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The Reason Hedgies Would Rather be Wealth Managers

October 4, 2017

Apparently professionals working as active asset managers — particularly those at hedge funds — are increasingly trying to find jobs at family offices, claims Institutional Investor.

The rising popularity of passive strategies, combined with lackluster hedge-fund returns, is driving seasoned pros out of hedge funds, the paper writes. The Barclay Hedge Fund Index has averaged just 3% from 2014 through 2016, according to American Investment Council data cited by Institutional Investor. And there are plenty of hedge funders presumably looking for work: 1,057 hedge fund shops shut doors last year, according to Hedge Fund Research data cited by the paper.

Family offices, meanwhile, could be more interested in private equity professionals, according to Institutional Investor. From 2014 through 2016, the median private equity benchmark, excluding venture capital and including dividends, was a 10% annualized return, according to American Investment Council data cited by the paper.

Nonetheless, active asset managers of all types moving on to family offices is a trend that’s likely to accelerate, Bill Woodson, head of family offices in North America for Citigroup’s private bank, tells the publication.

But hiring has been slow, in part because most family offices aren’t drastically boosting the number of their investment staff, Institutional Investor writes. The are an average of three investment specialists at each of the 5,500 to 6,500 U.S. family offices, according to a survey from the industry group Family Office Exchange cited by the publication. That means there are only about 18,000 jobs for hedge fund and private equity pros to fill.

But industry experts tell Institutional Investor that the number of investment folk at family offices is growing. In part that’s because there are simply more assets to manage: the $4 trillion managed by family offices is likely about two-thirds higher than just five years ago, Robert Casey, senior managing director of research at the consulting firm Family Wealth Alliance, tells the publication.

By Alex Padalka
  • To read the Institutional Investor article cited in this story, click here.