There has been an ongoing discussion surrounding hedge funds and their ability (or lack thereof) to create jobs. Many financial professionals wonder: Do they really have the capacity to help the job market? And if they do, what jobs are hedge funds producing?
Mitch Ackles, the President of the Hedge Fund Association and the CEO of Hedge Fund PR, told StreetID that yes, hedge funds do
create jobs. And they are currently hiring in areas such as compliance and operations.
"[Hedge fund] startups are bringing in traders and people that can manage the trading aspect of the business," said Ackles. "It's different for each hedge fund at each inflection point. If you're a startup hedge fund and you're coming out of the gate with $50 million, you might be able to succeed and do that with four people. You might have two traders, one operational person, and a receptionist, and then outsource other aspects of your business."
While outsourcing has received a bad name in the press (thanks in part to corporations that outsource domestic jobs to countries with lower wages), Ackles said that this ultimately leads to greater job creation.
"You already have to outsource your administrator," he said. "And you have to outsource your technology provider -- for example, the person that's going to bring the Bloomberg terminal. So there's a lot of aspects that you can outsource nowadays. Even compliance can be outsourced. But as you grow, you become more like a financial institution."
New hedge funds may only employ a few people in the beginning, but Ackles said that there are established funds in Manhattan with more than 200 people.
"You grow and then you have a marketing department; you have people that work directly with the investors; people concerned with the brand identity of the firm; you have a compliance army; you have internal counsel and external counsel; and obviously you've got almost a trading room that you would see at a prop desk at a bank," he said.
Ackles believes that the Volcker Rule, which could more or less lead to a ban on proprietary trading at major banks, could actually lead to further job creation.
"A prop desk is essentially an in-house hedge fund," Ackles explained. "Those firms, those talented people, have been getting out. They've been launching and hanging out their own shingles. That will continue to create jobs in the hedge fund industry because, as they move out, they have to get real estate, a staff, technology, support -- that's going to increase the number of hedge funds and it's going to increase the number of jobs in the hedge fund industry."
Further, Ackles said that the ecosystem extends beyond each hedge fund. "It extends to the people who provide services," he said. "So all the accountants and attorneys and technology providers and marketing folks, and all the people you might hire externally to support your business -- their jobs are depending on you at the hedge fund."
"There are a number of firms -- thousands -- that sell things to hedge funds," Ackles continued. "It's a broader economic impact than just the funds themselves and who they hire. If there are a lot of hedge funds succeeding in midtown Manhattan right now, there are going to be more restaurants and clubs and more ways for them to spend money around that neighborhood."
With regard to the reported layoffs in the financial sector, Ackles said that he sees "more of a retraction on the Wall Street side and more of an increase on the hedge fund side."
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No positions in stocks mentioned.