Like insolvency and restructuring roles, jobs around distressed debt always crop up in tough times. Not surprisingly, perhaps, both hedge funds and private equity firms want expertise in this area, but, be warned – they’re being very selective.
There are numerous reasons for optimism around this area; firstly, hedge funds have raised around €60bn this year to target distressed assets, according to research from PwC. Secondly, according to a Moody’s report released last week, around $180bn of European non-financial speculative corporate grade debt is set to mature between 2013-2014 and – as Financial News points out – hedge funds and private equity firms are likely step up to refinance the debt, rather than banks.
Last week, it was revealed that Steven Zander, former global co-head of loan and distressed debt trading at Bank of America, has joined hedge fund Capula Investment Management to oversee a new European distressed debt fund. Apollo Global Management, Marathon Asset Management, Butler Capital Partners, Triton Partners and Kohlberg Kravis Roberts have all set up distressed debt funds, according to reports.
Barry Seath, managing director of hedge fund-focused headhunters Mirage Recruitment, says: “It’s definitely a growth area; where working on a number of mandates in that area currently and clients are telling us that competitors are looking for expertise.”
However, recruiters also caution that many hedge funds and private equity firms are indulging in window shopping and new recruits are only taken on after a vigorous interview process.
“We’re hearing of seven or eight rounds of interviews at relatively small firms,” says one hedge fund headhunter. “Many firms are testing the market to see what sort of expertise is available, while others want to ensure that they’re able to recruit only the very best.”
Separately, while larger hedge funds such as Brevan Howard and BlueCrest may still be open to hiring, Man Group is likely to cut faster and harder. The firm releases its second quarter results tomorrow and is expected to have lost around £4.5bn in assets under management.
A research note from Morgan Stanley analysts pointed to the need to pare back headcount further and reduce compensation. Man Group is already planning $25m in cost savings by 2013, but the research suggests this could be accelerated and $85m – or around 10% of costs – may need to be stripped out.
In particular, distribution staff may be targeted for cuts, says Morgan Stanley, but the generous compensation offered to former GLG employees will have to be scaled back. Comp ratios currently stand at 60-70% in this division, and should be reduced: “Whilst unpopular and a possible risk to staff retention, we believe cost could plausibly be saved here,” said Morgan Stanley.