Hedge Funds Continue to Challenge Banks in Their Quest for Top Talent
Although the global market roller coaster may have many investors bracing themselves for more volatility, many hedge funds are actually enjoying the ride. A recent industry survey conducted by CPA firm Rothstein Kass shows that nearly half of all hedge funds see the credit crunch as “positive for their fund.” In fact, just 15% felt that the credit crunch “would negatively impact the overall world economy.” And as of July, the subprime crisis has not reversed growth in the hedge fund industry. According to HedgeFund Intelligence, the global hedge fund market grew to almost $250 trillion in the first half of this year. But the growing number of players in the industry has increased competition for investment money. In addition, industry experts say redemptions could be scary in the fourth quarter injecting more turmoil into the markets. Rothstein Kass also revealed that larger financial institutions would increasingly purchase hedge fund firms, potentially fueling industry consolidation over the next three years. Amid the trend executive recruiting firm, A.E. Feldman, says that hedge funds continue to challenge Wall Street banks in their quest for top talent.
A majority of hedge fund managers say a U.S. recession is “very likely” in 2008, but fewer than one in five said an economic slowdown would be bad for their funds. That’s according to a recent study conducted by Rothstein Kass, a provider of auditing and tax services for funds. The survey, which polled more than two hundred hedge fund principals with an average $492 million in assets under management, also shows that 66% of survey participants suggest a recession would bring investment opportunities.
The Rothstein Kass research was conducted before the full impact of market volatility could be quantified. Although the hedge fund industry grew from its ability to deliver strong returns independent of market conditions, industry experts suggest that poor performing funds will be faced with many investors who came into the “alternative” investment market with tepid commitments to the area and who are now pulling back because of possible recession. That means redemptions could be scaryin the last quarter of 2007. Market turmoil could ensue when the funds go to unload positions to create liquidity for redemptions, leaving funds with less money to invest.
Moreover, the growing number of players in the industry has increased competition for investment money. Rothstein Kass also found that the hedge funds that aim to grow assets by 50% or more over the next three years believe large funds will dominate asset raising, while smaller funds will be forced to consolidate. The survey shows that 38% of participants see M&A activity among smaller hedge funds increasing significantly.
Assets under management in global hedge funds increased 19% to reach $2.48 trillion in July, according to research compiled by HedgeFund Intelligence. The FT reports that Neil Wilson, managing director of Hedge Fund Intelligence concludes, “While these figures are only to July and don’t yet take account of the turbulence the industry endured in August, they indicate an industry still in robust health.†That’s some positive news for professionals seeking hedge fund jobs. Recruiting firm, A.E. Feldman, says that hedge funds continue to challenge top firms in their quest for top talent. The firm reports that the growth in assets under management continues to pad demand for personnel ranging from risk management and accounting to legal and administration.
