Hedge fund firing ratesSubscribe
I wanted to see what knowledge anyone can share about the firing rates at various types/sizes of hedge funds. I know this will depend a lot on performance in a given year, so it would be interesting to get a sense of what the rate looks like in a good year, bad year, average year. Have heard rumors that many shops have a blanket "fire bottom 20% each year" policy etc., so wanted to see how accurate/widespread that sort of policy is. Would also be interested in how the firing is distributed by role.
Thanks very much for any info on this - didn't see a consolidated thread about this, and have heard contradictory information on this topic, so would guess it is a question others might be curious about.
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Firing rates among hedge funds vary depending on what type you work for. Firing rates typically range from 10% - 20% of the bottom performers depending. Usually, you have up to a year to prove yourself and if you are fired, there is normally a severance of some sort.
User @IlliniProgrammer describes how non-compete clauses work in his part of the industry though it is by no means universal:
Many hedge funds and prop shops have lengthy non-competes, and the law normally requires them to pay you during this period. So if this question is being asked out of risk-aversion, don't worry. One of my friends got laid off from SIG a couple of years ago, and it turned out to be a free three-year paid vacation for him. He landed another buy-side gig fairly easily after that, and in the meantime, he got to go everywhere from Nigeria to Antarctica to Thailand to Switzerland.
Otherwise, just do your job, make sure the stuff that you work on reflects your competence and excellence, and try to learn as much as you can about how the firm makes money- and how to contribute to that. And remember that getting laid off isn't like getting expelled from school. Getting expelled implies you're a screwup; most people in our industry will get laid off at least once (maybe twice) during their careers. The analogy to getting expelled would be getting fired for cause, and that's probably actually a little less likely at a hedge fund than it is in a sell-side S&T role. (I would argue that there are more opportunities to prove you are a screwup on the sell side.)
I do think 20% is a high number. 10% may be more typical. At an I-Bank, they'll often get rid of the bottom 5% every year anyway (GS is a good example, IIRC). Since this is buy side (or sell side) finance, the vast, vast, majority of these people land on their feet….SIG, Bridgewater, Citadel, Kepos, DE Shaw, Two Sigma, Getco (prop shop), TMG (prop shop) all make their researchers sign non-competes. That's hardly everyone, but it's hard to call it a narrow segment of the buy side when they control a good chunk of AUM, are some of the biggest employers and have some of the biggest recruiting presences on college campuses. (I am making the assumption that OP could be a college student but I could be wrong.). In any case, SIG is famous for its ridiculous three-year non-compete. Nearly everyone has to sign it, and recruiters all know about it and don't see any selection signal in three years of unemployment (though there are still some currency issues).
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