The hedge fund landscape is becoming increasingly dominated by multi-manager platforms with industry titans like Citadel, Point72 and Millennium leading the charge, as they see a surge in investor interest.
Reports show that multi-manager platforms experienced a 15% increase in assets, reaching ~$370bn by end of June 30 2023. The rest of the industry trailed behind with just over 2% growth. In terms of performance, multi-managers enjoyed an average annualised return of 4.5% versus the industry average of 3.4%. Platforms with AuM $10bn+ delivered annualised returns of 7.9%, outperforming smaller funds.
Turning to talent, these platforms ramped up their headcount by an impressive 22% during the same period, in contrast to a mere 1% rise seen in the broader industry. Eisler Capital has increased its investment teams by 50% to 60% this year, while Brevan Howard has increased its headcount by circa 40% too. As ever, talent retention remains a key challenge across the board, and we have seen an intensifying competition for top portfolio managers.
Some of the industry’s largest multi-strats have adopted fee structures that have given them more power to attract and retain elite talent than ever before. Strong and steady returns have meant that investors are willing to pay “pass-through” fees, which are higher than a typical management fee of 2 & 20, that go toward firm expenses like hiring. Smaller funds struggle to compete with this and so we see the talent gap, and thus the performance gap, widen further.
Advice to clients
It goes without saying but my advice to hiring managers at smaller funds when they encounter top performers is straightforward: don’t delay. The longer the interview process takes, the more alternatives’ candidates will have. It is vital to remember that the most exceptional talent is swiftly onboarded. Streamlining your recruitment process is essential, as speed and efficiency are key factors in securing the best talent. Ensure your recruitment process is agile, without compromising thorough evaluation, to swiftly secure top talent.
If you are concerned about how the current market may affect your position, or to discuss how we can support your hiring processes in the current market, please get in touch with Senior Consultant in Hedge Fund Front-Office, Orla Louden, at orla.louden@coopman.uk
