For what could be the first time in the history of hedge funds, there is a true buyer’s market for talent. And for firms, that means now is the time to get quality talent on the cheap.
Underwater funds that were fighting for their lives during the early part of 2009 have been understandably fearful of bringing in new talent. Many have wanted to hire — they are anxious to get into new markets and they want to bring in new talent to make it happen — but they remain leery of paying high salaries.
Now, maybe they don’t have to.
Recently an out-of-work portfolio manager called to ask if I knew of any senior analyst positions. Just months earlier, when he was still employed, he practically hung up on me when I asked him if he would consider a position move. Suddenly this talented PM was willing to take a step down on the career ladder, and he’s not alone.
The top hedge funds with at least $10 billion under management or more know a good trade when they see it and have been hiring up a storm. In the last few weeks, I have had meetings with many of the top funds and nearly all are showing a willingness to pull the trigger much more quickly.
It is the small funds that are missing out, especially if they are under water and still dealing with lock-ups. For those funds, it’s time to grab a snorkel. If they haven’t adapted by now, during this period of uncertainty and change, then they are going to find themselves out of step when the good times truly return again and they are not staffed up.
When they ask how they can recruit when money is tight, I advise them to consider “creative financing.” Establishing IOU’s, the right to a share in ownership in the future, more portable track record offers ( a portable track record is enticing because an Analyst or Portfolio Manager can establish a record of performance and can have it audited), greater responsibility, and more discretion to put trades into the portfolio or manage a carve out. A carve out is the money that an analyst has full discretion over but just needs approval from his or her Portfolio Manager to actually execute the trade. We call this “all but the trigger.” These are only a few options for capital-constrained funds.
At the end of the day, it’s vital to understand why hiring now is important, particularly for smaller funds. These funds should be approaching the human capital market like any other market: Buy low, sell high, and be ahead of the curve. There are droves of talented hedge fund professionals who, if they’ve been out of work for six or nine months, are more likely to be open to creative payment methods.
John Pierson is the founder of 10X Partners, a hedge fund recruiting firm based in New York. For more information, visit the company Web site at www.10xcap.com .
