Hedge funds may cut 20,000 workers worldwide this year, a record 14 per cent 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 fell an average of 0.51 percent in February and 0.59 percent so far this year, less than the declines in stocks and bonds, according to HFR. HFR’s Fund Weighted Composite Index dropped 19 percent last year, the biggest decline since the Chicago-based firm began tracking data in 1990.
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.