Hedge funds lead back office hiring spree

Lobbying by investors and forthcoming stipulations from regulators on robust infrastructure at hedge funds has fuelled a hiring spree for back office staff, with recruitment of managers taking a back seat, says research out today.

The base salaries for back office workers in Europe have doubled over recent years, according to PricewaterhouseCoopers’ study, Infrastructure: From Cost to Benefit.

PwC found compliance and risk management were two areas where UK hedge fund recruitment was heaviest, with over 90% of respondents ‘active’ or ‘very active’.

About 65% of respondents were seeking back office staff, while half noted they were not keenly seeking fund managers.

“Competition for high-quality tax, risk and compliance staff is rising, demonstrating the importance of having experienced people with good credentials,” PwC’s report said.

“At a time when hedge fund investors, legislators and regulators are seeking improved governance, controls and transparency, strong infrastructure is critical.”

PwC said compliance, tax, financial reporting, legal, internal audit and marketing were important functions funds needed to focus on, to satisfy investor scrutiny and regulation.

Investors’ eyes are on controls at funds, from boards to managers, to service providers such as prime brokers and administrators.

“Having a strong and robust infrastructure is becoming a prerequisite for raising assets.”

A raft of regulation is also set to intensify the need for funds’ non-investment functions, PwC’s report added.

Infrastructure requirements from the EU’s Alternative Investment Fund Managers Directive will be clarified by the European Securities & Markets Authority when it publishes detailed measures lastre this year.

Furthermore the UK’s Financial Services Authority’s Remuneration Code has noted variable remuneration for roles such as compliance should be set by how well they do their jobs, not firms’ profits.

And America’s SEC requires managers registering with it to appoint sufficiently resourced and experienced chief compliance officers.

“Clearly, increased regulation is driving the need for an effective compliance function,” PwC said.

“The rising burden of regulation in Europe and, to a lesser extent, Asia, makes the strengthening of compliance resources inevitable.”

David Walker

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