The other reason you can't get a job at that hedge fund
It's become a cliché to observe that hedge fund hiring is booming in 2023, but that doesn't detract from its truth. As assets under management (AUM) at leading hedge funds grow, more and more people are needed to manage them, but once you've joined one hedge fund, leaving for another is less easy than it seems.
The problem is partly hedge fund's harsh non-competes, lasting 12 months or more. Legislators in the US and the UK are moving to prohibit them, but even if non-competes are banned, insiders say there's another issue: cozy agreements between leading funds not to poach each other's staff.
These first came to light two years ago when Bloomberg reported that Balyasny had agreed not to poach staff from Citadel for a limited period of time. That particular agreement was triggered by a court settlement, but hedge fund headhunters say there are plenty of others in the industry, implemented on more collegial terms.
"There are a lot of these hands-off arrangements, and they're kept under wraps," says one leading headhunter in the sector. "They're not official, but are tacit agreements between funds not to poach from one another's teams."
The hands-off arrangements are most commonly triggered when one fund coinvests in another. Funds like Woodline Partners, for example, which spun out of Citadel in 2019, won't typically poach portfolio managers from their alma mater. "Non-solicitation agreements between funds are common when there's an investment between them," says another headhunter, also speaking on condition of anonymity.
However, the arrangements are more prolific than implied by coinvesting alone. When several hedge funds have taken money from the same fund of funds, the headhunter says they can all be covered by agreements not to poach each other's people. "You end up with a huge web of mutual interests," he says.
Even senior people in the hedge fund industry are unaware of the restrictions. "A lot of people have no idea that they exist," says the headhunter. Hiring senior staff in the hedge fund industry can be incredibly disruptive, he adds: "You have to pay buyouts, recruitment fees, and then there's the time, disruption and impact on performance. When you're a big investor, it makes no sense for one fund to be poaching from another."
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