Hedge fund dream job is van­ish­ing as harsh new re­al­ity sets in

Gulf Times Business - - BUSINESS -

Af­ter 30 years in fi­nance, David Gold­burg’s dream was fad­ing. His re­sume was good. Gold­man Sachs prop desk. Man­ag­ing money for Michael Milken. He tried to start his own hedge fund. His tim­ing was bad. It didn’t work.

He couldn’t land a job. He net­worked. Met with head­hunters. All he got was a sharp sense of his op­tions nar­row­ing.

At 55, he was too ex­pen­sive. Hedge funds, many of them hurt­ing, could hire two or three young bloods for the price of a Gold­burg. Gray­beards even cre­ated a name for the process: “ju­nior­fi­ca­tion.’’

“It’s pretty bru­tal out there,’’ said Gold­burg, who even­tu­ally found a job out­side hedge funds. “If you have more than 15 years’ ex­pe­ri­ence, and you want to tran­si­tion to some­thing else or want that next level of op­por­tu­nity, there’s never been a worse time.’’

Fac­ing ‘head­winds’: An­a­lysts as young as 30 are fac­ing what they might call “head­winds’’ in a chang­ing Wall Street. Au­to­mated trad­ing, a world awash in data and pas­sive in­vest­ing have made stock pick­ers less in­flu­en­tial. Hedge fund fees are down, mak­ing an­a­lysts tar­gets for cuts. Euro­pean reg­u­la­tions have put re­searchers out of work. And in a 10-year bull mar­ket juiced by the Fed­eral Re­serve’s low rates and bond buy­ing, in­sights more ex­pen­sive than “buy the dip’’ cost too much.

An­a­lysts at hedge funds, many of whom had been hired away from in­vest­ment banks, do ev­ery­thing from grunt work to com­ing up with ideas for portfolio man­agers to trade. The lousy en­vi­ron­ment for them is a re­flec­tion of the dim­ming out­look for hedge funds. In the last three years, nearly 400 more hedge funds around the world have closed than opened, ac­cord­ing to Hedge Fund Re­search.

That means not only are there more peo­ple look­ing for work, there’s lit­tle or no move­ment in ex­ist­ing jobs. Se­nior an­a­lysts who in years past would’ve gone on to start their own funds aren’t go­ing any­where, so there’s stag­na­tion on the or­gan­i­sa­tional chart.

Run­ning leaner: The sur­viv­ing so­called sin­gle-man­ager firms, even the ones man­ag­ing tens of bil­lions, are run­ning leaner, said Ilana We­in­stein, found- er and chief ex­ec­u­tive of­fi­cer of IDW Group, a hedge fund re­cruiter.

“If we think about the death of the an­a­lyst, I think you have to go up one level and talk about the death of most hedge funds,’’ We­in­stein said.

Dmitry Balyasny cut at least 125 peo­ple from his epony­mous firm, or about one­fifth of em­ploy­ees, ac­cord­ing to peo­ple fa­mil­iar with the hedge fund.

Few an­a­lysts are in dire straits. Many of the se­nior ones were, or still are, mak­ing mid-to-high six fig­ures, with plenty of up­side in a good year. But many are also fac­ing some­thing worse – the panic that comes with re­al­is­ing their ca­reer as­pi­ra­tions will never be at­tained. They may never make part­ner or run their own firm. They’re stuck.

“Ev­ery­body’s mis­er­able and ev­ery­body’s try­ing to grind it out,’’ Gold­burg said. “Ev­ery­one wants that bet­ter op­por­tu­nity and that bet­ter job, but they don’t ex­ist. And no one wants to leave their ex­ist­ing seat be­cause if you leave your ex­ist­ing seat, it’s like mu­si­cal chairs – you might not be able to get another seat.’’

An­a­lysts also have to con­tend with off­shore com­pe­ti­tion. Soft­ware com­pany Line­data Ser­vices has 35 for­mer sell-side an­a­lysts based in Mum­bai help­ing 14 clients, mostly hedge funds.

Shrink­ing as­sets: “They’ve let peo­ple go due to their as­sets shrink­ing,” said Jonathan Shapiro, a Line­data se­nior di­rec­tor. “We pro­vide them with some­one who’s just as qual­i­fied and is ready and ea­ger to do that work for a frac­tion of the cost.”

What are the op­tions? Big multi-man­ager plat­forms, like Citadel, are hir­ing (and fir­ing) by the dozen. With the ben­e­fit of Europe’s MiFID II fi­nance rules, bou­tique re­search firms are also grow­ing. And some an­a­lysts men­tion another path: ditch­ing their job analysing an in­dus­try to ac­tu­ally join the in­dus­try.

Quentin Koh, a for­mer an­a­lyst at a macro fund, watched as data and com­puter sci­en­tists in­creas­ingly edged out fun­da­men­tal an­a­lysts. Now he’s do­ing some­thing about it. At 30, he’s got the flex­i­bil­ity many of his older peers don’t, and a shot to steer his ca­reer down a more lu­cra­tive path. Ear­lier this year, he quit his job to learn to code. Mean­while, a hand­ful of larger shops of­fer sought-af­ter pro­grams ded­i­cated to train­ing young an­a­lysts for in­vest­ment man­ager roles. Man Group’s GLG Part­ners, for ex­am­ple, has a two- year pro­gram that grad­u­ates portfolio man­agers of the fu­ture.

“We die if we don’t train the next gen­er­a­tion,’’ said Pierre Henri Fla­mand, the firm’s chief in­vest­ment of­fi­cer.

Get­ting creative: Af­ter two years with­out in­come, Gold­burg got creative. He’s now a part­ner at $90mn Merida Cap­i­tal Part­ners in Man­hat­tan, where his task is pick­ing win­ners in the mar­i­juana in­dus­try. It’s a risk, but it’s mean­ing­ful work that pays.

“Be­fore I found cannabis, it was very de­press­ing,’’ Gold­burg said. “This op­por­tu­nity is so much more in­ter­est­ing and ex­cit­ing from a growth per­spec­tive and a money-mak­ing per­spec­tive.

If you pick the right names, there are go­ing to be ma­jor brands and ma­jor play­ers that are go­ing to come out of this that are go­ing to be the Pfiz­ers and Mer­cks of 15 years from now.’’

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