Hedge Funds Groom Their Own Superstars in New Talent Era

Today we look at the big take, which is about how top hedge funds from Citadel to .72 are creating schools to build in house superstars. Bloomberg's Nishant Kumar wrote the story. He Co wrote it and joins me now. And of course Nishant knows everything that's going on inside the hedge fund industry. Why is there so much demand right now to turn these kind of hedge fund underlings into full on stars? So as we all know, hedge funds are all about people and traders and the star traders. And there is really it's a problem of demand and supply. You know, hedge funds have grown their AUM by $3 trillion between 2008 and now. So they have plenty of money, but not enough people to manage that. At the same time, if you look at where all these hedge funds got their people previously they used to be the prop trading desks at major banks. Obviously after 2008 crises and regulations, you know, that ecosystem has been decimated. So there is no new supply of talent coming from. They have hired everyone they could. So the only way they could, you know, add more people is obviously by paying even higher amounts of money to these star traders or they find a way to train some of the junior people and tweak them as per their needs to fill the gap. And, and together, you know, this, these two approaches could work really well for multi strategy hedge funds. You know, they have really not enough people to manage the billions and billions of dollars Nishan that they have. You had a very fascinating moment in this story too. A very rare interview with the Co CIO of Citadel, who says one of the most significant binding constraints in the industry is the availability of talent. Well, is that the only problem here, the cost of talent alone with pass through fees? Is that also coming under pressure? Not really because if you look at the performance of some of these hedge funds, they are doing really well. Even this year the returns for the top multi strats fund range between 5 to 10% or 9%, which is pretty good. It's well above the risk free rate. So, you know investors are satisfied with that kind of return so much so that you know all these hedge funds have no capacity left to take in more money. S clearly demand for their products is not an issue. It is only the problem. If you want to grow more, add more to their assets. There is no other way to do that unless they add more people, they go into newer markets, they add different asset classes or strategies to the mix.

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