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Bill

The Wild, Wild West (End of London)

If you want to know where the hedge fund jobs are going, look at where the office space is being rented.  Right now, the hot growth area for hedge fund physical plant is in London, but not in the stodgy Square Mile. Rather, fund managers are looking to the fashionable West End of town, according to a recent Bloomberg article.

“Hedge funds agreed to lease out more than twice as much office space in London’s West End this year as in the whole of 2012,” reports Bloomberg’s Jesse Westbrook, citing U.S.-based commercial real estate brokerage Cushman & Wakefield. “Hedge funds added 58,000 square feet (5,390 square meters) of space in the district, up from 25,000 square feet last year.”

Who is gobbling up all that floor space? According to Bloomberg, it’s the big boys. Specifically, the article points to Blue Bay Asset Management LLP and Elliot Management Corp. Combined, they have in excess of $100 billion in assets under management. But they couldn’t be more different in their approaches to making money. One of them or the other — but probably not both — ought to be on your hedge fund job hunt radar screen.

Although Blue Bay is a wholly owned subsidiary of the Royal Bank of Canada, it is headquartered in London. It specializes in fixed income and alternative investments, with most of its money placed in investment grade and emerging markets securities. So if these are the areas where your hedge fund job hunt takes you, it is well worth sending Blue Bay your resume. Here’s a tip, though: You have to go to them; they won’t go to you. If someone tells you he’s a graduate school recruiter for Blue Bay, he’s lying. There’s no such thing.

U.S.-based Elliot is best known as a convertible arbitrage player, restructuring companies with distressed debt — a vulture capitalist, if you will. Describe Elliot however you like, its top dogs rode away from MCI, WorldCom and Enron in limousines. This diversified experience in distressed corporate debt led Elliot inevitably to distressed sovereign debt; they now own the Congo, Peru and Argentina, or something like that. If that’s the end of the hedge fund industry which appeals to you, then Elliot’s new West London office may be the place to hang up your Mackintosh and boot up your Macintosh.

According to Cushman & Wakefield, startups are taking a pass on the West End’s growing hedge fund industry presence for one simple reason: it’s expensive out there. And the big guns just keep bidding up the rents. According to the Bloomberg article, 31 percent of the office space in the upscale Mayfair and St. James’ neighborhoods is rented to hedge funds.

If you were to ask, “What about the rest of the space?” then Cushman & Wakefield’s answer would be “private equity firms”. Bloomberg reports that 24 percent of those same two neighborhoods’ rents are paid by the hedge fund industry’s close cousin. In other words, as of this year, more than half of London’s most prestigious West End addresses have the name of a hedge fund or a private equity firm above the door.

So if you’re looking for a hedge fund job, it might be good advice to take the Tube to Marble Arch. And mind the gap.

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JOBS Act: Targeted to Create U.S. Jobs for Everyone … Except You

A hedge fund the epitomizes the whole concept of a start-up business: low barriers to entry, high risk/high reward, began its life as an idea and a clear space on the dining room table. But the Obama administration’s hallmark of domestic job creation, the Jumpstart Our Business Startups (JOBS) Act, might actually be causing U.S.-based hedge fund headcount to languish.

This is more likely an unintended consequence of half-baked public policy than an intentional hatchet job by the anti-Wall Street crowd. After all, Congress passed it with bipartisan support and months before the Republican Party even settled on its 2012 standard bearer. The idea was to cobble together a bunch of bills promoting deregulation, which would then enable a more robust market for crowd-funding small businesses via social media, which would lead in turn to the sort of capital formation that creates American jobs.

And this is all well and good if you’re on the receiving end of the crowdsourced cash flow. But if you’re looking for a job in the business of aggregating that cash, you might find yourself at the end of the line. That’s according to a recent Bloomberg article about how Third Point Reinsurance Ltd. might be skirting the Act’s job creating spirit while complying with its letter.

Reporters Lee Spears and Noah Buhayar convey how Third Point Re, a Bermudan creation of hedge fund magnate Daniel Loeb, has no U.S. operations yet qualifies for favorable SEC disclosure rules stemming from the JOBS Act.

“Third Point Re is an ’emerging growth company’ under the [JOBS] Act, according to filings for the planned initial public offering,” Bloomberg reports. “Under the act, companies with less than $1 billion in annual revenue can qualify, allowing reduced disclosure about executive pay and waiving requirements for auditors to attest to a company’s financial controls.”

The upshot is, Third Point Re — or any hedge fund that grossed less than 10 digits last year — can gain access to the deepest market in the world, skate around the kind of disclosures that domestic companies have always had to contend with when going public, and not have a single employee with a blue passport. Tellingly, Third Point Re’s web site is the first one we’ve come across in a long time that doesn’t have a “Careers” tab. Your tax haven country can now be your low-cost base of operations as well.

This isn’t the first disconnect between Wall Street and non-financial startup businesses resulting from the JOBS Act, but it has had the most immediate impact on hedge fund jobs. Bloomberg has previously reported that there had been static over advertising restrictions. Actually, the hedge funds and the small businesses are on the same side — they want to spend all they can on advertising. But the buy side wanted to keep the existing general solicitation ban in place. Score one for the hedge fund industry: ultimately, the SEC lifted the ban. So maybe there will be more hedge fund jobs — for those who majored in marketing.

Oh, by the way, Third Point Re did go public. Its stock price got set at the low end of the expected range, where it has languished ever since.

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Could you be a vulture capitalist? How about a Wolverine capitalist?

September 9, 2013

Ever been to Detroit? Chances are, at some time in your life you bought a car that was partially made or assembled or at least designed there. Whatever you paid for that car, you could now buy a house in Detroit for less. Of course, it’ll have no police or fire protection. It won’t even […]

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