Hedge Fund Regulatory Departments Growing
Facing mounting market pressures, demands for risk management and increased scrutiny over operations, regulatory departments at hedge funds are growing. The funds are on the hunt for legal counsel and top compliance officers (also known as Chief Legal Officer). Executive recruiting firm, A.E. Feldman, says hedge funds are creating more of these positions and compensation for the right candidate is on the rise. In fact, more funds are reportedly looking to investment banks for lawyers and Chief Compliance Officers (CCOs) because their regulatory expertise is increasingly valuable.
Increased scrutiny is pushing hedge funds to rely more on in-house counsel. With more and more legal work to be done, hedge funds are seeking insurance against regulatory catastrophes. And now, amid the volatile investment climate, demand is growing for lawyers who can advise the industry and define the lines for liabilities. Institutional Investor reports that at least three hedge funds (Cadogan Management, Caxton Associates and Proctor Investment Managers in New York) all created counsel roles in the last year. “Particularly today, with the financial markets in flux, investment firms are looking for counsel from seasoned advisors who have experienced various economic cycles and can provide the insight to help firms chart a successful course forward,” Christopher Wells, head of the Head Fund Practice at U.S. law firm, Proskauer Rose, told HedgeCo.net.
Hedge fund lawyers advise on all financial products and counsel traders, sales staff and risk managers on the legal aspects of their work. These attorneys also negotiate general commercial agreements and corporate transactions. They also typically have expertise in financial products or structured finance. Specific experience with hedge funds isn’t necessarily required for a job as in-house counsel or to work for a law firm’s hedge fund clients. However, experience with financial services, particularly in a transaction-related field such as securities or M&A, is essential.
As hedge funds round out their regulatory departments, CCOs are also in demand. These compliance officers must manage the cost and risk trade-offs of compliance efforts. Typically these individuals have a legal background, but they are not always lawyers. Institutional Investor reports that a Chief Compliance Officer for a New York-based hedge fund with $7 billion under management is seeking a senior level compliance person with an investment banking background. “Funds cannot find enough compliance officers,” he said. “The natural progression is to go to individuals with investment banking backgrounds because their skills are portable to issues at funds, and funds are willing to compensate them. They want someone who has knowledge of complex strategies and experience with capital markets.”
