Goldman Sachs MD says multistrategy hedge funds may yet need many more PMs

23 hours ago

2 minute read

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Last year, the biggest multistrategy hedge funds hired 2,000 people. But in the past 12 months, Goldman Sachs' co-head of prime insights and analytics, says hedge fund hiring has lagged capital inflows into funds.

Speaking to the AIMA podcast, Freddie Parker, who is also Goldman's co-head of America's capital introduction, said there have been record flows of capital into multistrategy funds over the past 12 months. Around $500bn of assets have arrived, said Parker, an increase of 25%. Flows into funds haven't been this high since 2022-2023.

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At the same time, though, Parker said that Goldman estimates that headcount grew by "more like 10-11%."

The implication is that the big multistrategy funds may need to portfolio management talent more rapidly in the second half of the year, to cope with all their new assets. Parker said large flows require "digestion" and can dull returns while funds find the talent to deploy them.

Last December, JPMorgan said average leverage at multistrategy funds was 645%. If this remains the case, an additional $500bn of assets implies $3.2 trillion of new leveraged assets to be managed. This, in turn, implies huge portfolio manager hiring even if existing portfolio managers scale their books.

However, Parker notes that funds are already finding ways around this conundrum by allocating money to external fund managers in ever greater amounts. Headcount at these external managers isn't measured in Goldman's figures. "Perhaps headcount growth isn't telling the full story," he admitted.

On balance, Parker said a higher rate environment is likely to be good for hedge funds. The exception will be "long-short funds that are growth-tilted," he observed.

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