From the category archives:

Hedge Fund News

February appears to mark the end of 14 consecutive months of positive gains for the hedge fund industry, with HFRX weighted average returns posting a decline (- 0.35 percent) as the surge in market volatility worked its worst in hedge funds.

While the HFRX is much narrower in its scope than the HFRI, which comprises thousands of funds, it is unlikely that the HFRI, when released, will produce a positive number for the industry.

Performance Aside

Neither performance, assets under management or fee pressures will deter hedge funds from recruiting candidates with a great skill-set in mathematics and the hard-sciences, particularly engineers and developers. Quantitative skills are in demand, and while they will not guarantee a job, such attributes will put these job seekers at the front of the queue.

Demand for quantitative traders and analysts are on the rise. This is equally true for programmers experienced in MattLab, SQL, Java, Hadoop, Q, kdb+, C#, C++, HTML5, Python and other programming languages.

Additionally, a number of fundamental hedge funds are moving in a “quantamental” direction, hiring data scientists from academia and Silicon Valley, to better evolve with the times. This includes recruiting those experienced in not only data science, but also artificial intelligence, machine learning and other disciplines with a quantitative bent, to aid portfolio managers in making better investment decisions.


However, having the bona fides enumerated earlier, does not guarantee a successful placement in the hedge fund industry, or any other industry. Other attributes are also important, such as communication skills, interpersonal skills and overall intelligence.

Other Disciplines

The evolving nature of the hedge fund industry gives rise to opportunities for those who excel in a wide variety of endeavors. For example, the recent passage of the Tax Cuts and Jobs Act of 2017 may create opportunities for those in the legal profession. Extraordinary geopolitical events could lead to employment opportunities for those skilled in geopolitics, political science, and world history.

The variety of educational and employment backgrounds that already exist in the hedge fund industry are astounding. One need look no further than the 2018 Hedge Fund Compensation Report to see the myriad backgrounds from which hedge fund professionals originate.

The Takeaway

Hedge funds, which are known for innovation and evolution, are not merely a home for stock pickers and number crunchers. Successful hedge funds rely upon a host of experts in a variety of disciplines to achieve successful outcomes for their investors.

As the chart demonstrates, hedge fund professionals join the industry from technology, the law, public accounting, consulting, research, and many other fields. When you contemplate the existence of around 10,000 hedge funds employing many more thousands of people, it is not difficult to see the wealth of employment opportunities that exist in the hedge fund industry.

Anyone interested in a hedge fund job should carefully consider the juxtaposition of his or her skill set to a job in a hedge fund firm. It may require a degree of imagination, but that is what the hedge fund industry is all about.


The January 2018 results for aggregate hedge fund performance have been published. According to HFR, the industry showed a 2.8 percent gain. In contrast, the S&P 500 gained 5.7 percent in January before plummeting in the wake of February’s correction. Year-to-date gains for the S&P 500 as of February 16 stood at 2.19 percent, 61 basis points short of hedge fund aggregate gains in January alone.

The S&P 500 as a Benchmark

Many in the financial media benchmark hedge fund performance by making comparisons to the S&P 500. The recent correction has demonstrated, among other things, the folly of using this index to benchmark hedge funds.

From the S&P’s high-water mark on January 26 to its low on February 8, the index was underwater by as much as 11.84 percent. However, that pullback has been trimmed substantially and it is with baited breath that we await HFR’s February result for average hedge fund returns.

The markets continue to rebound and log impressive gains signaling that correction lows have come and gone. Interestingly, there is a dearth of media comparisons between January’s hedge fund result and the current state of the S&P 500. Apparently, such comparisons are only offered in scenarios that make the industry look bad.

If Not the S&P 500…

There is no consensus on the appropriate benchmark for hedge fund performance. However, it is clear that the benchmark should not be the S&P 500. Moreover, it is equally unwise for any investor to put too much weight on an aggregate result, such as those proffered by HFR, Eurekahedge, Prequin and a host of others.

This is not in any way meant to disparage these providers. Rather, it is to point out that such indices are built on the aggregate of individual hedge fund performance results, and they reflect the measurement biases of these funds. More to the point, they fail to illuminate the diversity of individual hedge fund performance characteristics.

Until a benchmark consensus is reached, the hedge fund industry will likely continue to suffer the apples-to-oranges comparison the media makes with the S&P 500.

What about Hedge Fund Jobs

If recent market events signal a return of volatility, hedge funds are likely step-up their search for talented stock pickers and those possessing such skills will see demand for their talents on the upswing.

The potential of Federal Open Market Committee rate hikes beyond those forecast cannot be ignored as a factor for increased volatility. If the FOMC is forced to raise rates to cool inflation, volatility will surely increase.

Traditionally, volatility has been the hedge fund industry’s best friend, providing the industry the opportunity to do what it does best—hedge! Volatility will be a persuasive force, encouraging hedge fund investment. The resulting positive cash flows will be accompanied by an increased demand for hedge fund professionals.

Now, the stars seem to be aligned to favor employment in the hedge fund industry, particularly for those with proven stock picking skills.


Hedge Fund 2017 Results Hold Promise for a Better 2018

December 25, 2017

It is not possible to allow 2017 to pass into history without acknowledging the achievements the hedge fund industry has made during the year. First, hedge funds made positive gains for investors in each month of 2017. Gains, year-to-date, stand at around 7.5 percent. Of course, December’s results are not final, but almost no one […]

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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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Bill ‘Att’Ackman Targets ADP After Acquiring 8 Percent Stake

August 7, 2017

Activist hedge funds are hardly a new phenomenon, and Bill Ackman of Pershing Square is certainly not a novice in the game. While activist funds have been on the scene for decades, the motives that lay behind the activism have changed dramatically. Earlier versions of activism were analogous to private equity plays, in which the […]

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Will the Bloom Return to the Hedge Fund Rose?

July 24, 2017

In the wake of countless glowing articles touting hedge fund gains through the first half of 2017 as well as new industry records for assets under management, hedge fund managers can’t help but be pleased—and who can blame them? Here Are the Facts Hedge fund gains have been in positive territory for the past eight […]

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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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