Wealth Manager-Family offices may poach hedge fund staff

Date: Friday, March 19, 2010
Author: Joseph A. Giannone, Reuters

Hedge funders interested in family offices - survey

* Jumping ship could mean an initial pay cut

Families so rich they employ their own investment managers are set to increase their recruiting from an untapped pool of talent: hedge funds.

And in the wake of the financial crisis, more hedge funders may be open to joining so-called family offices, despite an initial cut in pay, according to Greg Coules and Adrienne Donald of recruiting firm Hunter Advisors.

"They'll make the jump because of the stability. Also, the culture and the lifestyle at these big institutions is tough," said Coules, who surveyed hundreds of senior hedge fund staffers on the topic last year. "It's a much more genteel environment."

Family offices, typically managing $100 million or more, in the past year have stepped up efforts to recruit fund managers and analysts from hedge funds.

The Hunter partners said 90 percent of respondents in their survey were interested in exploring job opportunities with family offices, both as direct investors and as supervisors of outside money managers.

Exact figures are not available for this secretive corner of the market, but Hunter estimates there are 300 to 500 family offices managing $500 million or more in the United States.

For hedge funders, signing on with a family controlling hundreds of millions of dollars in business assets, investments and real estate may be compelling.

In the past year, Brian Frank left Cumberland Associates to join MSD Capital, an investment company formed by computer maker Michael Dell. Carl Meyer left Citigroup as head of distressed loan sales and trading to join as chief investment officer for Michael Milken, the famed 1980s junk bond king.

A number of issues keep hedge fund managers from jumping ship, according to the survey, including worries about family politics and nepotism, a perceived loss of prestige that comes from leaving a top hedge fund, and whether family members would interfere.

Hedge fund staffers will also likely take a pay cut, initially, as they leave a world where managers are paid 2 percent of assets and 20 percent of a fund's profits.

Coules, though, said there is potential for an even bigger payday based on sustained market outperformance.