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Comments (12)

Feb 5, 2013 - 10:54pm

I've got it at my desk but its in a print out not electric. Off the top of my head ESL and Adage were two of the most lean. Viking/Lone Pine also ranked very high because they are at $20bn in AUM and you can only realistically utilize so many investment professionals. SAC was at the bottom, but when you could (note the tense) charge 3/50 that changes the Math.

Its not a hedge fund, but Fairholme might be at the top of this list. Two investment professionals at $9-10bn in AUM.

Feb 5, 2013 - 11:22pm

Gray Fox:
I've got it at my desk but its in a print out not electric. Off the top of my head ESL and Adage were two of the most lean. Viking/Lone Pine also ranked very high because they are at $20bn in AUM and you can only realistically utilize so many investment professionals. SAC was at the bottom, but when you could (note the tense) charge 3/50 that changes the Math.

Its not a hedge fund, but Fairholme might be at the top of this list. Two investment professionals at $9-10bn in AUM.

Gray Fox, how efficient does ~$10B with 30 professional sound to you?

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Feb 6, 2013 - 8:47am

Gray Fox:
$10bn with 30 investment professionals or total staff? Is it a mutual fund that charges 1% and actually clears 70 bps or a hedge fund that charges all fees to the fund plus 2/20??

30 investment professionals at a long-only. I think total is just under 50.

Not sure what would be the average rate since they work with institutional, high net worth individuals, and retail. The publicly traded funds have a net expense ratio over 120 bps.

BTW do you know what deal long-only fund typically strike with institutional clients to incentive them to outperform? I heard it was ~100bps of AUM if you outperform by a certain threshold.

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Feb 8, 2013 - 11:28am

Seems fairly logical that the SAC/Millenium biz-model of many independent teams leads to more heads per $.

At the large multi-strategy fund I work for, headcount/$ is on the higher end of the spectrum cited in the article but investment professional head/$ is pretty lean. Some strategies are more scalable than others but most of the incremental hiring for growth comes on the operations side.

Gross regulatory assets are a pretty imprecise way to look at this info (both due to the "gross" and the "regulatory"), even for equity funds, and near-worthless for some strategies.

There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.
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Feb 8, 2013 - 11:31am

There's a large trend in the industry to 'lean out' the non-revenue producing personnel at Hedge Funds. If you're a $1B L/S shop who employs 10 Alpha Generators (PMs, research, trading, IR) and 10 Operations personnel, your incentive to outsource operational procedures begins to go up.

Some of the most efficient funds on the street are outsourcing a lot of their back office so they can concentrate their time/efforts to performance and raising assets.

What list are you looking for?

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Feb 8, 2013 - 11:40am

rothyman:
There's a large trend in the industry to 'lean out' the non-revenue producing personnel at Hedge Funds. If you're a $1B L/S shop who employs 10 Alpha Generators (PMs, research, trading, IR) and 10 Operations personnel, your incentive to outsource operational procedures begins to go up.

Some of the most efficient funds on the street are outsourcing a lot of their back office so they can concentrate their time/efforts to performance and raising assets.

What list are you looking for?

Very good point-Bridgewater and Cerberus come to mind as large shops that have spun-out/outsourced a lot of their back-office people.

Ease of doing this depends a bit on strategy-distressed/credit shops need loan closers, etc who are harder to outsource.

There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.
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Feb 8, 2013 - 12:02pm

Kenny_Powers_CFA:
rothyman:
There's a large trend in the industry to 'lean out' the non-revenue producing personnel at Hedge Funds. If you're a $1B L/S shop who employs 10 Alpha Generators (PMs, research, trading, IR) and 10 Operations personnel, your incentive to outsource operational procedures begins to go up.

Some of the most efficient funds on the street are outsourcing a lot of their back office so they can concentrate their time/efforts to performance and raising assets.

What list are you looking for?

Very good point-Bridgewater and Cerberus come to mind as large shops that have spun-out/outsourced a lot of their back-office people.

Ease of doing this depends a bit on strategy-distressed/credit shops need loan closers, etc who are harder to outsource.

Yup, I believe Bridgewater just outsourced a lot of their operations to Northern Trust.

It's much easier for a fund to do this when they trade liquid/listed securities.

Feb 8, 2013 - 11:51am

I'm trying to think of what would constitute being "lean" ... maybe anything > 1 or so? But this selects pretty hard against smaller firms and at a certain point the incremental employee doesn't help manage the incremental billion in AUM.

I hate victims who respect their executioners
Feb 8, 2013 - 12:03pm

BlackHat:
I'm trying to think of what would constitute being "lean" ... maybe anything > 1 or so? But this selects pretty hard against smaller firms and at a certain point the incremental employee doesn't help manage the incremental billion in AUM.

Yeah really only works at funds with "critical mass" (definitely in the $bns of AUM).

As for lean it pretty much only have any meaning on a relative basis (hence the article's premise being interesting even if the results are either unsurprising or less than ideally helpful because of data issues).

There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.
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Feb 8, 2013 - 1:02pm

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