Just a year after the financial crisis hammered hedge funds and forced many out of business, the industry is back, looking for capital and poaching top talent from investment banking firms.
Hedge funds are luring pros from investment banks, endowments, foundations and asset managers, according to a report by the recruitment firm Heidrick & Struggles, reported by bankinvestmentconsultant.com In particular, hedge funds are looking to hire hedge fund specialists in credit, distressed debt, equity long-short, macro as well as marketing pros and human resource executives.
Credit markets have thawed and market returns for hedge funds in 2009 look to be the highest in a decade. The article quotes a Bank of America Merrill Lynch estimate pointing to 19 percent average annualized returns for hedge funds, with some of the top categories being convertible arbitrage (30 percent) and event-driven strategies (11.1 percent).
Investment banking firms such as Deutsche Bank, Citigroup, Credit Suisse, Goldman Sachs and Barclays capital have all been hit by defections to the hedge fund industry.
Wall Streeter Megan Nicholson worked for three-and-a-half years for Lehman Brothers and Barclays Capital in their capital introductions group. She was drawn to Raven Rock Capital LLC in Chapel Hill, N.C. for the entrepreneurial spirit and improved lifestyle of the new city.
Leaving Wall Street for the hedge fund industry isn’t a new phenomenon. One of the fathers of the modern hedge fund industry, Julian Robertson, followed the same path after working for Kidder Peabody & Co.
High frequency traders are highly sought after according to a story in Advanced Trading, which notes that proprietary trading firms are poaching people with quantitative experience away from exchanges and bulge bracket firms.
Proprietary trading firms are hungry for proven talent and can dangle big upside carrots in front of those who make the switch, given that bonuses at hedge funds are often tied to individual P&L, rather than the performance of the entire firm.
The article notes that automated trading continues to dominate the markets. So much so that several top Wall Street execs are leaving jobs at major firms to take senior roles at newly-formed high frequency trading firms. This reflects a belief, even among traditional Wall Street types, that “black-box” trading represents the future of the markets.
It also means an increasing demand for hedge fund jobs for those with experience in high frequency trading. Candidates coveted by high frequency trading firms have backgrounds in technology and quantitative trading. Many have experience building electronic trading systems for equity markets. They can build a system, understand how to make it work fast and develop models and strategies for execution, according to Joe Long, executive recruiter at I-NET Technologies, a New York-based recruiting firm.
Bloomberg reports that Hedge funds went on a hiring spree this past August and September, primarily to bulk up with sales and marketing types to lure new capital from endowments and sovereign wealth funds.
Although markets such as the S&P 500 have jumped 62 percent since their 12-year lows in March, many hedge funds still haven’t recouped all their losses, and therefore can’t take a percentage of profits from their existing clients until they do. Thus, the urgency behind the push for new money.
The article quoted Claude Schwab of Chicago-based recruiting firm, Heidrick & Struggles International Inc. as saying “The asset-building frenzy is unbelievable.” Their firm is seeing a big uptick in hiring for marketing and investor relations professionals.
Many firms have shown positive returns in 2009 and have ramped up hiring. Among them: Soros Fund Management LLC, Paulson & Co. and Brevan Howard Asset Management LLP, Citadel Investment Group and SAC Capital Advisors LLC.
