When portfolio manager David Lipner said he was quitting billionaire Izzy Englander’s Millennium Management to join a rival, the hedge fund countered with an unusual proposal: A one-year paid sabbatical and an incentive upon return if Lipner stayed.
Q1 2023 hedge fund letters, conferences and more
And stay he did. For Millennium, the $58 billion industry giant known for ruthlessly cutting underperformers, the generous offer was seen as totally worth it. After all, Lipner had made money for the firm for more than a decade, longer than most hedge funds remain in business.
Such enticements are now becoming part of a growing array of expensive tools the world’s biggest hedge funds are deploying to hire and retain traders. They show how a limited pool of talent and surging demand for steady returns in a volatile market are prompting firms to pull out all the stops to attract the best — with clients footing the bill.
The hunt is no different from the bidding war for Premier League or NBA players, one executive said. Last year, a senior portfolio manager was lured by a major New York fund with more than $120 million in guaranteed payouts, according to a headhunter who said he’d done several deals paying north of $50 million. Contracts worth $10 million to $15 million are increasingly becoming common for traders, said another.
Hedge funds have long been the land of eye-popping rewards, but a few recent trends are converging to take it to new levels. The stellar track record of several giant firms that spread money across teams of traders following multiple strategies has caused their assets to surge. That’s prompted a hiring spree to add more traders and strategies so the existing ones aren’t overstretched.
The performance — and resulting wait lists of investors wanting it — has also given the firms leverage over clients to charge many times the traditional 2% management fee and use that for recruitment and retention. And as the firms increase rewards and defer more of them over several years, it’s taking even bigger offers to tempt traders into leaving.
“In a world where there’s a lot of liquidity, the bigger challenge in developing a platform business is investing in talent rather than attracting capital,” said Chris Milner, the chief operating officer of London-based Eisler Capital, which is transforming itself into a multi-strategy hedge fund from its roots in macro trading.
Read the full article here by Nishant Kumar, Advisor Perspectives.
