2008 Job Forecast, Part II: Hedge Fund Industry

We followed up directly with finance recruiter Kathy Graham about her 2008 Financial Services Career Forecast (about which we posted a few days ago) to hear more about where hedge fund employment will head this year. Her are some of her thoughts.

How can someone evaluate job security in an uncertain environment? Can you suggest “Five Questions To Ask Yourself”?

Yes, here are my “five questions hedge fund professionals should ask themselves to evaluate their job security in an uncertain environment.”

(1) How diversified is your firm? The more diversified the strategies, the more likely there will still be funds performing well enough to keep the firm viable (and hopefully your position) if one or more funds are especially impacted by a market movement.

(2) Does your firm have some very liquid funds? In March 2008 a number of hedge funds closed, all of the same type of strategy. They were outstanding firms run by experienced professionals that had their positions in almost every single strategy impacted by the markets (i.e., mortgage-backed real estate, fixed income derivatives, munis, distressed debt, etc.). They had very few liquid strategies like a quantitative fund that could be closed out to generate needed cash for increasing margin calls, etc.

(3) How leveraged is your firm? Does it have traders who, because of excellent past performance, have very little supervision or input from others as to the size and direction of their trades?

(4) Are you working in a department that is making, or losing, money?

(5) If your firm’s performance is shaky, or your department has been losing money, what are the probabilities and repercussions of staying and waiting it out to receive a layoff package, versus beating the “herd” to the door?

How do interactions between candidates and recruiters change in shaky times?

Interest in the other party is in an inverse relationship. When jobs are plentiful and talent is scarce, recruiters want to speak with top talent to fill their positions, yet candidates at that point are less interested in speaking with recruiters. In down times like now, the reverse is true. Many candidates are interested to explore new options, while recruiters have fewer positions to discuss.

Recruiters overall are swamped with resumes. Therefore, a good strategy is to send your resume, understand why return calls are slow, and keep focused on finding a position on your own.

What is required to move into the hedge fund industry this year?

Risk management skills/background at the portfolio level; IT skills in developing/implementing systems that truly provide value, by either tracking/calculating risk or capturing market anomalies for profit; new trading strategies that deliver returns with less leverage. These are the most desirable backgrounds.

How can someone best position himself to move into a hedge fund when the market recovers?

Take a position with a results-oriented firm (i.e., investment banks, private equity/venture capital, etc.) in a specialty area; develop a track record in that niche.

There’s no consensus about the near-term future of fund-raising. What do you think? What’s the impact for hedge fund job opportunities?

I agree; there’s just no consensus about hedge fund asset flows this year. There are too many competing influences to see clearly what the outcome will be. Consequently, individuals need to ask two further questions about their job security: What impact would a drawdown have on my firm? What is the probability of a drawdown? Another interesting effect is that larger firms are beefing up their marketing areas this year.

What has been happening on the recruiting end in the last 6 months?

A number of funds have put searches on hold due to the environment. They’re not sure if their needs will be the same in three months, given how the markets are acting. We have 2-3 searches in that holding pattern. In 2007 our hedge fund searches tended to be back office: staff and management in accounting, compliance and risk management. In 2008 the trends have shifted. We’re seeing more requests for marketing staff and management, plus seasoned professionals for risk management and other cost-saving areas.

Kathy Graham (kathy at hqsearch.com) is a financial recruiter and consultant via her several Chicago-based firms: Highest Quality Search, HQ Seminars, HQ Scripts, and HQ Services. The complete version of the 2008 Financial Services Job Forecast is available via her website, www.hqsearch.com, or from Kathy by email.

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