Hedge Funds May Cut a Record 20,000 Jobs as Losses Erode Fees

March 10 (Bloomberg) -- Hedge funds may cut 20,000 workers worldwide this year, a record 14 percent of the industry’s jobs, as investment losses and client withdrawals erode fees.

The dismissals will come on top of the 10,000 jobs that disappeared last year at the investment partnerships, according to estimates by New York-based Options Group, an executive-search firm. Employment peaked at 155,000 in 2007, and has since dropped to about 145,000, the firm said.

“Hiring activity is much reduced and it’s going to get worse,” said Hank Higdon, managing partner at Higdon Partners LLC, a New York-based search firm focused on financial services. “I don’t see markets improving at all.”

About 920 hedge funds, or 12 percent, closed last year, according to data compiled by Chicago-based Hedge Fund Research Inc. Of the 6,800 single-manager funds that remain, 70 percent lost money in 2008, meaning they can’t resume collecting performance fees until the losses are recouped. Those fees, generally 20 percent of investment profits, are the primary source of cash used to pay bonuses.

Hedge funds eliminated about 6.5 percent of jobs last year, when client assets fell 37 percent to $1.2 trillion from their peak in June, according to Hedge Fund Research. Banks and brokers have fired more than 272,450 workers, or 5.9 percent of their payrolls, since mid-2007, according to data compiled by Bloomberg.

Hedge-fund assets may fall an additional $250 billion, or 21 percent, this year, estimates Huw van Steenis, a financial- services analyst at Morgan Stanley in London. That would leave hedge funds, which cater to wealthy individuals and institutions, overseeing about $950 billion, the lowest since 2004.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a8uLPVL9X8yY&refer=home

It´s called self-cleaning process,

 

Most of these funds will pop back up in some shape or form. It is better to close the fund, and start over. That way, they can collect the performance fees again instead of waiting for profit on the old funds which are way underwater. Most of these guys are just churning anyways. It's easy to make money on a bull market when you just buy and hold.

 

Mostly worthless jobs.

 

Only those hedge funds which had the partners' skin in the game are legit. The rest are ponzis. Remember, the investment banks with brokerage operations love to encourage (i.e. push) their older partners out by helping them raise capital and form a hedge fund. Once up and running they get the flow of the fund and ex-partners make +$10M in fees in two years and exit before the strategies begin to dry out.

But High-Frequency and Systematic Trading Funds are growing.

 

I don't know why hedge funds and mutual funds need to exist. People should just invest in ETF's or individual stocks and bonds themselves.

 

Hedge funds typically cut hugely underperforming funds i.e. to come back from 50% down and hit high watermark is almost impossible thus as they cut funds, they will need less research, traders, administrators, portfolio managers etc., no surprise.

 

you've got to be kidding me... i suppose we should also handle our own legal issues and perform surgery on ourselves since we all have the expertise and time.

 

First of all, your average joe, ie: Elite Trader Cronie could not invest in "HEDGE FUNDS", even though the lot of them like to throught the name about. Hedge Funds are for "ACCREDITED INVESTORS, look up the definition. And it's usally not your basic accred. investor who gets into a Hedge Fund. Net worth tends to be in the 5mil to 100 mil range. Any HEDGE FUND that allows non--accredited investors to join, something is up.

Mutal Funds are for the Common "COLLECTIVE" folk who voted OBAMA in others..... Mutal Funds typically allow you to put in 300 per month per sa.

Both are needed.

 

Let me guess...you must work for a hedge fund or a mutual fund or sell mutual funds right?

How much time does it take to click the buy button or call up your broker and say buy me 1000 shares of ABC company or a bond. A whopping 10 seconds perhaps? Not exactly brain surgery.

 

Its hard to believe you are on this forum and have made this statement, lol

But sure, tons of funds have performed like absolute dog rockets. However, you can't diminish the level of difficulty and expertise that it takes to consistently outperform the indexes.

This is not a game of throwing darts with a blindfold on.