Wanted: a new generation of managers (other than DSK…)

March 27, 2014  

The time for hesitating is over. The hedge fund industry needs new blood. Investors are ready for you. And now is the moment to strike

By Nick Evans

Mon dieu – these political types have some balls, don’t they?

The nonchalant news this month that the irrepressibly self-assured former IMF managing director Dominique Strauss-Kahn is hawking around a global macro fund that aims to raise a mere $2 billion from investors takes some beating as a display of blasé insouciance about the realities of the hedge fund world these days.

Of course DSK’s pedigree speaks for itself, not least as a big swinger in the highest echelons of the politico-economic policy-making world – and as someone who has forged an impressively wide and varied array of connections with people from all around the world.

But his background as an economics professor, a corporate lawyer and a government minister hardly qualifies him as the most obvious person to be a macro manager – still less the fact that he was supervising the global economy, while he was not otherwise engaged, from his supranational berth in Washington in 2008 when the roof fell in.

Furthermore it appears that the research head for his firm’s new macro fund will be none other than his daughter, Vanessa – who has been following in her old man’s footsteps by practising as a professor of economics, rather than actually getting involved in those pesky markets that never behave the way that academic economists know that they should.

Although the IMF might have had a better crisis than some – and nobody could blame the former French presidential-hopeful for seeking new things to do with his time, given that his preferred career path was so comprehensively blown off course – someone with DSK’s credentials and reputation is not necessarily what the hedge fund industry needs right now.

At a time when seriously talented and committed money managers are working flat out to try and make a success of running hedge fund businesses in an environment that remains distinctly challenging – thanks in no small part to the heavy-handed regulatory response that was set in train by the likes of the G20 and the IMF, while DSK still had his seat at the top table – Strauss-Kahn’s entry into the game looks to be rather opportunistic at best and somewhat cynical at worst.

But good luck to him and his entourage anyway. Perhaps the Strauss-Kahn family and their associates will turn out to have a gift for managing other people’s money in macro – an activity that has been proving rather difficult and demanding of late, even for those who have been doing it with skill and success for years – and a new legend will be born.

Or perhaps not. Who knows? This is an unpredictable and random business at the best of times – which are not concepts that ivory-tower academics are best equipped at dealing with – and there is little evidence thus far that egghead economists make for good macro managers.

Putting aside DSK’s heady ambitions, though, there is no doubt that the hedge fund industry – more so in Europe than anywhere else – is crying out for a new generation of managers. And there is also no doubt that the time is now ripe for talented and proven professionals to go it alone.

The long, dark chill of the post-crash winter in European hedge fund land is finally over. Spring has returned and Europe is now back on the map of global investors in a way that has not been seen since the pre-crisis days.

Money is coming in fast. Many of the biggest brand-name funds are closed or closing. Capacity constraints are forcing investors to look beyond the usual suspects for new places to put their money – with mid-size funds and new launches looking well set to benefit as allocators become increasingly confident and adventurous in allocating their money and seeking out new opportunities.

And it is clear that investors are convinced that their money is better off in hedge funds than almost anywhere else – despite the misguided and counter-productive efforts of politicians and regulators to paint the hedge fund industry as an extension of the banking sector, unfairly and unwisely tarring asset managers with the same brush as those brilliant bankers who drove the bus into the wall.

So the message to a potential new generation of managers sitting in established firms and still hesitating over whether or not to venture out on their own should be clear. It’s a difficult thing to do. But it can be done. And the opportunity to do it is better now than at any time in recent years.

The time for delay is over. The hedge fund industry needs new blood. Investors are ready for you. And now is the moment to strike. So dust off those business plans, grab the bull by the horns, gird your loins and give it a go.

Where Strauss-Kahn goes, let’s hope that others – perhaps with less chutzpah than the 'chaud lapin’, but possibly with more savvy in terms of managing investment affairs – will follow.

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