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December 22, 2003 at 07:00 PM
NEW YORK (HedgeWorld.com)–The bear market was great for filling positions in hedge funds, what with droves of experienced people from Wall Street and the mutual fund world looking for jobs.
“Hedge funds are the only part of financial services where there has been growth in employment,” said Annette Cazenave of Horizon Cash Management in Chicago, who recently hired an associate. “This is where the momentum is.”
By most accounts, the industry retains that impetus. Veteran recruiters see an entrenched trend through ups and downs from month to month. “The brain drain continues,” said Michael Martinolich of Cromwell Partners. “We will continue to see talented investment professionals move from the long-only side.”
Indeed, this process may be accelerating because of the mutual fund crisis . “The economics and the freedom to invest more broadly remain compelling. I don’t foresee that changing,” Mr. Martinolich said.
There is a long-term tendency for different types of money management businesses to reach a stage of development where they build staffs, explained George Wilbanks of Russell Reynolds. In the past few years, this has become noticeable in alternatives, venture capital and private equity as well as hedge funds and fund of funds.
Just Beginning
“Every quarter we see more and more of it,” he observed. “They are all going through a process of maturing as a business.” He noticed a similar pattern in long-only institutional separate account managers, starting in the late 1980s. And before that, from the early 1980s, mutual funds went through a dramatic period of growth that lasted around a decade and involved recruiting professionals from outside the industry.
“The alternative managers are just beginning,” said Mr. Wilbanks. “They still think of themselves as a cottage industry.” Only the very largest firms have so far initiated extensive searches for executives, and only in the past two, three years.
With the exception of the top 15 to 20 firms, most hedge fund managers still hire people they already know and are comfortable with. While they want to make a lot of money, Mr. Wilbanks has found that they also place high priority on working in an environment where they enjoy themselves and are with individuals who are smart and interesting and challenging.
Russell Reynolds has recruited for some of the largest firms, including Soros Fund Management. The firm conducts around 200 executive searches a year in the broadly defined money management arena. In another two years or so, Mr. Wilbanks expects it will be doing 50 to 100 searches annually just for hedge funds–like the new search it recently started for a financial officer for a US$4 billion fund.
Monthly fluctuations do impinge on the long-term trend. In the first two quarters of this year, uncertainty in the market discouraged hiring. But by summer many money managers were confident enough to expand their payrolls. In early fall, recruiters were busy.
In October, however, the mutual fund investigation cast a pall. Many hedge funds got swept up in it and that had a dampening effect on their willingness to acquire new people. But searches picked up again in November, says Mr. Wilbanks.
In addition to other developments, there is an emerging factor that is creating demand for seasoned executives: significant numbers of senior partners in well-established firms are taking early retirement. Trying to replace such people is a challenge and more firms are going to professional recruiters to look for and learn about high-level executives.
