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EY 2017 Global Hedge Fund and Investor Survey How will you embrace innovation to illuminate competitive advantages?

AN EXTRACT FROM EY’S 11th ANNUAL GLOBAL HEDGE FUND AND INVESTOR SURVEY

RESEARCH

Talent management

This survey has highlighted the inroads that technology has been making, and will continue to make, at hedge funds. By no means is this an indication that people are not important and don’t have critical roles to play throughout a fund’s organization. However, roles and responsibilities are shifting. Across the front, middle and back office, individuals are spending less time performing routine tasks and are being redeployed to analytical and other strategic assignments. The amount of data available to front office analysts is exponentially larger than in years past. Analysing investment theses requires an awareness and ability to interpret this data, as well as to contemplate how others, including computers, may be doing the same. Middle and back office team members need to understand their technology solutions to be able to identify and investigate non-routine transactions, errors or reporting irregularities as well as to be able to more comprehensively analyse financial performance to add value to strategic business decisions. These individuals can be more focused on delivering “operational alpha” rather than checking every single transaction. These developments have changed the type of talent that hedge fund managers require, as well as how they retain these individuals despite significant competition from hedge funds and other industries.

Investor confidence in future talent is critical in the decision to invest

Talent management and developing future leaders is far from an issue that is only an internal matter for hedge fund managers to contemplate. Investors increasingly are evaluating not just the current team in place leading their managers, but also the future professionals who could succeed and be the firm’s future leaders. Eighty-five percent of investors indicated that it is important for them to evaluate the future investment professionals as part of their investment due diligence, with almost 60% stating that this was a critically important consideration. Almost of equal importance to investors is assessing the next generation of business executives. Investors are not satisfied knowing just that the investment team is in good hands. They want to validate that other C-suite roles can be suitably filled when leadership transitions occur.

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