Decades later, the sentiment resonates more than ever at hedge funds.
Some accepted more money than they could reasonably invest, and hiring went in overdrive to keep pace.
The hunger for portfolio managers was voracious but not always discriminating.
Hedge funds have responded to this pressure invarying ways, including some that are bolstering efforts to verify performance.
Their identities are known to BI.
“You’re just putting people in bad positions,” a PM with experience at multimanager funds said.
“It’s a horrible way to start a business relationship.”
Others were meeting candidates at coffee shops or going to their homes.
While some PMs obliged, eager for a hefty payday, others were spooked.
Violating their nondisclosure agreements made them deeply uneasy, and the courtship stalled.
“It’s a big conundrum,” he said.
“It’s happening more and more,” the second headhunter said.
“Some guys balk at it, and that’s where the deal falls apart.”
He said due diligence ramped up as the guaranteed pay packages got larger.
“To show something in person is always better,” he said.
“It violates all the confidentiality agreements,” another PM who’s worked at multiple funds said.
“I don’t think reputable firms would ask you to do that.”
And some PMs smelled an opportunity.
“Guys lie all the time.
That doesn’t eliminate the sticker shock for investors, though.
Some allocators have started pushing back on expenses.
“And they are trying to get as much transparency as possible.”
Dozens of investors signed the letter.
“It does appear to be getting more scrutiny given the recent capital flows into the space.”
Other funds are opting to take a harder line before a PM ever enters the front door.
BD teams have a limited set of tools to vet a candidate.
He wasn’t asked for additional verification.
Some firms delicately dance around the law to obtain tax records with salary history that corroborate past performance.
Another BD rep said many candidates would bring up the W-2 on their own.
The ex-BD source said some “detective work is required to protect investors.”
This person recalled a colleague visiting the home of a candidate to view performance evidence.
This person has also received documents via FedEx.
“It’s really a slippery slope,” he added.
“You need information to verify it, but there’s legal and ethical ramifications.”
Hedge funds regularly go to war over talent defections and breaches of their proprietary information.
Citadel is not alone in its efforts to color inside the lines.
“Otherwise,” he said, “deals aren’t getting done.”
Due diligence revealed the candidate had presented their track record in a misleadingly rosy light.
“It’s a colossal waste of everyone’s time,” he said.
Alex Morrellis a correspondent at Business Insider.
