Hedge funds, private equity face talent shake up

By Laurence Fletcher

LONDON (Reuters) - More and more top hedge fund and private equity managers are set to move to new firms as the credit crisis bites, speakers at this week's Reuters Hedge Fund & Private Equity Summit in London said.

Life has become tougher for both hedge funds and private equity in recent months, as debt, which has fuelled both industries in recent years, has become harder to obtain and market volatility has hit returns.

This is squeezing talented fund managers in many firms, either because their firms are finding it harder to reward them adequately in these tougher conditions or because their funds have suffered as market conditions have worsened.

"I think we're seeing more movement between firms at the moment than one might normally see," said Bill Maldonado, head of alternative investments at HSBC Halbis Capital Management.

"I've noticed in the last month or two an uptick in the number of meetings I can get (with fund managers he may hire) ...Often ... those teams come from firms where maybe things haven't gone so well. They're very talented people, they've historically done very well, but times aren't so great for them at the moment."

After returns of 12.56 percent in 2007 and 13.86 percent in 2006 according to Credit Suisse/Tremont, the $2.5 trillion hedge fund industry has been hit by volatile markets, investor redemptions and prime brokers paring back leverage.

According to preliminary data from the BarclayHedge Fund Index, the average hedge fund lost 4.4 percent in the first quarter, while other firms measuring hedge fund performance also show falls.

While the bull market and accompanying large bonuses of recent years have prompted a merry-go-round between fund firms, so the tougher environment also provokes moves.  Continued...