Hedge Funds Pay Up in U.S. to Poach From Rivals Stung by Turmoil

• Pay packages at multimanager giants can exceed $20 million
• Millennium, Balyasny hiring on track with last year’s level

Izzy Englander sent his Millennium Management staff to work from home in early March. Since then, about 100 people have quietly joined the $42 billion hedge fund.

The spree by such firms, which can use upward of 200 teams to invest, is a bright spot in a $3 trillion industry where many have shrunk or closed. Their need for managers, analysts and data scientists has caused pay to creep up, with some initial packages exceeding $20 million and the percentage of investment profits managers earn topping 20%. Non-compete clauses have lengthened as firms strive to retain their stars.

Multimanager shops tend to be most in need of new talent. They are quickest to cut teams or traders who lose money because of their tight risk limits. And their assets have surged. New York-based Millennium manages more than four times what it did a decade ago. At $32 billion, Ken Griffin’s Chicago-based Citadel has almost tripled in size. This year, the platform shops are standing out for making money while many other hedge funds are down.

Newer entrants have added to the demand. The $8.8 billion ExodusPoint, opened in 2018, recently raised an additional $3 billion. Smaller outfits such as Verition Group and Cinctive Capital Management, which both oversee about $1 billion, have been adding managers too.

Working from home hasn’t slowed hiring because recruiters generally track targets over months or years, waiting for the right time to poach them.

In the past several weeks, Millennium announced two high-profile additions. Matthew Rothman jumped from Goldman Sachs Group Inc. to help run the quant business and Peter Norley is coming from Credit Suisse Group AG as a top recruiting executive.

The competition for talent has been reshaping the employment landscape in recent years, with some firms rolling out strategies to thwart poaching or at least minimize the spiraling costs.

In 2018, Citadel poached two senior managers from D.E. Shaw, the $50 billion firm founded in 1988. The next year, D.E. Shaw started using non-compete agreements as long as a year to “protect the franchise,” the New York-based firm told employees in a memo.

The $6.4 billion Balyasny Asset Management began its Anthem program in 2016 to train senior analysts to become portfolio managers. Participants run half the capital of the firm’s average team. Seven of the firm’s 46 portfolio managers went through the training and are regularly among the top money-makers, according to people familiar with the matter. It has 18 more analysts in the pipeline.

Millennium favors seasoned professionals and promises them greater autonomy in running their teams, which can be as small as two people. Last year investment team hiring increased by 38%, and the firm has been looking beyond its traditional strategies of fixed-income and long-short equity as well as adding teams in Europe and Asia, said people briefed on the matter.

In the past few years, some payouts have reached 25%, though such arrangements typically include hurdles surrounding performance and volatility and cover managers who run teams with sub-portfolio managers, the people said. Its non-competes, which had been at around three months, have gotten longer as the industry average approaches nine months.

Citadel’s payouts are lower -- in the mid-teens -- but the portfolios are bigger, usually $2 billion to $3 billion. The teams generally include a portfolio manager plus four to seven analysts, some of whom run sub-portfolios. Non-competes average a year, and managers may have to sit out as much as 18 months to get their deferred compensation.

The traders attracting the biggest pay packages are generally the most senior lieutenants from traditional hedge funds, rather than stars from other multimanager firms. The initial payments, which can reach $20 million or more, include signing bonuses, a two-year guarantee and the deferred compensation that a candidate would have to forgo to jump ship, recruiters said.

Spokespersons for the hedge funds declined to comment.

Some investors say the costly competition for talent is one reason they shy away from these multimanager firms that pass through expenses to their clients.

“We don’t invest in any of these multistrategy, multimanager firms, in part because it seems like a zero-sum game where each firm is competing with other firms for a limited set of talent, and all-in expenses tend to be very high,” said Adam Blitz, chief investment officer at the $3.2 billion Evanston Capital Management.