Hedge funds seen losing staff to the SEC: survey

Date: Thursday, January 14, 2010
Author: Nick Zieminski, Reuters

U.S. hedge funds last year lost staff to endowments, sovereign wealth funds and the U.S. Securities and Exchange Commission, and the trend is likely to continue in 2010, according to a survey by executive recruiter Heidrick & Struggles International Inc.

Veteran hedge fund and markets professionals are also in demand at the SEC, where a promise of increasing government enforcement and the creation of a new Division of Risk, Strategy, and Financial Innovation are leading to new hires, according to the survey.

Heidrick & Struggles surveyed more than 400 portfolio managers and studied more than 100 hedge fund firms for its report, released on Wednesday.

Funds with less than $1 billion under management are especially vulnerable, according to the report, which notes that 900 funds liquidated last year, after 1,500 liquidations in the prior year.

The prospect of more funds liquidating will have a direct impact on flows of talent this year as professionals seek to move to more stable firms. Firms with access to sizable, stable capital are less at risk of losing top staffers, Heidrick said, as are those hedge funds that allow a high degree of autonomy.

The report predicts professionals can expect compensation guarantees to return this year, although more employers will insist on deferrals and clawback clauses. It also says compensation bidding wars should return.

"The post-TARP brain drain is turning around, with a significant increase in hiring at most large banks (and) proprietary trading firms," said Claude Schwab, head of the U.S. hedge fund practice and a partner at Heidrick & Struggles.