Recruitment & Retention

What price quality?

Alan Summers, S&H Consulting
Originally published in the September 2006 issue

According to a recent report in The Times, Britain's status as a major centre for hedge funds has been confirmed, with new figures showing that the value of assets invested in City hedge funds leapt more than 25 per cent last year to £370 billion. And, according to research by International Financial Services London (IFSL), the UK is the world's third largest asset management centre across all types of funds. This rise has apparently been fuelled by the investment community's rising interest in hedge funds says the IFSL as institutional investors in particular, have increased their exposure to higher risk, higher return funds.

Against this backdrop the war for talent is showing no signs of abating. As the hedge fund sector matures and grows, the type of individual needed is evolving all the time. As organisations change the way they structure themselves to take advantage of increased business, they require flexible professionals who can define, manage and implement that change – a change that could involve people, or processes or procedures. Although the sector has historically provided a real alternative for professionals who may have tired of the restrictions imposed by the rigid infrastructure of investment banks or fund management houses, hedge funds are growing up and many are now building infrastructures that mirror those larger institutions. The sector is therefore, now competing for professionals within compliance, operations and technology which has resulted in a war for talent on a scale not seen since the 'big bang' era of the mid to late eighties.

"As the hedge fund sector matures and grows, the type of individual needed is evolving all the time".

You only have to look at firms such as IKOS which has recently announced four key strategic hires in the areas of operations, HR, business development and risk to see how firms are really beginning to boost their infrastructure. And the increasing importance of software is leading to a new breed of professional who has a real understanding of the value that technology can bring to a business. As Dr Martin Coward, co founder of IKOS said in a recent interview: "As long as there are markets, there will be a need for someone to supply liquidity. As computers and software grow more powerful still, this task of liquidity provision will be almost entirely taken over by a web of interacting intelligent machines competing with each other to be selected in a virtual world where the fittest is the most efficient liquidity provider."

The evolving nature of the hedge fund sector

  • its products, its technology and its systems
  • has led to a real recognition of the value

But on a more general level, what sort of individuals are most in demand? Often, it's more about cultural fit than anything else. A CV will tell you all you need to know about a particular candidate's level of experience and skill set – in other words whether he or she can do the job- but the hedge fund sector is well known for being exciting, flamboyant and entrepreneurial – and fitting into that culture is key.

Additionally that culture can differ enormously from one fund to another – mainly because it's usually determined by the hedge fund founder's own personality and beliefs. Consequently it's not a place for shrinking violets or people who like to be pigeon holed. Those most in demand will have a like minded and flexible approach and be comfortable in taking on a role that by necessity, is very diverse in its nature.

But how do you identify these people – and what presses their buttons? We all know the history of the embryonic hedge fund – typically set up by a small number of key individuals who initially will use their own network to identify key strategic hires. However, that network can become exhausted quite quickly and is only really of use in the start up stages. There are obviously serious cost issues associated with niche headhunting firms and search fees – particularly in those early stages of growth when a search firm may not even result in a successful hire. The volume recruitment sector is of little, if any, use as often a volume contingency recruiter will have no clear understanding of an organisation's requirements.

What the sector really needs is a recruiter who operates in what we have defined as the "third space" – a firm which combines the best qualities of executive search with those of a professionally run contingency business. This "third space" route works particularly well for hedge funds who are in their initial growth phases – organisations who obviously need a very close cultural fit as well as the right skills. In other words, key strategic people, who can define, manage and implement change or develop business: those who can make a real and lasting difference to your organisation and revenue streams.

Accessing individuals of this calibre demands exceptional knowledge not only of your industry, but of your organisation. Just one reason why having the right recruitment partner is absolutely key- one who will work with the organisation developing resources strategically in line with their business. A partner who can be part of the direction and strategy of the longer term will help an organisation plan and implement the right supporting infrastructure at the right time.

In terms of selling opportunities, obviously there's a mercenary element. Despite all the column inches we read about career development, work life balance and the importance of diversity policies and corporate social responsibility, money still talks. Consequently, smaller firms have to really sell the opportunity as well as competing heavily on the money stakes. What can really make the difference is the quality of the clients, the success of the leader of the firm and the diversity of the role as well as flexibility, autonomy, an entrepreneurial environment, premium salaries and – of course – the potential of telephone number bonuses!

So – what price quality? Your network of contacts will have a finite end, the boutique search firm will have a hefty price tag – and still may not deliver the right person. The volume contingent recruiter will have little understanding of your particular markets, culture and organisation. In a seemingly never ending war for talent, it may just be time to look atthe "third space" and work with a partner for your future resourcing strategy.