Thursday, 23 March 2017
Last updated 7 hours ago
Mar 7 2008 | 12:00pm ET
The last few months have not been kind to hedge funds. But whether they’re up or down, the alternative investment industry is always on the lookout for top talent—and it’s willing to pay for it.
Industry sources say the cash-rich hedge fund industry has always been an employees’ market, with opportunities galore for back-office and junior level hedgies.
In fact, nearly 70% of hedge funds are having difficulty retaining back-office personnel, according to a new survey by Rothstein Kass. And just under 60% of those hedge funds polled—Rothstein Kass spoke with more than 500 CFOs at direct-investment funds with at least $100 million in assets under management—indicated that they are short-staffed in the back office.
“With 59.2% of all firms, and even 47.7% of large funds, reporting shortages in back-office personnel, it’s apparent that recruiting and retention issues will persist,” said Todd Noah, principal-in-charge of the Rothstein Kass executive search group.
Did we mention that it pays really, really well to work at a hedge fund? According to Rothstein Kass, chief operating officers and CFOs were paid on average between $1 million and $1.6 million last year in total compensation. Controllers took home between $300,000 and $430,000. Noah stresses that the total compensation may or may not include deferred bonuses, profit sharing, or equity that may skew the actual results.
Surprisingly, the survey reveals that bigger hedge funds are not necessarily paying more than their smaller counterparts.
“When smaller funds want to obtain the same level of talent as bigger funds, they attract people by offering more jobs where one person could be a CFO, CCO and COO, and they might include equity positions to make people like owners and the potential upside is much bigger,” said Noah.
So where are hedge fund looking to fill their back office needs? Sometimes, hedge funds pick recent MBA graduates and plug them into in-house training programs, which aren’t the best places to train a hedge fund newbie.
“Hedge funds do a very poor job of taking even the brightest person out of college and training them because they really don’t have a program in place for college recruitments,” said Noah.
“What they tend to do is bring in the two top people from Ivy League schools and sit them next to analysts and watch what they do. And what they find within two years is that the person really hasn’t learned anything, but it’s not really their fault: The analysts are not programmed to train people.”
Rather, Noah said hedge funds usually look for people that they can plug in from another hedge fund, accounting firm or prime broker.
Adam Zoia, founder of executive search firm Glocap, concurs with Noah’s sentiments. He says that hedge funds prefer to hire people that are ready to hit the ground running but added that the industry is increasingly expanding its searches to include MBAs.
“The reason for that is simply that the industry has grown so rapidly that they’re looking at places where there’s ready-made high quality talent and MBA programs are a perfect place,” he said.
In fact, within the last four years, there’s been a greater emphasis on junior hiring at hedge funds than there has ever been before, according to Zoia, who describes the current typical hedge fund staff as more “cylinder-like” with portfolio managers working side-by-side with senior analysts, and now junior analysts as well.
Zoia echoed Noah’s assessment that the number of back-office jobs has soared as a result of the globalization and institutionalization of the industry.
“The number of products offered by hedge funds has gotten larger and most large funds are now global. In addition, the assets in the hedge fund space are increasingly institutional. Those investors require a higher level of transparency reporting when they’re doing their due diligence, so they’re looking for fully built out risk management, compliance, and information technology departments.”
Zoia, who started Glocap a decade ago, said the current short-term market volatility means that hedge funds are now more focused on managing their portfolios than interviewing new candidates. But after going through the dot.com boom and bust and a recession, he expects the industry to continue to shell out big bucks for top talent.
“Hedge funds still have more than adequate means to pay people, so hiring freezes don’t exist in the hedge fund space,” he said.
By Hung Tran