4 key things you need to focus on to improve retention within your organisation | Paragon Alpha

4 key things you need to focus on to improve retention within your organisation

By Colin McGhee

Retention is a core focus for virtually every single organisation, regardless of industry or discipline.

The Great Resignation highlighted skills gaps as well as how retention strategies haven’t been prioritised for hedge funds as we enter a post-pandemic world. We spend a great deal of our time advising clients on how to attract high-calibre talent, but to retain, there are a few variables to consider.


Below are 4 key things that you should be focussing on in 2022 to improve retention within your hedge fund.


#1 Remuneration


Although money won’t be the only motivator for someone to leave your hedge fund, it does play a considerable part in employee engagement and retention.


There are four pillars to remuneration that you must consider: salary, sign-on bonus, discretionary bonus, and salary progression. Remuneration must be fair, regularly reviewed, and communicated with clarity.


If you are offering salary increases, have you reviewed your progression paths and are they clear? A useful way to check if this is understood is through one-to-one meetings, or even sending out a company-wide survey to gather valuable data on where there may be blind spots. A breakdown or insufficient communication about remuneration could cost you talent, both from an attraction and retention perspective.


If you’re unsure where to start with remuneration, a recruitment partner will have the ability to conduct a salary survey/report across all seniorities to give you the full scope of the market.


Additionally, there are numerous online resources and reports to cross-reference and stay up to date with the latest remuneration demands in the market. Depending on your location, you may also have better visibility on salaries (but not necessarily someone’s complete package). For example, in May 2022 it will become a legal requirement in NYC to list salary ranges.


Not only will this keep salaries incredibly competitive in Wall Street, but it will encourage firms to stay ahead of the curve, and offer higher-quality packages, not just basic salaries. These legal requirements in theory should improve the quality of candidates directly applying, but it will also evidence firms who need to remunerate competitively.


The FT produced an excellent article discussing the battle for talent, highlighting that “In addition to a base salary that can in some cases reach $250,000 to $400,000, those with strong performance are now regularly being offered 20 per cent of the trading profits they generate, with some offered as much as 25 per cent, say industry insiders.” These exponential amounts have been influenced by Covid-19 and the boom that has come post-Omicron.


#2 Extensive non-competes


Non-competes vary depending on location, and there can be grey areas when it comes to enforcing them. For example, non-competes in NYC can range from 6 months to two years depending on the firm. Chicago, Illinois has slightly stricter enforcements in place whereby changes to non-competes have to be communicated in writing with a grace period that can be as long as 14 days.


In Texas, non-competes can be up to a year, although there are some circumstances where they can be longer (although courts can become sceptical at this length being enforced). The USA as a whole will always have a variety of non-competes due to state law, so funds with multiple locations, particularly in America, will need to be mindful of this.


In London and Dublin, non-competes are slightly shorter but still sit in the range of 3-12 months, and Singapore and Hong Kong have similar lengths, although some longer non-competes (in the range of 6-12 months) are possible to enforce depending on their clauses.


On average, 6-12 months seems to be the “sweet spot” for employers; however, you must review your location and its laws before enforcing anything that would be deemed extensive by the courts. It can be a difficult balancing act between protecting the firm and retaining employees, through to breeding distrust and even damaging your own attraction strategy with unreasonable non-competes.


Bridgewater, Renaissance Technologies, and Jump Trading are examples of hedge funds that have good retention due to developing robust non-competes. Although candidates won’t decide to join or stay with a company purely based on its retention, it is something that they will consider. The closer you get to HFT, the more extensive the non-competes are, as every last piece of IP is essential to the success of the business.


If your firm appears as though it has a revolving door (statistics are easily accessibly by candidates via LinkedIn average median tenure) then this could damage your brand reputation, and also send out the impression that your organisation is seen as a “stepping stone” rather than somewhere to grow and develop long-term.


A circumstance whereby non-competes are less aggressive, or not enforced at all, are when individuals decide to transfer to a Tech company (or vice versa). An article by efinancialcareers highlighted this, stating “the hedge fund that you’ve left will continue to pay you a proportion of your salary during the non-compete period. At the same time, however, the Tech company (or any other non-hedge fund and non-directly competing company) that you’ve joined will pay you a salary too. You will be paid twice over.” This situation sounds “too good to be true” but it happens very frequently in the industry.



 #3 Family office culture


Creating an empowering work culture is crucial for retention. Firms that have a family office culture create a home from home environment which ultimately breeds trust, better collaboration, and a healthier approach to work.


Hedge funds such as Marshall Wallace, Cascade Investment, and Mousse Partners are some of the more well-known, who are renowned for their family office culture as well as their operating practices. Even if you don’t operate as a family office in a literal sense, you can still take the working practices and cultural differences to improve your office environment.


Barrons produced an article on the importance of creating an enjoyable culture, stating “Money managers do better when they remain open-minded and even-keeled, she said, keeping in mind their priorities and the priorities of their investors. Having a diverse group of people around with different opinions who will push back on bad ideas is vital as well.”


Putting culture first can improve your retention better than hiring a “unicorn” candidate who has a toxic demeanour that could affect others. Eisner Amper produced a comprehensive article discussing family office culture and practices in more depth, which can be accessed here for further reading.


#4 Clear strategy for growth and progression


Your strategy for growth and progression should be clear, but many firms still struggle to grasp the importance of this. High-quality talent will demand this from you as a bare minimum, and if you can’t communicate this succinctly and effectively, you will struggle to both attract and retain talent.


As we are in the midst of bonus season, factoring in the above 4 points will put you in a much better position long-term.


Sometimes, individuals leaving an organisation is inevitable, and in some circumstances having movement within your firm can create more opportunities for growth.


But, with the demand for talent only increasing as time progresses, you want to ensure that you are future-proofing your firm whilst also creating a compelling environment and clear progression path for individuals that choose to work for you.