Hedge funds' attempts to tread the straight and narrow are contributing to a shortage of compliance professionals.
A study of 80 heads of compliance and senior compliance managers by recruitment firm Joslin Rowe suggests a lack of compliance talent in financial services. A full 79% of respondents said it was either difficult or very difficult to find the right people for the job.
Fergus Hooley, manager of the compliance recruitment division at Joslin Rowe, says hedge funds are increasingly hiring compliance people. 'As hedge funds get bigger, they are more interested in having their own compliance people in house.'
UK hedge funds are not regulated by the Financial Services Authority (FSA). However, the US Securities and Exchange Commission (SEC) will require hedge funds with at least 15 US clients to register with it from 2006. There are signs that the SEC's move is prompting hiring in the UK. Highbridge Capital Management, a US fund, is looking for a compliance officer for its London office, for example.
Ian Morrison, a recruiter at IMS Consulting, says the exodus of compliance staff to hedge funds has so far been more of a slow trickle rather than a gushing torrent. 'There are funds with 7 billion to 8 billion under management who are only now looking at employing compliance officers,' he says.
Instead of employing their own compliance officers, hedge funds have traditionally outsourced the compliance function to professional services firms offering compliance consultancy, such as PricewaterhouseCoopers. Morrison says consultants are also hiring additional compliance staff. IMS, for example, is looking for an additional five compliance specialists for its consultancy arm.
Hooley at Joslin Rowe says strong demand for compliance staff is prompting higher pay. A third of the senior compliance professionals surveyed say their pay is below market rate.