Hedge fund recruitment is just beginning to pick up after a very long hiatus, according to specialist headhunters.
The industry seemed to hit a turning point in the second half of the summer, said Robert E. Olman, managing partner, Alpha Search Advisory Partners LLC, Roslyn, N.Y.
“The prior 13 months were characterized by a complete inability by anyone in the industry to do anything vis-a-vis strategic planning. After all, when your assets are $12 billion and could go down to $8 billion the next day and you can't predict it, it's no wonder hedge fund execs were unwilling to make any moves,” Mr. Olman said.
“Hiring activity was eerily silent in the first two quarters this year, predicated by capital flows completely drying up,” agreed Lynn Tidd, Boston-based managing director and head of the hedge fund practice at Russell Reynolds Associates Inc.
“But just in the last four weeks, the buzz has started getting louder, with most search requests focusing on start dates in 2010. The pendulum finally has swung over now that hedge fund companies know what capital they're sitting on and they finally can start scaling up to where they need to be, instead of remaining in entrenchment mode,” Ms. Tidd said.
Hedge fund managers are eager to make up assets lost to high redemptions and market losses last year. But the recent past has convinced many firms that they have to institutionalize their businesses in order to attract more pension fund, endowment and foundation clients, said Joseph B. Goldsmith, managing partner at Goldsmith & Co., New York.
“After 2008, hedge fund managers have a much better understanding of which of their LPs (limited partners) are longer-term, dedicated investors. They had so much exposure to hedge funds of funds which experienced such high redemptions from high-net-worth investors that hedge funds want to diversify their client base with a much bigger proportion of institutional investors,” Mr. Goldsmith said.
That determination to attract more institutional investment, coupled with much more rigorous due diligence being directed at their operations, has resulted in much of the hiring activity by hedge funds being focused on finding experienced institutional marketers and client service executives, as well as finance, compliance and operations officers, Mr. Goldsmith said.
Among recent placements:
• Keith Thomas joined hedge funds-of-funds manager EIM Management USA, New York, as director, business development;
• Coby McDonald joined hedge fund-of-funds firm Permal Group, New York, as vice president-global consultant relations;
• Douglas Sherman joined Westrock Group Inc., New York, as head of the alternative manager's newly established institutional arm, Westrock Institutional Group.
Ms. Tidd noted that there's also been a sharp uptick of interest in investment professionals to manage distressed debt and credit strategies as hedge funds seek to exploit market inefficiencies and opportunities.
Many firms also pumped up their investment oversight with the addition of co-CIOs and additional research and risk management staffers in light of last year's difficulties. One such hire was Jason Karp, who was named co-chief investment officer at hedge fund manager Carlson Capital LP, Dallas.
The current surge of hiring activity has remarkably different characteristics from the good old days of 2006 and 2007, when competition for talent was outrageously intense, said Barbara B. Schoenfeld, managing director of Saffron LLC, Providence, R.I.
“Two years ago, the pace was so rapid that if we found a great candidate for a client, we had to race to come to terms as quickly as we possibly could because the chances were very high that the candidate had several other offers. There was an externally imposed, frenetic pace ... on every hedge fund manager when it came to hiring,” Ms. Schoenfeld said.
One candidate Ms. Schoenfeld spoke with recently said he had just had his ninth interview with the same company. In another search she conducted, the extended evaluation of “a long parade of candidates led the hiring firm to realize that it needed to modify the position specifications. The search has been redirected into a different market segment,” she said.
Alpha Search Advisory's Mr. Olman said hedge fund managers not only have the upper hand when it comes to candidate selection, they also control the purse strings.
“Starting compensation still is down significantly from 2006, 2007 and early 2008. It's kind of sad for the candidates, but hedge fund employers are not budging much on the issue of compensation and with so many people with industry experience still unemployed or underemployed, they are accepting the lower comp packages pretty readily,” Mr. Olman said.
