Here’s 2007 hedge fund compensation in a nutshell. This chart is excerpted from the latest Hedge Fund Search Digest Compensation Survey, which had responses from individuals representing over 200 firms.
Note that not all ranges on the vertical axis are of the same size. Increments are of 50,000 up to 300,000.
You could spend hours each week looking at uninformative or repetitive hedge fund job posts. A helpful job post is concise and tells something about the hiring firm, the responsibilities of the position, and the required qualifications, without a lot of unnecessary “filler”. Here’s an example.
Equity Research Analyst, Long/Short Hedge Fund , New York, NY
Analyst will join a portfolio team that trades long/short, event driven and/or pair trading strategies ——– Not looking for a generalist, but someone with great depth of knowledge about a particular industry/sector ——— Must have 3+ years of experience generating trade ideas with a demonstrable record of success
See other hedge fund jobs here.
JPMorgan’s CEO, James Dimon, is playing the markets, press and Bears Stearns investors perfectly. He knows exactly what he is doing and is executing with precision. Yesterday we learned that JPMorgan sweetened the deal now to $10 USD a share, up from a shocking $2 original bid. Dimon was quoted in the Wall Street Journal as saying, ‘We took another crack at it to get it just right.’ Mr. Dimon is mastering the art of the spin.
Our theory is that Dimon knew all along that a $2 bid would have tremendous shock and awe value. In fact, he was counting on it. What better way to steal acquire Bear Stearns’ stock than to quintuple your original offer a week after the investors and the press couldn’t talk about it enough? Current Bear Stearns shareholders and investment bank employees had already calculated the fortune that got flushed down the toilet - now, hopeful again, they would be thrilled with any double digit stock price. A classic negotiating tactic is playing out before our eyes and, for most, the offer change comes as big news. We’re thinking this approach could go even further.
In mid-March, a beaten up Bear Stearn’s stock was nearly $60 a share. To think that JPMorgan (or anyone else for that matter) could pick it up for even $20 a share was unfathomable at that point. Now, even if Dimon takes another “crack at it,” he’ll be pleased as punch to take the stock at $15 a share - especially with the aid of the Fed. Dimon knows the potential upside and he’s already protected JPMorgan from the downside.
If JPMorgan’s target price for Bear Stearns was $12-15 a share all along, then anything less than that is simply icing on a very sweet cake.
This is the second of a two-part interview with Kevin Collins, a capital markets recruiter who has made his career with April International in New York. In his words, “a recruiter’s biggest mission is to let people know what they’re worth in the marketplace.”
Please give an overview of your firm.
The firm was founded in 1978, and I’ve been here since 1989. A friend of mine who owned the firm approached me. At the time I was working at CBS News and also managing a restaurant. I went to see what it was all about and realized it’s a fun, people-person job. In restaurants there’s constant contact with people, and in the newsroom too, of course, so my experience was very applicable. In recruiting you learn something new about industry every day, so it was very attractive.
Now we work almost exclusively in capital markets, but in the early days we’d work with almost anyone. That was enjoyable because it broadened your scope. I’ve looked for Saul Steinberg at Reliance Insurance, for a helicopter pilot for him once. I’ve looked for patent attorneys for Sony Corporation. I have another client, an investment bank out of Europe, and they come to me for everything, areas that I don’t normally recruit in.
15% to 20% of my work is for hedge funds. The remainder is major investment firms: Merrill Lynch, Goldman Sachs, Lehman Brothers, Morgan Stanley. We primarily do quantitative analysts, risk managers, credit analysts, controllers.
How has the internet changed your business?
Although you probably won’t be given a Rubik’s Cube to solve during your hedge fund job interview, you should be ready to solve a puzzle of some sort. Make sure you think through the question before jumping into an answer. And, for goodness’ sake, answer the question that is asked! Nothing decreases your chance of getting a job you are qualified to do faster than not answering the right question.
Q: Picture a 10×10x10 “macro-cube” on the table. This big cube is made up of 1×1x1 “micro-cubes”. Your dog walks by and knocks the macro cube off with his tail, causing it to crash to the ground. When it hits, the impact causes the entire outer layer of micro-cubes to fall off. How many micro-cubes are on the floor?
A: First, don’t beat the dog, he was just happy to see you. This is a popular question and you should be ready for it. There are a couple ways to solve this. The first (not the best), is to count the number of cubes on each face and add them up. This math is confusing for most people.
The better solution is to focus on the structure of the problem. The original macro-cube and new smaller macro-cube hold the answer. The difference between their volumes is how many micro-cubes fell off. The volume of a cube is n cubed. The answer is, therefore, 10 cubed - 8 cubed. So, 1,000 - 512 = 488.
Note: A common mistake is for people to think because only one layer fell off, the solution is 10 cubed - 9 cubed.
Special thanks for this interview question to Timothy Crack, author of Heard on the Street: Quantitative Questions from Wall Street Job Interviews
This morning CareerDiva.net wrote about the effect of Bear Stearns on the job market. “You commit yourself to a company, as many of these employees did and then one day, whammo…. all the workers, from the top down, saw themselves as part of a family….”
This is a very similar situation to the thousands of Arthur Andersen employees who started their careers with AA and poured everything they had into the #1 firm. Then, in a matter of months, only a shell remained (as their website now reflects).
It’s true, there is no single firm that can guarantee employment security. You can work for the best of the best and still find yourself pitching your skills to a competitor that you would not have considered working for just a year earlier.
While there’s no shortage of bad news for the US hedge fund industry, the global picture is different. This month, Dubai-based Rasmala won the “Best New Fund” award at the annual Hedge Funds World Middle East Conference. This marks the second year of the award, as the Gulf area continues to be prosperous for hedge fund growth.
Hedge fund job descriptions are worth reading carefully. Whether from an industry recruiter, or from a hedge fund directly, specificity in the desired candidate profile is always intentional. It saves time on the hiring end, and helps candidates find the right niche. Here’s an example:
Portfolio Analyst, New York, NY
Support investment & trading; responsibilities will involve monitoring the High Yield Bond, Bank Loan and CDS markets; analyzing events & trends; and providing senior management with insights on opportunities, risks and the performance of individual holdings as well as the overall portfolio ——– Have 3+ years in analyzing Credit Portfolios, ie. corporate bonds or loans, be familiar with pricing data, performance analysis & benchmarks, and be able to work independently
See other hedge fund jobs.
The other shoe has dropped - offficially. Bear Stearns, big investment bank, announced to the Street today it needed help in a big way. Bear Stearns has looked to JP Morgan and the government for emergency help. Bear Stearns lost 50% of its value while dragging down the Dow by 200 points.
Did you really think that positive blip earlier this week was a “sign” of better things to come? Think again. We believe we are in for a rough ride and there is more of this to come. Tip of the iceberg? We hope not. Be ready for an extended period of rocky hedge fund employment waters.
If you are considering making a career change right now, be careful. There is likely going to be some “downward pressure” in your current role. Expect some downsizing, increased responsibilities and lower bonuses. If you are a top performer, there is still plenty of opportunity. If you continue to generate profits for the firm despite what is going on (remember when “hedge” meant “hedge”?), you are in higher demand than ever.
As always, we’ll keep a close eye on the hedge fund job market for you.
Hedge Fund Search Digest’s annual Compensation Survey aggregates compensation data reported by hundreds of hedge fund professionals. But who? Here we profile respondents to the 2007 survey by years with their current firm.
Plainly, there is plenty of mobility in the industry.