the DJIA rocketed, resulting in year-to-date gains of 7.03 percent through the end of September, 2018, which left hedge fund investors scratching their heads.

The story of Q4 is very similar to Q3, with October and November gains in dark territory, at -2.71 and -0.41 percent, respectively. Through November, 2018, year to date gains were negative, albeit narrowly at -0.06 percent. HFR has not published its December data at the time of this writing, but it is unlikely that hedge fund year-to-date losses will exceed those of the DJIA or the S&P 500.

For the DJIA, Q4 was nothing short of a debacle, with year-to-date gains plummeting by -5.63 percent.

Other Noteworthy Data

2018 was marked by a 38 percent decrease in the number of hedge fund firms pursing an equity strategy, falling from 48 percent of firms in 2017 to 30 percent of firms in 2018. Although the equity strategy remains the most popular, at 30 percent, credit strategies are nipping at their heels, rising to 29 percent of hedge fund firm strategies.

Hedge fund fees continue to retreat, with 83 percent of hedge fund firms charging a management fee of less than 2 percent. Just 13 percent of hedge fund firms charged a 2 percent management fee in 2018, and only 4 percent of hedge fund firms charged management fees in excess of 2 percent.

What about Hedge Fund Jobs?

Predictably, hedge fund job seekers will see significant negative press on the hedge fund industry’s performance in 2018—don’t allow this to dissuade you from your goals. After all, the S&P 500 was down -6.24 percent, year ending 2018, a benchmark that hedge funds will no doubt beat by a significant margin. The hedge fund industry continues to play a significant role in the U.S. economy and we fully expect job prospects will mirror that significance.

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Here we are, in the closing days of the worst year for the hedge fund industry since the financial crisis. According to HFR, hedge funds, in the aggregate, were down .16 percent in November and 2 percent for the year. Concurrently, Eurekahedge data suggest that the combined effect of investor redemptions and performance based losses have resulted in hedge fund assets under management shrinking 3.4 percent year-to-date, and if that is not enough dismal news—hedge fund closures may overtake hedge fund starts by year-end.

Perspectives

Given the hedge fund industry’s poor showing in 2018, how should aspiring hedge fund professionals assess their prospects for 2019?  The short answer is that one must keep things in perspective.

For example, hedge funds as a whole, were down 2 percent year-to-date and while this sounds rather dismal, it is important to recognize that the Dow Jones Industrial Average (DJIA) is down 9.2 percent, as of December 21, 2018—perspective! Similarly, the S&P 500 is down 9.6 percent, and the NASDAQ is down almost 8.3 percent, as of December 21, 2018—again, perspective!

Starts and Stops

Looking back fondly on 2017, one should recall that hedge fund closures outpaced hedge fund starts throughout the year, yet, 2017 proved to be the best year for hedge funds since the financial crisis. Once more, perspective!

The Rear View Mirror

That rear view mirror, we once fondly gazed into, has been torn away in a collision with the Trump administration. The disrupter in chief is fulfilling the voters’ mandate in spades, from regulatory policy, to trade, to immigration, and to taxation, disruption is the buzzword de jour of this administration. Recently, the FOMC and its Chair (Jay Powell), long considered sacred cows by U.S. Presidents, has been the recipient of President Trump’s displeasure, with what he perceives to be growth killing, unneeded rate hikes.

No one should diminish one’s self by making excuses for poor performance, but that tenet may require revision in the age of Trump, and, before anyone gets their political hackles up, please understand that no one is saying he is right or wrong. What is being said here, is that Trump’s administration is disruptive to the status quo. The markets, as a result, have been affected in ways unlike previous administrations have affected the markets.

What Does This Have to Do with Hedge Fund Jobs?

Simply this—aspiring hedge fund professionals need to put what they hear, see and read about the hedge fund industry in context with broader events in the markets, geopolitics and the financial sector in general.

What we see happening in the hedge fund industry is a snapshot in time, not the best of times to be sure, but still, a snapshot in time. Institutional investors understand this and we have not seen these investors turn their collective backs on hedge funds, so, why should you?

Anyone interested in pursuing a career in hedge funds may find that this moment in history is ripe with hedge fund employment opportunities, as this innovative industry strives to meet today’s challenges as well as tomorrow’s. Rather than hurting hedge fund job opportunities, meeting these challenges requires new talent and, yes, fresh perspectives.

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Is the Hedge Fund Industry Facing an Existential Threat?

November 26, 2018

Hedge Fund Research (HFR) reported an asset weighted composite index of -2.71 percent for the month of October, bringing the year-to-date asset weighted composite index to -0.98 percent, and HFR, in mid-November, is reporting continued declines, which suggest that November will also be in negative territory. As a result, many media outlets are, once again, […]

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When You Think Finding the Job Is Harder than Doing the Job

November 12, 2018

Regardless of one’s level of preparation, the hunt for a hedge fund job can be exasperating at times. Setbacks and rejections are inevitable, as is the case for most on the job quest, and setbacks and rejections are certainly not exclusive to those seeking a career in the hedge fund industry. Improvements in unemployment rates […]

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Who Will Be King of the Alternative Asset Class?

October 29, 2018

Hedge funds have long dominated the alternative asset class, both in terms of assets under management(AUM), and also in sheer numbers of firms. As reported by Prequin, hedge fund AUM reached a record high of $3.61 trillion through the first half of 2018. However, again according to Prequin, the alternate asset universe was around $8.8 […]

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Is an Ivy League Degree a Must for a Hedge Fund Job?

September 3, 2018

Many of those who aspire to a career in the hedge fund industry believe in the necessity of an Ivy League degree. Others believe that an MBA or other advanced degree is a requirement. While these educational attributes most assuredly enhance a CV, the absence of these attributes does not preclude employment with a hedge […]

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Will Hedge Funds Win the High Stakes Race for Talent?

August 20, 2018

While there has always been keen competition for talent, the battle lines are being clearly drawn between the financial (particularly hedge funds) and the technology sectors. MBA graduates from the London School of Economics (LSE) have opted for the technology sector in large numbers since 2013, when LSE began splitting out the technology sector. Forty-six […]

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