If you’re hoping to escape your banking job and to join a multistrategy hedge fund on a large package akin to the $60m Millennium allegedly offered Citadel portfolio manager Stefan Ericsson in June 2022, then sorry. That ship has sailed.
The end of last year was quiet for hedge fund hiring and the start of this year is quiet too, says one headhunter, who works on both sides of the Atlantic, and who spoke on condition of anonymity. “2023 was a bad year for hedge funds, and that’s having a lagged effect on jobs,” he observes.
“The bar has realigned,” agrees a rival search consultant. “Hedge funds are much more cautious about hiring in 2024. Moving from the sell-side to the buy-side is going to be a lot more difficult this year.”
Not all hedge funds had a bad 2023, though. BNP Paribas said yesterday that the average multistrategy hedge fund returned just 6.69%. However, Citadel returned 15.3% last year and Millennium returned 10%. The very biggest funds did ok: it was the likes of Schonfeld (4.8%), Balyasny (2.7%) or Walleye (4%) that let the side down.
This doesn’t mean that hiring has ground to a halt at these businesses. Balyasny, for example, has added at least six new portfolio managers this year, including Giulio Pescatore from Exane (long/short equity), Jeremy Simon from Viking, Salim Choueiki from Citadel Securities, and Adrian Lee, the former head of Asian ECM at Credit Suisse. Those hires come after a $100m loss in the firm’s event driven credit business and the exit of people on both sides of the Atlantic.
Citadel and Millennium are also picking up portfolio managers in 2024, although less enthusiastically than before. Millennium hired 410 investment staff between 2022 and 2023 (including analysts), an average of 34 a month, but by our count has only added five new portfolio managers so far this year. They include Matthew Pascale, who joined in January from Point72 in Connecticut but are mostly in Asia. Citadel has added around five new portfolio managers in 2024, including three from Egerton Capital in London, plus Mark Maislish and Sam Finkelstein from Goldman Sachs. All but Finkelstein, who joins as a macro PM and will also run a new development program for Citadel’s macro business, are in equities.
Even at the big funds, it’s not necessarily about net growth. Citadel and Millennium also trimmed a few people at the end of last year to make way for new hiring – Citadel’s London cuts, from Surveyor Capital, were from its equities team, for example.
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Citadel and Millennium are only two out of an estimated 55 multistrategy hedge funds in existence. Hiring and performance is far more patchy at smaller rivals. With most multistrategy funds operating a pass-through fee model and charging their investors for pay, entertainment and office space, there’s little left for the people providing the money: BNP said investors received only 41% of returns at pass-through funds last year.
This alone will squeeze hedge fund pay in 2024. But so too will 2023’s more moderate performance. Headhunters say the very high packages on offer to portfolio managers who moved jobs last year were a reflection of the opportunity cost of them sitting out of the market on 12 month non-competes after the outperformance of 2022. That opportunity cost has been recalibrated and so paying someone to sit out of the market will be less expensive.
With investors targeting 9.06% returns from hedge funds in 2024 according to BNP Paribas, anyone joins a fund this year is advised to pay very careful attention to historic performance. Under-performing funds are at risk of closure and consolidation, as are under-performing pods, even at the biggest multistrategy funds. “Everyone’s combing through the people they hired last year and looking at whether and how they made money,” says one headhunter. “I’d join a good portfolio manager at a second tier platform over a mediocre portfolio manager at a top platform any day,” advises another. This year, there’s no room for fat.
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