HedgeCo.net — NEW YORK, December 18, 2006 — Long Ridge Partners, executive recruiters specializing in the hedge fund industry, said today the vast majority of hedge funds are bracing forincreased competition in securing and sustaining professional talent in 2007.  Michael Goodman, a partner at Long Ridge, said that due to the widely forecasted competitive nature of themarketplace, larger payouts with larger allocations are to be expected, particularly in the multi-strategy hedge fund sector.
 
            “Based on an informal survey of hedge funds with more than 10 employees, all the firms we spoke with predict trends in compensationto be more competitive in 2007, and do not foresee any catalyst happening in the upcoming year to change that,” said Mr. Goodman.   “Obviously there are external events that can change a wholeindustry or internal events that can change the outlook of a fund, but barring those events the outlook for 2007 is one of increased competition and compensation.”
 
            Mr. Goodman highlighted additional trends and outlooks as follows:
 

• P&L payouts will rise to a range of 8-20% with one fund paying out 3-5% for managers with over $500M allocations.  Long Ridge predicts that average payouts will climb about 15%, up 3% from 2006.  Allocations range anywhere from $50-250M.  The survey excludes funds that allocate $5-10M in capital. 

• Proprietary trading desks will be paying out more like traditional hedge funds with 10-12% of P&L payouts in order to retain talent.

• Most management companies are charging back the cost of capital and direct staff, including research analysts and traders, to individual portfolio managers. They also are increasing other services to the portfolio manager, such as risk management, operations and marketing of their specific funds. 

• A small handful of funds are willing to negotiate with portfolio managers and pay them a management fee on the assets they are allocating or have allocated to them.  Long Ridge said this appears to be a way for smaller hedge funds with less to offer in terms of infrastructure and capital to attract talent. 

• Management companies are increasing their willingness to negotiate the launch of a portfolio manager once he or she has reached “critical mass”.  Terms of these negotiations can vary from gaining capacity to owning a piece of the management company and, in most instances, both.

            Long Ridge Partners, Inc. is an executive recruiter specializing in the alternative investment industry and in finance and accounting.  Headquartered in New York, Long Ridge’s client base includes hedge funds, funds of funds, family offices, pension funds, endowments, investment banks and proprietary trading desks.