American hedge funds are making smart moves by hiring the most talented traders from the European startup funds that are struggling due to the sovereign debt crisis.
According to Bloomberg, SAC Capital Advisors LLC, Pine River Capital Management LP and Millennium Management LLC have all hired traders and analysts from the European hedge funds started by bankers in the region.
Most of the employees for the U.S. funds came from Portman Square Capital LLP, Edoma Partners LLP, Occitan Capital Partners LLP and other funds that have either closed down, suffered losses or are struggling to meet their fundraising goals, people familiar with the matter told Bloomberg.
Traders and analysts in Europe have found themselves jobless as banks are cutting jobs; funds have incurred losses and investors are pulling money from unprofitable funds due to the regional crisis.
Charles Morrison of Altus Partners Ltd. said some of the most promising startup funds in the region have floundered. Though hiring picked up in the second half of last year, there are still a lot more jobless candidates than jobs. Morrison helps hedge funds hire analysts and traders.
Hedge funds can’t charge a performance fee when they fail to make money for investors. So, they have to survive on a meager 2 percent management fees. Funds are finding it hard to raise money, and pathetic returns on the asset under management forced about 873 hedge funds to liquidate worldwide in 2012, says Hedge Fund Research Inc.
Pierre-Henri Flamand, who once headed the No.1 proprietary-trading unit at Goldman Sachs Group, Inc. (NYSE:GS) left his job to start Edoma Partners LLP. Unfortunately, his fund’s assets declined from the peak of $2 billion to just $850 million. Flamand liquidated the fund in November 2012 and returned the remaining money to investors.
The Minnetonka, Minnesota-based Pine River hired the former Edoma partner Evan Pearce, who is expert in capital-structure arbitrage. Pine River also hired an analyst who worked under Pearce at Edoma Partners LLP.
People familiar with the matter said that Paul Godfrey also joined Pine River last month. Paul was a Citigroup Inc. equity trader who later worked with Portman Square.
New York-based hedge fund Millennium also hired an ex-Edoma partner Oliver Haslam who specializes in trading stocks. Steve Cohen’s SAC Capital added an ex-Edoma employee Louis Villa, and Paul Selvey-Clinton who was an analyst at Occitan, to its team.