From the category archives:

Hedge Fund Jobs

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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The current buzzword, fake news, begs the question, how often does one encounter fake news? It must occur with some degree of frequency, because pollsters report that two-thirds of the American public believes the mass media peddles fake news. There are larger questions. Is fake news the result of carelessness or is it done intentionally? How does one identify it? What can Americans do to combat it?

The much-touted information age, which arose in concert with social media and an ever-expanding internet, has given a voice to anyone with the time and inclination to sit at a keyboard. This has not only made fake news possible but, in fact, prevalent.

Fake by Omission

Here is one example that illustrates fake news by omission. This article purports to address the top 15 highest paying jobs in America. Our readers will be stunned to see that the news article makes no mention of any occupation in the hedge fund industry. The highest salary plus bonus is said to be that of an orthopedic surgeon, whose median salary and bonus total $450 thousand.

Anyone that has read the 2017 Hedge Fund Compensation Report is keenly aware that the article in question has major omissions. For example, the compensation report lists the total annual compensation for a legal/compliance officer in the hedge fund industry at $484 thousand, $34 thousand more than the median for an orthopedic surgeon, which the article names as the highest paying job in the land.

Identifying Fake News

Although one can make a credible argument that the Internet is the culprit behind fake news, it must also be said that the Internet offers the best hope of debunking fake news. The problem is that most people tend to take what they read at face value, particularly if what they are reading reflects their personal beliefs.

News articles that rely heavily on statistics and percentages should be viewed with a skeptic’s eye. For example, a small community that suffers one robbery in 2015 suddenly sees a rise of 100 percent in the robbery rate in 2016. While that sounds horrendous and makes for a gripping headline, the fact remains that there were but two robberies in 2016. Statistics are another source of concern. It is entirely possible for one to drown in a lake with a mean average depth of three inches.

Combating Fake News

Sadly, the only way to combat fake news is through independent research. Not everything one reads is deserving of fact checking. One has to choose his battles. If the news affects one personally, in that life-altering decisions are going to be made based on the information, of course, prudence dictates that one research and verify the facts as they are presented. The Internet makes this possible.

What about Hedge Fund Jobs?

The aforementioned Hedge Fund Compensation Report revealed twelve hedge fund jobs that have higher median pay than the fifteen jobs listed in the article. No one is suggesting that the omission of these jobs in the article was intentional. However, this is important information for anyone making a career choice and highlights the importance of doing one’s due diligence when making a life-changing decision such as a career path.

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Can You Write Your Way into a Hedge Fund Job?

October 16, 2017

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 […]

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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 Does an Analyst Do and What Do They Earn?

June 11, 2017

Although there are more than a few avenues leading to a job in the hedge fund industry, it can be argued that an analyst’s position is a typical entry-level position. Make no mistake; although the term entry-level often connotes the absence of a need for skills, education, prior experience or other attributes, this is not […]

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