Hedge funds must take advantage of skills outflow

Date: Wednesday, June 25, 2008
Author: Hedgeweek.com

The time is right. Hedge fund managers have never had it better in terms of having access to the best available talent to boost their business. In the wake of the job cuts announced by many investment banks and other financial institutions, many skilled executives are looking keenly at joining hedge fund and private equity firms. This could provide a fillip to hedge funds, many of which are performing well despite the difficult market conditions.

Citigroup is reportedly cutting thousands of trading and investment banking jobs this week as part of its plan to reduce the headcount its investment banking division by about 10 per cent. The departure of some senior executives, including Steve Bowman, Citi's head of hedge fund services, adds to the exodus of alternative investment talent.

In total, the US financial sector has announced around 66,000 job cuts in the first five months of this year, according to Chicago-based outplacement firm Challenger, Gray & Christmas. This brings to more than 83,000 the number of announced job losses in the industry since last July, according to data compiled by Bloomberg.

More than 45 traders, bankers, analysts and other executives have left major investment banks this year to join hedge funds and private equity firms, Bloomberg says - not including people who have left to start their own companies.

The pain for the investment banks is providing a fresh supply of talented traders, administrators and strategists to hedge fund managers, which now have the challenge of demonstrating they can use the new blood effectively.