Wednesday, 27 July 2016
Last updated 9 hours ago
Dec 18 2006 | 2:42pm ET
Hedge funds are bracing for increased competition in securing and sustaining professional talent in 2007, according to New York-based Long Ridge Partners, executive recruiters specializing in the hedge fund industry.
Michael Goodman, a partner at Long Ridge, said that due to the widely forecasted competitive nature of the marketplace, larger payouts with larger allocations are to be expected, particularly in the multi-strategy hedge fund sector.
“Obviously, there are external events that can change a whole industry or internal events that can change the outlook of a fund, but barring those events the outlook for 2007 is one of increased competition and compensation,” stated Goodman.
Going forward, Goodman said that P&L payouts would rise to a range of 8-20% and predicts that average payouts will climb about 15%, up 3% from 2006. Proprietary trading desks will be paying out more like traditional hedge funds with 10-12% of P&L payouts in order to retain talent. A small handful of firms are willing to negotiate with their portfolio managers and pay them a management fee on the assets they are allocating to them. Goodman said this is a way for smaller hedge funds with less to offer in terms of infrastructure and capital to attract talent.
In addition, firms are increasing their willingness to negotiate the launch of a portfolio manager once he or she has reached “critical mass” such as giving managers capacity in the firms’ funds to owning a piece of the management company and, in most instances, both.
Long Ridge's client base includes hedge funds, funds of funds, family offices, pension funds, endowments, investment banks and proprietary trading desks.