Here we are, in the closing days of the worst year for the hedge fund industry since the financial crisis. According to HFR, hedge funds, in the aggregate, were down .16 percent in November and 2 percent for the year. Concurrently, Eurekahedge data suggest that the combined effect of investor redemptions and performance based losses have resulted in hedge fund assets under management shrinking 3.4 percent year-to-date, and if that is not enough dismal news—hedge fund closures may overtake hedge fund starts by year-end.
Perspectives
Given the hedge fund industry’s poor showing in 2018, how should aspiring hedge fund professionals assess their prospects for 2019? The short answer is that one must keep things in perspective.
For example, hedge funds as a whole, were down 2 percent year-to-date and while this sounds rather dismal, it is important to recognize that the Dow Jones Industrial Average (DJIA) is down 9.2 percent, as of December 21, 2018—perspective! Similarly, the S&P 500 is down 9.6 percent, and the NASDAQ is down almost 8.3 percent, as of December 21, 2018—again, perspective!
Starts and Stops
Looking back fondly on 2017, one should recall that hedge fund closures outpaced hedge fund starts throughout the year, yet, 2017 proved to be the best year for hedge funds since the financial crisis. Once more, perspective!
The Rear View Mirror
That rear view mirror, we once fondly gazed into, has been torn away in a collision with the Trump administration. The disrupter in chief is fulfilling the voters’ mandate in spades, from regulatory policy, to trade, to immigration, and to taxation, disruption is the buzzword de jour of this administration. Recently, the FOMC and its Chair (Jay Powell), long considered sacred cows by U.S. Presidents, has been the recipient of President Trump’s displeasure, with what he perceives to be growth killing, unneeded rate hikes.
No one should diminish one’s self by making excuses for poor performance, but that tenet may require revision in the age of Trump, and, before anyone gets their political hackles up, please understand that no one is saying he is right or wrong. What is being said here, is that Trump’s administration is disruptive to the status quo. The markets, as a result, have been affected in ways unlike previous administrations have affected the markets.
What Does This Have to Do with Hedge Fund Jobs?
Simply this—aspiring hedge fund professionals need to put what they hear, see and read about the hedge fund industry in context with broader events in the markets, geopolitics and the financial sector in general.
What we see happening in the hedge fund industry is a snapshot in time, not the best of times to be sure, but still, a snapshot in time. Institutional investors understand this and we have not seen these investors turn their collective backs on hedge funds, so, why should you?
Anyone interested in pursuing a career in hedge funds may find that this moment in history is ripe with hedge fund employment opportunities, as this innovative industry strives to meet today’s challenges as well as tomorrow’s. Rather than hurting hedge fund job opportunities, meeting these challenges requires new talent and, yes, fresh perspectives.
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