The number of poker players taking hedge fund jobs is increasing, reports Fins.com. More and more funds are looking for fast-thinking card players who can quickly analyze intricate situations and make cold, hard, calculated bets. The type of skills shown by top poker players mirror those needed in hedge fund trading jobs: namely, rational approaches toward risk and a good memory.
A good example would be superstar gas trader John Arnold, who’s made billions trading energy futures for his Houston-based Centaurus Energy fund, and was profiled recently by CNN’s Money. He is described as having the “brain of an economist… and the iron stomach of a riverboat gambler.”
Arnold began his career as an energy trader at Enron, but escaped before the firm imploded. A few years later he reportedly earned $1 billion betting that natural gas prices would fall – betting against the now famous wager at Amaranth Advisors LLC. In 2008, he foresaw the collapse of the commodities boom and doubled his firm’s money.
“He’s like a poker player who can see everyone else’s cards,” one longtime associate is quoted as saying in the article. Arnold focuses on a “virtual” type of natural gas trade known as a “swap.” No physical natural gas trades hands. But if big energy producers such as Chesapeake Energy or BP are worried that prices are going to fall below a certain threshold, they often enter into a contract with a firm such as Arnold’s Centaurus to pay an agreed amount of cash in the event of a price drop. However, if prices move the other way, Centaurus wins.
Arnold showed great aptitude for numbers early in life, able to easily grasp economic concepts and do complex math in his head. His early experiences at Enron gave him unique insight into the energy needs of gas customers around the country. He was handling contracts totaling more than $1 billion a day on Enron’s natural gas trading desk, when he was only in his mid-twenties. Today, his Centaurus fund, founded in 2002 with a few colleagues from Enron, has 70 employees.
Given the current state of the economy and financial markets, many hedge fund professionals are pleased to still be in the business and generally satisfied with their overall compensation. That’s one of the findings revealed by our recently completed 2008 Hedge Fund Jobs Digest Compensation Survey.
We received hedge fund compensation data directly from hundreds of hedge fund Portfolio Managers and employees from both large and small firms, including Bank of New York Mellon, Barclays Global Investors, Citigroup, Fountain Advisors LLC, HSBC, Kellogg Capital Group, Lansdowne Partners and many others.
The results show that these players in hedge fund jobs knew trouble was brewing on the horizon not long ago. And that 42% of them are happy with their current level of compensation – up from 25% last year. Despite no significant increase in compensation, there was a big increase in job satisfaction – an indication that, before Wall Street’s meltdown, hedge fund employees knew the market had shifted.
You can read the executive summary of the Compensation Survey at JobSearchDigest.com
Dozens of hedge funds that once set the price of entry at $1 million to limit the number of investors participating in their funds are now trying to limit redemptions to keep their funds afloat, reports Reuters.
Managers are looking at so-called “gate provisions” that limit withdrawals in an effort to stop the flood of capital pouring out the door. Some funds have halted redemptions completely. Managers argue that it is their fiduciary duty to slow redemptions and thus avoid having to unload securities at fire-sale prices, which would further damage the returns of those who wish to remain invested in their funds.
Many industry experts already blame hedge funds for accelerating stock market declines because of them having to dump huge blocks of shares to boost their funds’ liquidity. According to Chicago-based Hedge Fund Research Inc., the average hedge fund has lost 20% this year, prompting wealthy individuals and institutional investors to yank out a record amount of money. More redemptions are expected until November 15th, which is the deadline to get funds out by year-end for tax purposes.
