Kathy Graham – Analytic Finance, Econometrics and Recruiting

Kathy Graham of Highest Quality Search (www.hqsearch.com) in Chicago discusses the past, present and future of the job market, confidentiality, and managing career trajectory.

How did you get started in recruiting?

They don’t teach Recruiting 101 at college, so generally most of us kind of trip over it and land up in it. I started off in Cleveland and moved to Toledo, where there wasn’t really a lot of opportunities. I went to a search firm looking for a job, and instead they offered me a job. And I wasn’t sure, so they put me on the phone, in the middle of the downturn, with a phonebook, and a half hour later they came back to see how I had done. I had five companies that wanted to talk to me further about positions, so they offered me a job on the spot. And immediately I started work that very first week, and filling the first position I got.

So from day one I was a top award winning recruiter. I worked for three firms before starting HQ Search, and we’re going to be celebrating 10 years in the business this October. I love finding that perfect fit, where someone can really succeed in the job, and where they really provide value at it. They get promoted for our clients. That’s not something someone can teach you. I think it’s more of an art, but that’s what I’ve been doing for the past 20 years, finding “who fits best.”

Very, very quickly I moved over to financial services because I find that whole field fascinating. In fact, I got my Masters over at the University of Chicago in Analytic Finance, Econometrics and Statistics. I think I’m one of the few recruiters who can actually crunch the numbers, and understand the intricate areas of hedge funds. I learned how to do the hedges and the risk management, &c, of portfolios as part of my degree training.

We’re a retained executive search firm. We focus on positions globally in the financial services field, hedge funds, private equity, venture capital, traditional money management, investment banking, banking, consulting and corporate. From day one we always felt that they were blurring, and you can see that, definitely, convergence, as Russell Reynolds called it, happened big time in 2007. And we’ve always worked in that area and our searches are all six figure bases.

Tell me about some positions you’ve filled.

Generally the firm has done a search on their own, and they just haven’t found “the right person.” We have a list of criteria client a firm has to meet before we’ll accept them as a client. We want to work with companies that have low turnover, and that offer a real exceptional career opportunity or future, and that are not a direct competitor to any of our other clients.

One of our claims to fame is that we started back with Ken Griffin when he was just a three man shop with Citadel, and helped him grow with putting in some of his top traders and staff, including Alec Litowitz, who went on to head up Magnetar, which is a multibillion dollar hedge fund also here in Chicago.

We finished a Senior Risk Management Professional for the middle office of a Fortune 50 commodities firm, their proprietary trading desk. We did the Number Two to the CFO of a $12 billion multi-strategy hedge fund, and Head of a Quantitative Analysis Department for a multibillion dollar money management firm, offering both traditional and alternative strategies. We just concluded with an offer being accepted for a Fund Accountant to join the management team of a $150 million proprietary trading firm that does derivatives, swaps, options and equities. The traders there were helping them grow their management team, because in the near future they’ll be accepting outside monies, and given who the traders are, they’ll start off with $3 or $4 billion assets under management. And so we’re helping them put together their trading team, and the accounting, the back office, et cetera, in order to support those kinds of assets.

We’ve done a Director of US Equity Research in the alternative hedge fund arena for a consulting firm that caters to the investors in the hedge fund industry. And we’ve done the Number Two to the Head Trader of an international long-only fund. So we’re across the board, and in technology too.

What are your top sources of candidates?

I’m going to talk about these from the candidate’s perspective because they have to understand where we’re going. If they’re looking for a job, where they need to get for us to see them, or be aware of them — first of all, we go to our database. So if someone has sent a resume, even if there isn’t a current position, they’re not lost. They go in, and we go first to our database.

Second of all, we go to referrals because that someone knows someone. So getting known in the industry is very important, and having a good reputation out there is very important, because no one recommends someone that they think is just so-so.

And then of course, we do do ads with a few very select publications including yours. And we go for places that are very specialized and targeted, that the candidates applying are of a very high caliber.

Is your firm busier or slower than it was this time last year?

Oh, this has been a great period. And by the way, every year I do an annual financial services job forecast, for the last five years, and that’s been 100 percent accurate for those five years, including — and I think it was mentioned in an MFA article — the year before, the Amaranth blowup &c — it had even predicted that there would be some shift like that. And so far for this year I predicted that the job market was going to be more volatile because of increasing volatility in the market, and I said that back when there was no volatility, so I’m very pleased, in a way, that we’re seeing it.

What has happened, to answer your question, to searches and looking for positions is basically, when you look at the unemployment rate, for people with advanced degrees which most of the people in the hedge fund industry have, we’re at 0 percent unemployment. So it is a very tight market. And companies have been increasingly concerned about the complexity of the instruments they’re dealing with, and how diverse the ownership of those underlying assets are. Everyone’s been chasing returns for awhile. So we’ve seen a lot being added in the quantitative sectors which we see now slowing given the poor performance recently of the quant hedge funds. But it’ll still be there. We’ve seen additions in risk management, in the portfolio management and research, and accounting. Because companies want to make sure, the hedge funds really want to make sure they know what they have in their books, and how they can best manage the risk that’s there. And of course, marketing’s always been in demand by the smaller firms looking for more assets. But quite frankly, in the larger firms, the monies are still flowing in very heavily into the hedge fund sector. So that’s not as big a deal even though we do work on marketing positions, attracting investors, et cetera, for the hedge fund industry, for the larger ones that’s not really been a big concern.

