Alternative investors may be suffering — but you
wouldn’t know it from statistics tracking the
hiring of professionals tasked with gathering assets for
According to a quarterly analysis of hiring activity in
alternative investment marketing and investor relations
released today by the executive search firm Context Jensen
Partners, year-over-year recruitment activity for marketing
professionals is up. Context Jensen Partners tracked a record
231 marketing moves in the third quarter of 2016, up from 188
in the second quarter. The third quarter of 2016 was the most
active hiring quarter the executive search firm has seen in its
almost three years of tracking this activity.
"What I’m seeing in the U.S. is a full market,"
says Sasha Jensen, founder and CEO of Context Jensen Partners.
"All the stats are up on last year in all sectors."
An increase in recruiting activity among private equity,
credit, and long-duration type strategies is to be expected,
given that fund flow trends and recent reports show
considerable interest by investors in these spaces over the
last 12 to 18 months. The same is true for quantitative trading
strategies — in both equities and commodities
— which in recent years have proven to be one of the
few bright spots for hedge funds. More of a surprise, however,
is that Context Jensen Partners data show robust hiring
activity among event-driven managers.
According to data from hedge fund tracker HFRI, event-driven
managers experienced net outflows of $15.5 billion in the third
quarter of 2016, the most by far for any of HFRI’s
four hedge fund categories. (Equity hedge funds lost $9.4
billion, macro experienced modest inflows, and relative value
lost $4.1 billion.) In total, HFRI data show that event-driven
managers have seen a net asset decline of $26.4 billion through
the first three quarters of the year.
However, Jensen recorded a record 17 marketer hires for the
space, more than the first two quarters of 2016 combined.
"The way I’m reading it is that from a macro
economic perspective there is a lot of opportunity in the
market right now," says Jensen, referencing politics and the
economy more broadly. Event-driven firms are well positioned to
take advantage of those opportunities, she says.
Among the firms to have made significant marketing hires in
recent months are Dan Loeb’s Third Point, which
hired Anne Gresens from Morgan Stanley’s cap intro
team, and Passport Capital, which hired Emily Sheridan,
previously of North Carolina–based hedge fund manager
Silverback Asset Management.
This uptick of potential fundraising at event-driven firms
is happening even as there have been some high-profile closures
— as in the case of Richard Perry’s Perry
Capital — or significant underperformance, such as
Bill Ackman’s Pershing Square Capital
This hiring activity also comes as a number of institutional
investors, especially public pension plans, are significantly
reducing, or completely eradicating, their hedge fund
portfolios. In October the state of Rhode Island announced it
would be eliminating the $1 billion hedge fund allocation for
its public pension system.
Uncertainty does not always beget opportunity, of course.
One market that has not seen much recruitment activity is the
U.K. Jensen says managers in the U.K. are in a holding pattern
while they await the fallout from Brexit, the June referendum
vote in favor of withdrawing from the European Union.
The recent spat of redemptions and asset allocation changes
could be a case of institutional investors selling at the
bottom of the hedge fund market. Or hedge fund managers may be
optimistically holding out for a customer base that is moving
away from them. A report on U.S. asset management published
this week by the global consulting firm McKinsey & Co.
found growth in alternative investing continues to outstrip
that of traditional asset management. But the authors identify
a change in the types of alternatives investors want, saying
that "demand has been robust in the illiquid private market
segments, as investors seek to capture liquidity premia and
look for alpha generation in less efficient segments of the
market." They report that fundraising in private markets is
already back to pre-2008 levels. Among the investors McKinsey
surveyed, 33 percent said hedge funds had fallen short of
expectations and only 9 percent said their hedge fund
investments had exceeded expectations in 2015, compared with 6
percent and 30 percent, respectively, in private equity.
For event-driven managers, at least, recent performance data
may offer some reason for optimism. Through the end of
September, the HFRI Event-Driven Index was up 4.48 percent,
while the HFRI Fund Weighted Composite Index was up 2.92
percent and the S&P 500 was up 3.85 percent.
The data suggest event-driven funds, which were down on
aggregate 3.55 percent last year, might have turned the corner.
Then again, as 2008 Republican presidential candidate Senator
John McCain says, "It’s always darkest before
it’s completely black."