The hedge fund community is acting shocked over reports that Man Group plans to fire 200 people days after completing its merger with GLG Partners. The news comes shortly after D.E. Shaw’s recent firing of 150 people.
After all, you don’t usually associate hedge fund firms with austerity and retrenchment. They are supposed to be the ultimate swaggering growth companies, since they really aren’t “companies.”
Now, one could very easily take the populist route and rail at GLG co-founders Noam Gottesman and Pierre LaGrange, who both figure to earn at least $570 million from their merger deal, yet 50 of their own people are likely to lose their jobs. And David Shaw, the absentee owner of D.E. Shaw, personally earned nearly $800 million over the past two years, including gains on his own capital in the funds he no longer manages on a day-to-day basis. Couldn’t these guys share some of the loot to avoid layoffs, the populists might ask?
However, the reality is that as the biggest hedge fund firms become even bigger, as I chronicled in a previous article they also are more resembling big financial institutions.
In fact, the latest rumored company to be planning layoffs is Ken Griffin’s Citadel Investment Group. According to Bloomberg, it is about to cut 5 percent of the staff of Citadel Securities, its Wall Street-like business.
Meanwhile, the big financial institutions are embarking on their own layoff wave. In August, analyst Meredith Whitney predicted Wall Street layoffs of as much as 80,000 over the next 1½ years.
Trading volume is down, spreads have narrowed, underwriting of new stock issues is weak and M&A has recovered, but is not robust.
So, already there are reports that Bank of America of planning to cut 5 percent of its capital markets group. In August, Credit Suisse Group and Barclays Plc each announced layoffs. Meanwhile, Morgan Stanley has instituted a hiring freeze for investment banking jobs for the rest of the year.
The bottom line: the bigger that hedge fund firms become, the more they resemble large, stodgy financial firms, for all the good and bad reasons.
