According to a report from Barclays, hedge funds are increasingly finding it difficult to hire good people. This might affect performance as a stable talent base “is the main, if not the only, source of competitive advantage.”
While the hedge fund industry grew in size from $1.4 trillion AuM in 2008 to $2.8 trillion, the demand for talents continually increased in the hedge fund industry. On the other hand, supply for talents is decreasing as more skilled people are no longer employed in investment banks but move to the Silicon Valley, says the hedge fund strategic consulting team of Barclays in a 24-page report send to their clients last month.
In the past, investment banks have been a steady source of talent for hedge funds and supplied about 70 percent of investment talent at the hedge funds. Today, only 30 percent have previously worked in investment banks. Especially for traders and portfolio managers for non-equity products, the search becomes harder for hedge funds as capital markets and sales and trading classes of investment banks have been decreased.
"An HF is a ‘people’ business; a strong and stable talent base is the main, if not the only, source of competitive advantage," the report said according to Business Insider. In order to sustain this competitive advantage firms have to train their own talents or poach other firms.