Key Takeaways
- • Portfolio manager exits have accelerated, with a circulating chart on X suggesting about 100 PMs departed so far in the month, versus 40 in September and roughly 20 before that, according to the article.
- • Losses that exceeded risk limits drove most stop-outs, with weak credit covenants, regulatory intervention and rising rates in credit, leveraged French government bond trades in macro, and tech stock sell-offs in equities.
- • Goldman Sachs' prime brokerage desk reported one of the broadest equities declines for hedge funds since the COVID pandemic, and multistrategy funds were down 1.9% on a Thursday according to Goldman data.
- • ADV forms indicate hedge funds added about 2,000 people last year, many drawn from banks, fueling a debate over whether the hiring push diluted PM quality or whether fund size and crowding are the real cause.
- • Departing PMs may struggle to secure new roles given non-competes and recent guarantees, though industry observers expect funds will need to rehire, possibly after non-competes are shortened.
Summary
Hedge fund portfolio manager exits have surged, according to eFinancialCareers. A chart circulating on X suggested about 100 PMs have left so far this month, compared with 40 in September and closer to 20 before that, and headhunters describe the number of people leaving the market as enormous. The departures follow a period of weakness across macro and credit funds, and Goldman Sachs' prime brokerage desk said hedge funds recently experienced one of their broadest equities declines since the COVID pandemic.
Most PMs were stopped out after losses exceeded their risk limits. In credit, the article cites weak covenants, regulatory intervention and rising rates. In macro, leveraged trades on French government bonds unwound badly, and in equities, tech stocks sold off. Even multistrategy funds, which are supposed to be insulated from single-strategy problems, were down 1.9% on a Thursday according to Goldman data.
The article notes that headcount at leading funds has risen substantially as assets under management have grown, with many hires drawn from banks. Some portfolio managers are sharply critical. One US PM said "Hedge funds hired too many morons," arguing that funds have hired juniors from banks who lack mentorship, since senior sell-side traders have largely moved to hedge funds. Another PM said there are "no mentors left on the sellside to coach juniors." Industry commentators also argue that the model has shifted, with sell-side banks pitching trade ideas that lead buy-side managers into crowded positions.
Others reject that framing. A young PM told eFinancialCareers the losses reflect the growing size of funds rather than individual ability. Freddie Parks, head of Goldman Sachs' prime brokerage, said in September that $500bn had flowed into multistrategy funds over the previous 12 months. Critics of the hiring argument say crowding and limited market liquidity are the core problem, and that junior hires from banks are risk averse because they were not trained in genuine risk-taking. Some funds also charge PMs for allocated capital, which can pressure them to deploy capital in difficult markets.
Departing PMs face a difficult job market, the article says, since many are bound by non-competes and some were recently hired on guarantees. Rumours suggest non-competes may be shortened as funds seek to rehire. Richard Averill of Waterline Compensation, which models hedge fund pay, said that when a PM's strategy stops working, the problem goes beyond individual positions to the viability of the strategy itself, and some who have left may return in a different guise.
Most PMs were stopped out after losses exceeded their risk limits. In credit, the article cites weak covenants, regulatory intervention and rising rates. In macro, leveraged trades on French government bonds unwound badly, and in equities, tech stocks sold off. Even multistrategy funds, which are supposed to be insulated from single-strategy problems, were down 1.9% on a Thursday according to Goldman data.
The article notes that headcount at leading funds has risen substantially as assets under management have grown, with many hires drawn from banks. Some portfolio managers are sharply critical. One US PM said "Hedge funds hired too many morons," arguing that funds have hired juniors from banks who lack mentorship, since senior sell-side traders have largely moved to hedge funds. Another PM said there are "no mentors left on the sellside to coach juniors." Industry commentators also argue that the model has shifted, with sell-side banks pitching trade ideas that lead buy-side managers into crowded positions.
Others reject that framing. A young PM told eFinancialCareers the losses reflect the growing size of funds rather than individual ability. Freddie Parks, head of Goldman Sachs' prime brokerage, said in September that $500bn had flowed into multistrategy funds over the previous 12 months. Critics of the hiring argument say crowding and limited market liquidity are the core problem, and that junior hires from banks are risk averse because they were not trained in genuine risk-taking. Some funds also charge PMs for allocated capital, which can pressure them to deploy capital in difficult markets.
Departing PMs face a difficult job market, the article says, since many are bound by non-competes and some were recently hired on guarantees. Rumours suggest non-competes may be shortened as funds seek to rehire. Richard Averill of Waterline Compensation, which models hedge fund pay, said that when a PM's strategy stops working, the problem goes beyond individual positions to the viability of the strategy itself, and some who have left may return in a different guise.
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