Hedge Fund Infrastructure Roles

As the institutionalization of Alternative Investments, especially Hedge Funds, continues to grow, professionals in the Hedge Fund space are seeing numerous career opportunities and paths emerge.  This growth is not only happening at the large billion dollar funds but at smaller shops and start ups as well.

The growth has been so great that many Hedge Fund firms have hired more infrastructure roles than investment roles the last few years.  And yes, this can partially be explained by the lack of infrastructure in place to begin with, but it is also due in large part to the demand of Institutional Investors. They want to make sure infrastructure roles are no longer neglected by the Hedge Fund; rather these roles are given the same importance and respect as investment oriented roles.

What is making these roles even more hotly contested for by Hedge Funds is that these roles can now, and in many cases do, lead into Operational Due Diligence Analyst roles for large Institutional Investors.  With such a heavy emphasis being placed on infrastructure and business operations by these large investors; the large institutional investors have realized the need for specialists in business operations and risk management due diligence.  

Hedge Fund Primary Mission – Focus on Infrastructure

In the last few years the large Hedge Fund firm’s primary mission has been to build and strengthen their infrastructure departments. In many cases these firms already had operational, accounting, risk management and human resources departments. However, they were managed in part by other professionals or partners in the firm and not receiving anyone’s fulltime attention.  These firms have since hired professional managers for each of these departments and have added head count to these departments making them a focal point within the firms.

In some cases these funds have identified additional revenue channels through back office operations, either by providing those services to other smaller funds or by creating and running their own stock loan departments.  Since there has not been a large supply of experienced professionals within many of the infrastructure fields, those who do possess solid experience have seen their compensation increase significantly, especially in compliance. In many cases Senior Infrastructure professionals compensation now includes equity in the fund.

Many of these experienced professionals have also been drawn to the smaller Hedge Fund marketplace, here their skill sets may not earn more cash compensation but can earn them a greater percentage of equity in the fund.  For an experienced COO or CFO with some Investor contacts in their rolodex, 25% equity in the firm is not unheard of. These individuals are also trending to smaller firms because of the greater responsibilities they are given, and in many cases they have worked for larger more bureaucratic organizations and are excited by the idea of working for a small firm.

Importance of Experienced Infrastructure Professional

Having an experienced Infrastructure professional in place can be a huge advantage when trying to raise assets or deciding which vendors to use for the smaller firm.  This experienced professional brings instant credibility to the firm, and may have solid relationships already in place within the Hedge Fund vendor universe. These infrastructure professionals manage all of the non-investment related areas of the firm, in many cases, allowing the Portfolio Manager to focus on performance, which is always most important.

In today’s Hedge Fund space there is a tremendous amount of value placed on the belief that someone is experienced and knows how to run a hedge fund.  This knowledge has become extremely valuable in the last few years and we do not foresee this capability losing any of its value in the near future.  What has come with this new value proposition is greater compensation for these roles, and I believe soon we will see a real shift in the marketplace where individuals looking for a new role will be very open to examining and interviewing for these roles.