04/03/2010 Author: Elana Margulies

Hire power

The recent recruitment drive at a number of big-name hedge funds points to a renewed emphasis on sales and marketing. Is this a further sign of the importance of investor perception driving hedge fund strategy?

Brick by brick, the barrier between hedge funds and their long-only cousins is being dismantled. Liquidity, transparency and reporting terms edge closer, while managers – so long able to magnetise money based on mystique and performance figures – are becoming ever more investor-facing. This shift has led to a boom in sales teams and a genuine departure for an industry that has previously relied on word of mouth, rather than the words of marketers.   

The news, revealed in HFMWeek last week, that DE Shaw is looking to increase its headcount on the sales and marketing side, signifies that, as assets are flowing back into the industry, hedge funds are ramping up their recruitment. The drive to boost investor relations teams is a clear sign that chief investment officers and portfolio managers are placing greater emphasis on building a solid infrastructure, and fostering investor loyalty.

Deborah Markus, founding partner of Columbus Advisers, a New York-based recruitment firm, is one headhunter that has seen a greater demand from hedge funds, as firms place more of an emphasis on hiring sales and client services professionals with a previous track record of raising assets and a strong knowledge of specific strategies.
“Firms that have historically placed little emphasis on sales and client service have recognised the important role they play in building and maintaining client relationships,” she says.

Meanwhile, Kyle Ramkissoon, founding member of IJC Partners, a New York-based executive search firm, has seen a higher demand for asset gatherers since the start of the year. “There is a heavy focus on keeping money that is in the fund, and an even greater focus on treating investors coming into the fund with more respect,” he says. “We are seeing greater demand for product knowledge and someone who can sit down with investors.”

Of Ramkissoon's hedge fund clients that are hiring in marketing, the majority have at least $1bn under management, meaning smaller funds may struggle to compete with the new marketing muscle of the big players.

Aside from DE Shaw, other institutionalised hedge fund managers that are looking to ramp up their marketing departments include Fortress Investment Group, AQR Capital Management and Two Sigma Investments. Also, HFMWeek recently reported that BlueMountain Capital Management has bolstered its capital-raising team. The $4bn credit specialist added three employees to its team of six.

Although it is sales and marketing staff that seem to be in greatest demand, hedge funds are also hoping to ramp up hiring in other areas, especially on the operations side and within analyst teams. Frank Carr, partner at Amrop Battalia Winston, a New York-based executive search firm, said he has seen hedge funds express greater interest in hiring chief operating officers and chief financial officers, particularly among mid-sized hedge funds.

“I think that's a great sign, because now the focus is on building out the infrastructure for the back-office and support functions separate from asset gathering and bringing assets into the fund,” he says.

James Drysdale, senior consultant at Radley James, a UK-based executive search firm, has seen many of his European hedge fund clients look to hire chief technology officers. “By the summer, hedge funds will really start pushing their investment in technology and also see a bigger increase in volume in terms of staffing needs,” he says.
Aside from hedge funds adding to their operations infrastructure, Ramkissoon has seen demand for senior-level equity and quantitative research analysts, especially in the areas that fared well last year, such as convertibles, healthcare, and financials.

On the strategy side, the headhunters that HFMWeek spoke to all concurred that it is distressed and other niche offerings that are picking up in hiring. These include asset-based lending strategies and other various credit offerings.
The observations come on the heels of Heidrick & Struggles' recent report, Hedge Fund Industry Trends: 2009 and Beyond, which discusses the strategies where the most investment professional hiring has started to occur. The report mentions liquid and low-leverage strategies as general growth areas, with a particular focus on macro, credit/debt, long/short equity, CTAs, high-frequency trading and quantitative strategies. A diversity of opportunity that means, despite the blurring boundaries, hedge funds will be sufficiently different from their long-only peers for some time to come