Hedge-Fund New York: A six year study of investment managers published by Finstad in 2005 found that firms with a high rate of staff turnover tend to produce inferior results relative to those firms where the staff rate turnover was lower. With this in mind, Opalesque looked to a recent study by Merrill Lynch and insight from Russ Gerson, CEO of the Gerson Group for the various ways hedge funds can approach hiring and contract negotiations with the end goal of staff retention.
The hiring report: 'the war for talent continues'
Although the credit crunch reached its one year anniversary this August and performance over the last few months has been lacking industry-wide, asset growth in hedge funds managed to continue an upward trend, increasing to $2.97tln (according to Hedge Fund Asset Flows & Performance Report, Hedgefund.net). However, according to the same report, liquidations overtook launches and most of the industry's asset gains were from growth in large funds. In spite of the economic slowdown, and the decrease of expansion through new funds within the industry, job postings at eFinancialCareers for hedge fund positions climbed 38% during the second quarter in comparison to last year (Source), and according to the white paper "Recruiting and Retaining Investment Professionals, What Works, What Doesn't" recently released by Merrill Lynch, 78% of polled asset management professionals agree "the war for talent continues despite the current environment."
The Gerson Group serves as a strategic partner to financial services clients advising on corporate development. One such strategic area is senior level recruitment. From CEO Russ Gerson's vantage point the current market is still full of opportunity for hedge fund employers and candidates alike. The fall off in hiring at the large investment firms (Merrill Lynch itself announced a hiring freeze this past week) has brought more interested candidates into the hedge fund job market and this increase in the talent pool allows managers to be more selective. "There is still a high demand for professionals with an established track record, as well as for those in active products like commodities and distressed debt. Additionally, there is high demand for marketing professionals and investor relations. Although the market has slowed considerably, the industry is quite vibrant," says Gerson.
Compensation structures which increase retention
Industry-wide, some of the points typically covered in employment contracts include: Base salary, non-solicit clause, discretionary bonus, non-compete clause, guaranteed first year bonus, and mandatory and voluntary deferred compensation. Of these negotiable points, both the Merrill Lynch poll results and Gerson agree that deferred employee compensation can be a solid incentive for staff retention. However, although it is standard practice in large investment firms, according to the statistics in the Merrill Lynch poll on......................
Source:
http://www.opalesque.com/AMB2008/46715The_war_for_hedge_fund_talent_continues.html
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