From the category archives:

Hedge Fund Jobs

Although 2018 hedge fund industry performance was its worst in nearly a decade, the majority of institutional investors surveyed in a recent Prequin report, expect to maintain or increase hedge fund allocations.


One might reasonably expect that on the heels of 2018’s collective 3.41 percent loss, institutional investors would turn their attentions elsewhere, and some will. However, a clear majority (79 percent, according to Prequin) has opted to place their bets on hedge funds, and plan to maintain and/or increase their allocations.


Isn’t that Counterintuitive?


Not really. Consider this oft repeated phrase, “past performance may not be indicative of future results.” When we read this phrase in a prospectus, for example, human nature leads us to assume that the performance of the investment in question may deteriorate. However, is it not equally possible that it will improve?


One astonishing example of such improvement is illustrated by Ray Dalio’s Dark Horse Pure Alpha fund, which having returned 1.2 percent in 2017, closed out 2018 with a jaw-dropping 15 percent gain. Past performance was no indication of this happy result!


Many of those responsible for allocations, believe that this decade long expansion is rife with bloated asset valuations and flagging economic growth, both of which are being exacerbated by growing protectionism and trade wars.


The natural outgrowth of such a pessimistic view is hedge fund investment. Although no one can know with certainty where we are in cyclical economic and market environments, it is no less clear that the environment is undergoing a shift. In such an uncertain climate, institutional investors are turning to hedge funds—not counterintuitive at all!


This is why 79 percent of institutional investors polled in Prequin’s report, the largest contingent of investors since 2014, plan to maintain or increase their hedge fund allocations in the coming months.


Since the Financial Crisis


The hedge fund industry has seen its obituary written multiple times since the financial crisis and, to be sure, the industry as a whole has seen some dark times since 2008. However, hedge funds continue to innovate, explore new strategies, and adopt new technologies. As a result, we are still here; we are still growing; and we remain relevant. Like Mark Twain’s death, the reports of the hedge fund industry’s demise have been highly exaggerated.


What about Hedge Fund Jobs?


Crypto-currencies, artificial intelligence, machine learning, big data, algorithms, block-chain technology and quants; these are terms that would not be heard in the same breath with hedge funds less than a decade ago. However, it is difficult to find a hedge fund news article today that does not contain at least one of these terms.


This speaks volumes to brighter prospects for hedge fund job seekers. Skills, talents and educational backgrounds once far removed from any relevance to a hedge fund firm are now integral to its daily operation.


As business cycles ebb and flow, and markets wax and wane, the hedge fund industry will be along for the ride, innovating and adapting as it has since the beginning. Demand for hedge fund jobs will continue to grow, to meet the changing needs of our evolving industry.

{ Comments on this entry are closed }

Both 2018’s hedge fund performance record and Super Bowl LIII results are in the record books. While it is relatively simple to understand the past, the future is exponentially more difficult to grasp. More than three-hundred fund managers and 120 institutional investors participated in a Prequin survey in an attempt to divine the future of the hedge fund industry. Here’s how they perceive the next 5 years unfolding.

Hedge Funds Fall to Second Place

Currently, hedge funds are the largest class of alternative investment and is predicted to grow by 31 percent over the next 5 years to become a $4.7 trillion industry. However, private equity is anticipated to grow by $1.8 trillion in the next 5 years, eclipsing hedge funds by reaching $4.9 trillion in assets under management.

Shrinking Hedge Fund Investment

Among those currently invested in hedge funds, around 1 in 4 expect to increase their allocations to hedge funds over the next 5 years, while fewer than 2 in 10 plan a decrease in their hedge fund allocations.

Evidence supports that this is already happening. For example, hedge funds experienced net outflows of $11.1 billion in 2018. More to the point, this recent article in Bloomberg presents a graphic illustration of attrition in some of the most lauded hedge fund firms in the industry.

Modest Growth in Hedge Fund Allocations Is Not Necessarily a Negative

Those investors who do allocate to hedge funds tend to invest a larger percentage of their portfolio, typically 14 to 15 percent, as compared to private equity (PE) investors, for example, who typically top out at 9 to 10 percent of their portfolio.

This suggests that even though the number of hedge fund investors may shrink, the size of their hedge fund investment will mitigate the loss of those investors who seek a haven in other alternative asset classes.  In short, the growth of hedge fund assets under management will be slower, but steady.

Single & Multi Family Offices Are Showing Increased Interest in Hedge Funds

Fully two-thirds of hedge fund managers surveyed, believe that family offices will become their primary sources of capital over the coming 5 years. This is consistent with the private wealth origins of the hedge fund industry and a marked departure from the past 15 years of growth, which was driven by institutional investors. Hedge funds are returning to their roots!

What Does This Mean for Hedge Fund Jobs?

The rapid expansion of hedge funds and the corresponding increase in the numbers of hedge fund managers and staff is a well-established fact. However, the universe of active hedge fund firms has leveled off since 2016 to approximately 14,800 hedge fund firms world-wide. Hedge fund managers are largely agreed (91 percent) that consolidation will be the hallmark of the next 5 years, with 26 percent of hedge fund managers suggesting that the consolidations will be significant.

If these predictions come to pass, one might reasonably anticipate substantial employee turnover. The manner in which hedge fund managers approach these challenges will determine the future for jobs in the hedge fund industry.

{ Comments on this entry are closed }

Hedge Funds: A Positive Perspective on 2018

January 7, 2019

Investors began 2018 with a cautiously optimistic view, duly supported by 2017’s positive returns, which paralleled the market rally. Hedge fund managers, broadly speaking, shared this hopeful vision and looked forward to improved performance and enhanced fundraising opportunities in 2018. A Look Back The year 2018 opened with a robust January HFR asset weighted composite […]

Read the full article →

Will Poor Hedge Fund Performance Hurt Jobs?

December 24, 2018

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 […]

Read the full article →

Is the Hedge Fund Industry Facing an Existential Threat?

November 26, 2018

Hedge Fund Research (HFR) reported an asset weighted composite index of -2.71 percent for the month of October, bringing the year-to-date asset weighted composite index to -0.98 percent, and HFR, in mid-November, is reporting continued declines, which suggest that November will also be in negative territory. As a result, many media outlets are, once again, […]

Read the full article →

When You Think Finding the Job Is Harder than Doing the Job

November 12, 2018

Regardless of one’s level of preparation, the hunt for a hedge fund job can be exasperating at times. Setbacks and rejections are inevitable, as is the case for most on the job quest, and setbacks and rejections are certainly not exclusive to those seeking a career in the hedge fund industry. Improvements in unemployment rates […]

Read the full article →

Who Will Be King of the Alternative Asset Class?

October 29, 2018

Hedge funds have long dominated the alternative asset class, both in terms of assets under management(AUM), and also in sheer numbers of firms. As reported by Prequin, hedge fund AUM reached a record high of $3.61 trillion through the first half of 2018. However, again according to Prequin, the alternate asset universe was around $8.8 […]

Read the full article →
Real Time Web Analytics