Gaining an Edge: How Hedge Funds are Navigating the New Talent Landscape

The Alternative Investment Management Association (AIMA) - the global representative of the alternative investment management industry - has published new research exploring where hedge funds are sourcing the brightest talent and how they are pivoting to retain employees during the so-called “Great Resignation.”

“Gaining an Edge: How Hedge Funds are Navigating the New Talent Landscape” reviews how hedge funds managed their people since the start of the pandemic, which lessons learned during the remote working environment will be taken forward, and which business functions will see the greatest growth over the coming year.

This report utilizes industry data from a market survey of 100 hedge funds collectively managing more than $520 billion. To further contextualize the findings of the survey, AIMA conducted broad market research across the hedge fund industry, including interviews with consultants and hedge fund headhunters.

Central themes that emerged from the survey and subsequent conversations with both large and small managers include if hedge funds think hybrid working is here to stay (they do) and whether the pandemic changed how they seek out and retain top talent (it did).

Some observations form the study include:

• Almost 90% of hedge funds surveyed describe improving diversity, equity, and inclusion (DE&I) as a ‘very important’ or ‘important’ theme shaping how the hedge fund industry sources talent.

• The majority of hedge funds surveyed say they are promoting a good work-life balance as a way of retaining staff and placing a high value on non-financial benefits such as flexible working models.

• 62% of hedge fund firms say they do not have a dedicated ESG specialist on staff, but many that AIMA spoke to for this report say they plan to hire one in the next 12 months. This is expected to create acute hiring pressure for these skill sets as the responsible investment market matures.

• Hedge fund interviewees also offer their predictions on which skills will be the most in-demand in the future with roles in technology and ESG among those highlighted. Specialist recruiters AIMA spoke to also explain why the war for talent is currently fiercer than at any time over the past decade.

• The report focuses on regional differences regarding talent management, including how APAC hedge funds are experiencing a significant migration of talent around its traditional financial hubs, while North America is seeing a surge in non-financial benefits being offered by its hedge fund employers to retain staff. Key learnings and takeaways from the study include:

• The talent wars are intensifying - Almost 90% of total respondents are ‘somewhat’ or ‘very concerned’ about talent retention in the near term. Strong industry performance is creating significant demand to bolster teams, particularly around technology, operations, and quantitative analytics.

• ESG will be the next hiring frontier - ESG specialists, in all their various forms, are expected to become one of the most in-demand hires over the next five to 10 years. Almost two-thirds of all hedge fund firms surveyed do not have a dedicated ESG specialist on staff. But investor demand for ESG products combined with increasing regulatory pressures will make expertise in responsible investing the must-have skillset of the future.

• Technology is increasingly influencing hedge fund hiring decisions - most roles across a hedge fund now require a high level of competency in technology, which plays a vital role across both front-office investment strategy as well as middle and back-office operations functions.

• The desire to improve DE&I is a driving force in hiring decisions - almost all hedge funds surveyed describe improving DE&I as a ‘very important’ or ‘important’ theme, shaping how the hedge fund industry sources its talent. Hedge fund firms are modernizing their hiring policies to enable them to tap into the widest possible talent pools – including outside their native sector.

Can company culture and hybrid working coexist?

The assimilation of new hires within the company’s culture and training junior staff are the biggest challenges when recruiting in the remote working environment, according to more than two-thirds of the respondents. Despite these challenges, hybrid working will become the norm for many hedge funds.

“With the eyes of the world currently on our financial and political leaders as they discuss how best to move to a more environmentally sustainable footing, this report demonstrates how hedge funds are also playing their part by investing in their ESG capabilities,” said Jack Inglis, CEO of AIMA. “The increasing demand for responsible investment specialists across the alternative investment industry is a key finding of this paper and a theme that we expect to remain prominent for the foreseeable future.”

“The topic of talent management has always been top-of-mind for hedge funds but never more so than in recent months in the context of the COVID-19 pandemic,” added Tom Kehoe, managing director and global head of research and communications at AIMA. “This report provides timely insights as to how the hedge fund industry is fostering its key asset - its people, illustrating the opportunities that exist for hedge funds seeking to gain an edge in how they recruit and retain talent. Many thanks to the AIMA research committee for their leadership to help bring this report to the market.”

The Alternative Investment Management Association (AIMA) is the global representative of the alternative investment industry, with around 2,000 corporate members in over 60 countries. AIMA’s fund manager members collectively manage more than $2 trillion in hedge fund and private credit assets. For further information, visit AIMA’s website, aima.org.