Hedge fund dream job vanishing amid harsh reality
After 30 years in finance, David Goldburg’s dream was fading.
His resume was good. Goldman Sachs prop desk. Managing money for Michael Milken. He tried to start his own hedge fund. His timing was bad. It didn’t work.
He couldn’t land a job. He networked. Met with headhunters. All he got was a sharp sense of his options narrowing.
At 55, he was too expensive. Hedge funds, many of them hurting, could hire two or three youngbloods for the price of a Goldburg. Graybeards even created a name for the process: “juniorfication.’’
“It’s pretty brutal out there,’’ said Goldburg, who eventually found a job outside hedge funds. “If you have more than 15 years experience, and you want to transition to something else or want that next level of opportunity, there’s never been a worse time.’’
Analysts as young as 30 are facing what they might call “headwinds” in a changing Wall Street. Automated trading, a world awash in data and passive investing have made stock pickers less influential. Hedge fund fees are down, making analysts targets for cuts. European regulations have put researchers out of work. And in a 10-year bull market juiced by the Fed’s low rates and bond buying, insights more expensive than “buy the dip’’ cost too much.
Analysts at hedge funds, many of whom had been hired away from investment banks, do everything from grunt work to coming up with ideas for portfolio managers to trade. The lousy environment for them is a reflection of the dimming outlook for hedge funds. In the last three years, nearly 400 more hedge funds around the world have closed than opened, according to Hedge Fund Research. That means not only are there more people looking for work, there’s little or no movement in existing jobs. Senior analysts who in years past would’ve gone on to start their own funds aren’t going anywhere, so there’s stagnation on the organizational chart.
The surviving so-called single-manager firms, even the ones managing tens of billions, are running leaner, said Ilana Weinstein, founder and CEO of IDW Group, a hedge fund recruiter.
“If we think about the death of the analyst, I think you have to go up one level and talk about the death of most hedge funds,’’ Weinstein said.
Just yesterday, Dmitry Balyasny cut at least 125 people from his eponymous firm, or about one-fifth of employees, according to people familiar with the hedge fund.
The firm has parted ways with its CEO Alex Friedman and launched a restructuring plan.November 26
Both already use the fintech company’s technology to market their products to advisors.November 9
Few analysts are in dire straits. Many of the senior ones were, or still are, making mid-to-high six figures, with plenty of upside in a good year. But many are also facing something worse — the panic that comes with realizing their career aspirations will never be attained. They may never make partner or run their own firm. They’re stuck.
“Everybody’s miserable and everybody’s trying to grind it out,’’ Goldburg said. “Everyone wants that better opportunity and that better job, but they don’t exist. And no one wants to leave their existing seat because if you leave your existing seat, it’s like musical chairs — you might not be able to get another seat.’’
Analysts also have to contend with offshore competition. Software company Linedata Services has 35 former sell-side analysts based in Mumbai helping 14 clients, mostly hedge funds.
“They’ve let people go due to their assets shrinking,” said Jonathan Shapiro, a Linedata senior director. “We provide them with someone who’s just as qualified and is ready and eager to do that work for a fraction of the cost.”
What are the options? Big multi-manager platforms, like Citadel, are hiring (and firing) by the dozen. With the benefit of Europe’s MiFID II finance rules, boutique research firms are also growing. And some analysts mention another path: ditching their job analyzing an industry to actually join the industry.
Quentin Koh, a former analyst at a macro fund, watched as data and computer scientists increasingly edged out fundamental analysts. Now he’s doing something about it. At 30, he’s got the flexibility many of his older peers don’t, and a shot to steer his career down a more lucrative path. Earlier this year, he quit his job to learn to code.
Meanwhile, a handful of larger shops offer sought-after programs dedicated to training young analysts for investment manager roles. Man Group’s GLG Partners, for example, has a two-year program that graduates portfolio managers of the future.
“We die if we don’t train the next generation,’’ said Pierre Henri Flamand, the firm’s chief investment officer.
After two years without income, Goldburg got creative. He’s now a partner at $90 million Merida Capital Partners in Manhattan, where his task is picking winners in the marijuana industry. It’s a risk, but it’s meaningful work that pays.
“Before I found cannabis, it was very depressing,’’ Goldburg said. “This opportunity is so much more interesting and exciting from a growth perspective and a money-making perspective. If you pick the right names, there are going to be major brands and major players that are going to come out of this that are going to be the Pfizers and Mercks of 15 years from now.’’