eFinancialCareers

Thanks to a surge in new business, fund of hedge funds are bridging the salary gap to compete for talent with single manager funds.

Pension funds’ increasing appetite for alternatives has seen them pursue the fund of hedge funds route, in spite of the extra layer of fees, as they claim to offer diversification and due diligence.

Investment consultant Watson Wyatt says it’s seen the number of pension funds searching for a move into fund of funds in the UK more than double – from 10 in 2006 to 27 last year.

What’s more, GAM and Man Investments have said they’ve seen an increase in interest from US pension funds, keen for higher returns but too wary to invest directly in hedge funds.

Peter O’Connell, director of CuttingHedge Recruitment, agrees, saying he’s taken people from hedge funds, investment banks, private equity and asset managers to work in fund of hedge funds.

And David Durham, managing director of hedge fund headhunter Durham Consultants, says demand is such that fund of hedge funds are prepared to source talent from just about anywhere – including options desks of investment banks.

But will the big hitters on the front line of single manager hedge funds be reluctant to switch across to the institutional route?

Peter Elliot, managing director of hedge fund recruiters Emerson Chase City, thinks not: “Good performance by fund of funds has meant they are no longer viewed as the poorer cousin of single manager hedge funds and people are less hesitant at making the move across.”

And the gulf in salaries is no longer relevant. Elliot reckons a portfolio manager working for a fund of hedge funds would bring in a base of £90k-£120k and could expect the same at a hedge fund. Bonus would obviously depend on the fund performance and individual, but could be from 100-300% of salary.