A while ago, when we asked people what they'd rather do if they weren't working in an investment bank, the verdict was clear: they'd rather be working in a hedge fund. 44% of our respondents said they aspired to a career in a hedge fund (or private equity). Unfortunately, as we reported yesterday, hedge funds are cutting their trading budgets. They're not hiring. They're firing.
Zoe Cruz isn't the only big name banker to have tried and failed as a hedge fund manager. George Soros and Carl Icahn have both wound down funds this year, as have numerous lesser-known names. Around 250 hedge funds closed in Europe last year according to Eurekahedge. At the end of 2011, Credit Suisse said 67% of hedge funds globally were below their high-water marks and that 13% hadn't earned a performance fee since 2007 - meaning their employees wouldn't be paid bonuses.
In total, Eurekahedge estimates that around 800 hedge funds have closed in Europe since 2008. That leaves a lot of formerly employed hedge fund managers sloshing around the market. Many of them are very wealthy, but many of them still want to work. In a contracting market, that leaves a lot of very highly qualified candidates chasing a shrinking pool of jobs.
"I've never seen such an imbalance of talent," says David Durham, managing director of hedge fund headhunters Durham Consultants. “A lot of experienced traders out there are trying to get jobs – there are a lot of people who’ve made a lot of money and would like to still be working, but who can’t find anything that’s suited to their level of experience.
"A lot of those people are now happy to work for someone else," says Durham, "but the attitude can often be, ‘Sorry – you lost, we won."
Nevertheless, there is hiring in the London hedge fund market. Another headhunter who recruits traders for hedge funds says Millennium, BlueCrest, Capula and distressed funds like Oaktree are all recruiting. Pimco is also hiring distressed debt professionals in Europe, he claims.
Hedge fund headhunters vary in their opinions as to where the hiring is taking place. One senior recruitment at an international search firm says he's actively placing credit and macro risk-traders (as opposed to execution-only traders). Durham says he's seeing a lot of demand for, "short term and medium frequency traders." Barry Seath, MD of hedge fund recruiters Mirage, agrees that credit and macro funds are hiring most in London, while hiring for equity/long short and special situations funds has been slow - but is picking up.
Long term, London hedge fund jobs may yet be given a fillip by hedge funds pulling back from Switzerland. Reuters reports today that Brevan Howard is taking on a new 65,000 sq foot office at 7-8 St James's Square in London, and cites various people who say Brevan's traders don't like living in Switzerland and that Alan Howard isn't happy there. "Life in a small city doesn't outweigh the tax savings," complains one.
Reuters notes that the top rate of income tax in Geneva is 44% while the top rate of income tax is due to fall to 45% in London next year. Swiss hedge funds are also at a disadvantage from new and punitive hedge fund rules due to take effect in 2013.