Hedge funds to cut 20,000 jobs in 2009

Date: Wednesday, March 11, 2009
Author: Joseph A. Giannone, Reuters.com

Battered by losses and redemptions, hedge funds worldwide could slash some 20,000 jobs this year as the outlook for investment managers remains dim.

The Options Group, a Wall Street recruiting and compensation firm, on Tuesday estimated record 14 percent job losses for an industry that had been growing by leaps and bounds for more than a decade, until recently.

Last year's market turmoil triggered an exodus of hedge fund customers and their money, forcing hundreds of firms to shut down and even more funds to reduce spending. So far in 2009, customers continue to drain assets from hedge funds.

"All financial services firms are scaling back and hedge funds are seeing the same thing," Options Group Chief Executive Michael Karp said. "A lot of redemptions are coming; businesses are consolidating."

Options Group said most of the layoffs are hitting sales people, marketers and those who gather assets, followed by back-office operations staff and traders. Regionally, the biggest losses will be seen in the New York City area and London, followed by Hong Kong and Tokyo, it said.

"It's across the board. Funds are looking to lay off people who are not revenue generators, the people whose ideas are not generating alpha," Karp said.

Hedge funds are in retreat after a year when assets under management sank, squeezing management fees. And with fund values down well below their "high-water" marks, managers are unlikely to generate performance fees -- typically 20 percent of fund profits.

Since peaking at roughly 155,000 jobs in 2007, employment at these lightly regulated investment firms has fallen by about 10,000 jobs to 145,000, Options Group said.

Since credit markets seized up in the summer of 2007, banks and brokerages worldwide have cut nearly 300,000 jobs.

(Editing by Gerald E. McCormick)