September 18, 2005
Is the brain drain from Mutual Funds to Hedge Funds for real?
Why will someone knowingly bargain for more work and less compensation? It is possibly because he is unable to get a job where he gets a vice versa deal. This very much seems to be the scenario as far as fund managers are concerned. The good traditional Money Managers operating in the Mutual Fund category are being poached by Hedge Funds. They are continuously being pulled into Hedge funds by offers of higher remuneration with additional performance pay thrown in.
The managers are also provided with enough freedom to employ various strategies to generate returns. Unlike in Mutual Funds, the managers can make money when the market is only on an upswing; Hedge fund managers can do it any market scenario. This implies that at any time the Hedge Fund manager can in-fact generate returns and add to his performance bonus. Hedge Funds also have lower regulatory barriers for new managers as compared to Mutual Fund. Deep pockets enable hedge funds to get the right talent when ever they want. Mutual Funds on the other hand are not so rich and therefore loose their star performers to Hedge Funds more often than not. So what the hedge funds have is the smartest brains in the investment arena. They are also able to attract right talent straight from B-schools. The new managers understand that they have to work hard whether they are managing Mutual Funds or Hedge Funds.
Therefore it comes as no surprise that these young managers aim to be part of Hedge Fund team rather than Mutual Funds or any other traditional investment tools. These were very much the points highlighted on the issue of brain drain by Mario Gabelli, Chairman of GAMCO Investors Inc at the Reuters Hedge Fund Summit in New York recently. Hedgeco.net reports:
“Gabelli told conference attendees at the Reuters Hedge Fund Summit, “A Hedge Fund manager in theory has the smartest people. They are very focused, highly incentivised, by and large”
Read More: Traditional Money Managers face challenges from brain drain to Hedge Funds
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