Study: Hedge Fund Success Driven By 'People Alpha'

Oct 22 2013 | 9:42am ET

Humans uncomfortable with the designation 'resource' take heart: you've been reclassified as 'people alpha' and, according to a new survey from Citi Prime Finance, you're a valuable hedge fund asset.

Citi says hedge funds that invest in 'people management' register higher average returns than their presumably neglectful peers.

“Just as hedge funds once claimed ‘operational alpha’ as a differentiator, we believe that ‘people alpha’ will separate some firms from the pack and will soon become an industry norm,” said Citi's Sandy Kaul in a statement. 

To quantify the benefits of 'people alpha,' Cit interviewed 24 hedge funds with at least $500 million in assets under management, evaluating their practices in terms of talent acquisition and retention, learning and development and performance management.

Perhaps unsurprisingly, firms that employ more people scored higher in their focus on 'people-related matters' and firms that offered extended benefits packages, flexible workplace arrangements and workplace perks scored well in talent retention.

Firms that do well at retaining talent also tend to do well at attracting it in the first place, via internship programs and active recruitment.

“As the industry continues to mature, sophisticated investors will assess hedge funds’ adherence to people management as a standard part of industry due diligence,” said Kaul.


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