Top Hedge Funds: AUM per Employee = Trading Strategy?

We have been playing with some new equations; looking to see if anything interesting can be learned from benchmarking assets per employee across various firms. (It turns out that adding this analytic to our suite of other “per employee” metrics yields significant insights.)

In the figure below, we took the top 10 hedge funds ranked by assets under management (AUM) and then re-ranked that list by AUM per employee. We also tossed in Virtu Financial and KCG (Getco) for giggles – and to test the extremes. Notice anything interesting? Based on what you might know about these trading companies, how would you label the X-axis?

top-hedge-funds_aum-per-employee-2016-v2

Here’s some additional data to consider: The correlation between assets and headcount is not perfect by any stretch, but it is signal-worthy. Also, this trick works best on mature, ongoing firms whose operations and business are relatively consistent. Headcount level doesn’t seem to matter. Albeit at the extremes of tradings firms, Virtu Financial generated nearly US$800 million in revenue (2015) with 148 employees – so this analysis is not about having the highest headcounts. If anything, this way of looking at the space ties directly back to what we are intensely focused on: measuring return on technology. Perhaps this is a good clue for the X-axis label.

More on this asset benchmarking soon…

 

By | 2017-02-06T20:34:57+00:00 December 14th, 2016|Alphacution Feed|

About the Author:

Paul Rowady is the Director of Research for Alphacution Research Conservatory, the first digitally-oriented research and strategic advisory business model focused on providing data, analytics and technical infrastructure intelligence within the financial services industry. He has 28 years of senior-level research, risk, technology, capital markets and proprietary trading experience. Contact: paul@alphacution.com; Follow: @alphacution.

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