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On February 3, 2017, President Trump signed an executive order that outlined his administration’s core principles for regulating the U.S. financial system. They are:

(a) empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;

(b) prevent taxpayer-funded bailouts;

(c) foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;

(d) enable American companies to be competitive with foreign firms in domestic and foreign markets;

(e) advance American interests in international financial regulatory negotiations and meetings;

(f) make regulation efficient, effective, and appropriately tailored; and

(g) restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework.

Empower Americans

It is difficult to make a case against allowing Americans to make independent financial decisions based on informed choices, saving for retirement and pursuing individual wealth. This principle is closely linked to the broadened definition of an accredited investor, which failed to make it through the lame duck Congress and awaits action by the 115th United States Congress. There is little doubt that the proposed definition, which is more inclusive, would broaden the market of potential hedge fund investors.

Prevent Taxpayer Bailouts

There is only one federal bailout of a hedge fund on record—the bailout of Long-Term Capital Management (LTCM) in September 1998. It is fair to say that the hedge fund industry shares similar views on government bailouts as those shared by Americans in general. In short, the Trump stance on taxpayer bailouts is neither help nor hindrance to the hedge fund industry.

Foster Economic Growth

Promoting economic growth and vibrant markets based on a regulatory philosophy that targets systemic risk and market failure is music to the ears of the hedge fund industry. Current regulatory efforts are a “gotcha” cat and mouse game that serves no one’s best interests. While this is core principle lets no one off the hook, it does remove regulatory uncertainty and hold the promise of an end to “gotcha” regulation.

American Competitiveness

Hedge funds are wary of this, not because they disagree with the premise, but because the means of achieving this end are unspecified. The potential for trade wars and isolationism are real and concerning to the majority of hedge funds.

Advance American Interests

Again, no one decries the premise; the means by which this end is achieved is the over-riding concern for the industry.

Efficient, Effective and Appropriate Regulation

Hedge fund managers would like nothing more than efficient, effective and appropriately tailored regulation. The single greatest expense for any hedge fund is the expense associated with compliance. If this core principle is realized, hedge funds and their investors will benefit substantially.

Restore Public Accountability

This, the last of Trump’s eight core principles, will likely be the most difficult to achieve. Federal financial regulators are accustomed to their pedestal. They will vigorously resist being toppled from it. The transparency they demand from those they regulate is unlikely to be reciprocated. However, if achieved, it will accrue to the benefit of the hedge fund industry.

Hedge Fund Jobs

Empowered Americans, fostering economic growth and competition, while advancing American interests abroad, coupled with efficient, effective and appropriately targeted regulation and public accountability for the financial regulators bodes well for the hedge fund industry’s success. This success will necessarily be accompanied by increased employment opportunities in the hedge fund industry.

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Hedge Fund Research and other respected sources suggest that hedge funds, taken together, gained about one-half of one percent in the month of January, far short of the S&P 500’s gain in the same period. With January in the record books and the balance of 2017 stretching out ahead, what does the future hold for hedge fund industry performance?

Great Expectations

Regardless of one’s politics, it must be acknowledged that there are great expectations for growth because of Trump’s proposed policies on regulation, corporate taxes and infrastructure spending. Arguably, this is confirmed by the equity markets, particularly the Dow, which has climbed almost straight up since Trump’s election.

The hedge fund industry will certainly welcome any relief from the crushing regulatory burden the Trump administration’s policies might offer. Executive orders have already been signed that herald the dismantling of Dodd-Frank.

Trump’s desire to spend $1 trillion on the nation’s infrastructure has potential for bipartisan support. If implemented, the prospects for job creation, increased tax revenues and corporate profits are very real.

Corporate tax reductions almost guarantee increased corporate profits, which will manifest in higher share prices.

Here Is the Rub

If President Trump is unable to move his initiatives forward in a convincing way, the expectation bubble will almost certainly burst, potentially derailing the bull-run and the prospects of a resurgent economy.

Given the level of animus displayed by those who oppose Trump and his policies, hedge fund managers and investors of all stripes may benefit from keeping their powder dry until Trump has proven his ability to move these initiatives forward.

Hedge Fund Jobs

Job prospects in the hedge fund industry run parallel with robust economic growth and sound markets. In the current environment, we have the expectation of both. Expectations, however, will necessarily give way to reality. That reality has not yet materialized and until it does, one cannot reasonably expect a surge of employment opportunities in the hedge fund industry.

Nonetheless, employment opportunities abound for hedge fund job seekers. According to the Hedge Fund Compensation Report, one in four hedge fund firms is hiring operations staff, two in ten are seeking help in legal, greater than one in ten are on the hunt for risk management personnel and three in ten firms have openings in research.

Using the very conservative number of ten thousand active hedge fund firms, this translates into 2500 operations jobs, 2000 openings in hedge fund legal departments, greater than 1000 positions in risk management and 3000 jobs in research. In these categories alone, more than 8500 positions are available to qualified job seekers.

As readers of the Hedge Fund Compensation Report can attest, job openings are not limited to those outlined above.

In short, regardless of whether or not Trump and his administration are successful in pressing their agenda forward, opportunities for employment within the hedge fund industry will persist.

To make the most of these opportunities, read the Hedge Fund Compensation Report.

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What Was Under Last Year’s Tree for Hedge Fund Professionals?

January 23, 2017

For starters, around three-quarters of hedge fund professionals will not receive their bonuses until the first quarter of 2017, according to the  Hedge Fund Compensation Report, so, if there was nothing under the tree, no worries, it is coming. What Will Bonuses Look Like This Year? Although the financial media has painted a bleak picture […]

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How Will Hedge Funds Respond to a Dismal Year of Performance?

January 10, 2017

It can’t be sugarcoated. Hedge funds, for the third year running, have concluded another inauspicious year, not only in terms of gains, but also in the context of asset flows and industry growth. Glaring Failures Not to paint the industry with too broad a brush, it is important to begin by saying that the majority […]

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Hedge Funds Face Fierce Headwinds in the Fight to Grow Assets

December 12, 2016

It appears that the hedge fund industry, on average, will end 2016 on the wrong side of the S&P 500, the arbitrary benchmark, which in the eyes of many, heralds a successful level of performance. The S&P 500 is up some 10.5 percent year-to-date, while average aggregate hedge fund gains hover around 4.5 percent. Another […]

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Should I Stay Or Should I Go?

November 29, 2016

The Clash hit of the same name topped the charts in 1982. More recently, it has become the de facto theme song of many an institutional investor. Of course, Clash did not have pension fund managers in mind when the group penned this tune, but it is descriptive of the dilemma these investors face. Should […]

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Little Rhode Island Delivers Devastating Blow to Hedge Funds

October 31, 2016

According to a recent article published in FINtech, the Rhode Island State Investment Commission has announced its decision to redeem $534 billion invested in seven hedge funds. This enormous sum does not include the $51 billion it plans to redeem from Viking Global. This reduces Rhode Island’s exposure in Viking Global by 50 percent and […]

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