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If you want to escape your banking job and join a multi-strategy hedge fund in June 2022 with a large package similar to the $60 million Millennium reportedly offered Citadel portfolio manager Stefan Erickson, If that’s what you’re thinking, that’s a shame. The ship has sailed.
One headhunter, who works on both sides of the Atlantic, said on condition of anonymity that hedge fund recruiting had been slow at the end of last year and had been quiet at the beginning of this year. “2023 is a bad year for hedge funds, and that’s having a lagging impact on employment,” he observes.
“The standards have been readjusted,” agrees a rival search consultant. “Hedge funds are becoming more cautious in their recruitment in 2024. The transition from sell-side to buy-side will be much more difficult this year.”
However, not all hedge funds had a bad 2023. BNP Paribas announced yesterday that the average return for multi-strategy hedge funds was just 6.69%. However, Citadel returned 15.3% last year, while Millennium returned 10%. The biggest funds were fine. Schoenfeld (4.8%), Baryasny (2.7%) and Wally (4%) were among those who disappointed the other side.
This does not mean that employment at these companies has stopped. For example, Valyasny added at least six new portfolio managers this year. They include Exane’s Giulio Pescatore (long/short equities), Viking’s Jeremy Simon, Citadel Securities’ Salim Choueiki, and former head of Asia ECM Adrian Lee. . Credit Suisse. These hires come after the company’s event-driven credit business suffered $100 million in losses and people left on both sides of the Atlantic.
Citadel and Millennium also plan to hire portfolio managers in 2024, although with less enthusiasm than in the past. Millennium hired an average of 34 new portfolio managers per month for its 410 investment staff (including analysts) in 2022-2023, but by our count it has added only five new portfolio managers so far this year. is. Most are in Asia, including Matthew Pascal, who joined in January from Point72 in Connecticut. Citadel will add about five new portfolio managers in 2024, including Mark Mayzlish and Sam Finkelstein of Goldman Sachs, along with three from London’s Egerton Capital. Everyone invests in stocks except Mr. Finkelstein, who is running a new development program for Citadel’s macro business.
Even for large funds, net growth isn’t always important. Citadel and Millennium also cut several jobs late last year to make way for new hires. For example, the job cuts from Citadel’s Surveyor Capital in London were from the firm’s equities team.
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Citadel and Millennium are just two of an estimated 55 multi-strategy hedge funds in existence. Smaller rivals show even more disparity in employment and performance. Most multi-strategy funds operate a pass-through fee model, charging investors for salaries, entertainment and office space, leaving little for those who provide the money. BNP says investors received just 41% returns on pass-through funds last year.
This alone will put pressure on hedge fund fees in 2024. But a more modest performance in 2023 will likely be as well. Headhunters say the very high packages offered to portfolio managers who moved last year reflect the opportunity cost of being out of the market for 12 months after outperforming in 2022. It states that That opportunity cost has been readjusted so that it will now be cheaper to pay someone to take you out of the market.
According to BNP Paribas, investors are targeting a return of 9.06% from the hedge fund in 2024, so those joining the fund this year are advised to pay close attention to past performance. Even among the largest multi-strategy funds, poorly performing funds are at risk of closure or consolidation, and so are poorly performing pods. “Everyone is combing through the people they hired last year to see if and how they made money,” said one headhunter. “I would go for a good portfolio manager on a second-tier platform any day over a mediocre portfolio manager on a top platform,” advises another. There is no room for fat this year.
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