The time to fill a position has gone up because everyone’s going for the same individuals, the same types of positions, and there’s a limited resource. Now thankfully, and this sounds weird to say, we’re hearing from our sources that we’re going to see some “shakeups” at some firms which means that some individuals who would have stayed put before are either going to be freed up, or they’re going to start looking for more stable firms. That is actually good news for people who are hiring because it has been a tough market to find someone.

I don’t think that the shakeout’s going to be so bad though, that it’s going to impact salaries. This is a great year to be looking to make a change because we have not seen anyone go for less than a 20 percent increase, which is great. And they’re having their choice of positions, and the perks being added are marvelous. But there is for the employers hiring, actually good news in that the search times are going to go down a little, and the number of people we can present them will be larger. They’ll still need to use search to find these individuals, but at least it will be a little easier to find people than it has been in the past.

How often are counteroffers made?

I would say that it is running over 60, 70 percent now. Yes, it has gone up. And in fact, we talk about it from the beginning on, and manage it. And we manage how to handle a counteroffer, and turn it down nicely.

The other bothersome trend — counteroffers have been around forever, and people know how to handle them, and they always show up when the market gets tight, and they are one of the reasons why searches are getting longer, because you are going to lose some people who will take the counteroffer — in the hedge fund industry, confidentiality has always been a keynote that HQ Search has offered both to our clients and to our candidates.

In other words, it’s a small sector. Everyone knows everyone else, and it has always been a recruiting industry standard in the past, to protect identities until there’s been a mutual interest, and to be very careful during the process when someone is interviewing with a prospective firm, that the information not leak back to their current employer so that they don’t lose their job.

I am sorry to say, and it has been in fact, a trend that has been noted in other areas outside of the hedge fund industry, that some recruiters are not being as careful with confidentiality as has been in the past. And so I do think that candidates need to be very careful, and really understand who they’re working with, and be careful about information leaking back to their current firms.

Is it better to stay put for a long time at one firm, or change more often? How do you know when it’s time to move on?

I’ll address the first question first, on length of tenure. When someone starts out, generally they need to stay two to three, maybe five years at their first job, and they need to show a promotion. Or if they change before then, a reason as to why they had to move, and then they need to stay at that next position for five to seven years, again being promoted before they move on.

I don’t encourage anyone to stay longer than 10 or 15 years with one organization, because then it is viewed as a negative in your ability to move over to another organization and fit into a different culture. Plus if someone stays super long at a firm, they’ve missed those 20 percent plus increases in their base salary. They’ve been doing the smaller bumps that one gets when one stays. So what happens is they land up being below market value in many cases. Once you’ve reached the more senior levels, still people are changing in five to 10 years.

And when do you change? The two times that one should change — when the situation at the current firm is not the best situation for the individual — maybe the culture has changed, maybe the job has changed and there is no future — or one has topped out. So in either words, either the company has changed in some way, or everything that company can offer you in terms of promotion, future growth, you’ve done it.

Since there’s often limited data available, how can a candidate research a fund in order to prepare for an interview?

Well, that’s why having a good network is very important, and joining the different organizations. I know I am part of Hedge Fund Cares, which helps, but there’s a Robin Hood in New York, &c — be part of the different associations. Get the credentials in your industry because then you have an educational network to tap into, to find out information. In other words, it is unpublished so you need to be connected to the unpublished sources. And also get to know some recruiters that are known in that field, and know the field well, because if you become known by them, they also can be a source of good information for you.

Any amusing annecdotes from the front lines of recruiting?

It’s not amusing, but it’s the most recent that happened, okay? And it was very sad. I had a candidate that was very well qualified for a position, and was very personable, and quite frankly should have had the offer, right? But I don’t know whether they were too confident, or what happened, but they didn’t prepare for the interview, and they walked in cold, and they were eaten alive. And so, word of warning to people. No matter how well prepared…no, how well qualified you are, before you go into an interview, no matter how senior you are, you should prepare for the interview. Or else they’re going to ask you questions, and you won’t have done your homework. And that’s what happened. And they knew it. They called me up after and said, “You know what? I blew it.” And that was sad.

What’s the most common attribute among successful candidates?

The most common one is that — and it’s the most desired one I’ve seen in the hedge fund industry — is that the person is well rounded and well informed, at all levels this takes place. So someone needs to be smart, and articulate, and quick, and yet down-to-earth, and someone who can play well with others, and not only know about their specific niche in this industry, but know what’s going on around them. Read the Economist, read the Wall Street Journal, understand what’s going on in the world. Why? Because in this field no matter what you do, you need to understand how it relates to the whole so that you can be doing your part in making sure that hedge fund is the most profitable in a changing market.

And that’s how you get to give that little extra, do the achievements by being well rounded and well informed, you’re going to be able to make suggestions that can actually be profitable for your firm. Those are the people that are promoted, and that’s in all areas, IT, Risk Management, Marketing, et cetera, and you have to be well informed, very well connected, and the tops in your field, or in your specialty area. The tops you can be to actually produce those results.

See Kathy’s chapter “Careers in Hedge Funds” in Hedge Fund and Investment Management, edited by Izzy Nelken.

See Kathy’s articles, including her financial services job forecasts.

In 2008, Kathy’s next book will be published, on viewing and managing your career as an asset.

Bookmark and Share

{ 1 trackback }

Hedge Fund Job Blog - Alpha Calling » Blog Archive » Interviews with Hedge Fund Recruiters
August 1, 2008 at 11:06 am

Comments on this entry are closed.

Previous post:

Next post:

Real Time Web Analytics