As has often been expressed, these are bad times for hedge funds. Bloomberg has a chart showing performance by fund for the year through October. This suggests that many funds are already below the performance threshold set by Ken Griffin for a viable hedge fund, namely the risk-free rate plus 4%. Based on the current yield on three-month Treasury bills, this rate is now above 8%.
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November could be even worse. Funds were already laying off portfolio managers (PMs) who closed modules and returned cash. The market – already saturated with junk macro and credit portfolio managers – is now saturated with more.
“There will be a big wash,” says a veteran portfolio manager and former Goldman managing director, referring to a cleansing of hedge fund talent. “It’s not an easy life,” he reflects.
Mike Alfaro, CIO of Gallo Partners, a New York-based long-short equity fund, says 108 pods have been closed and he has been bombarded with calls. “Headhunters I’d never spoken to before were calling me one after the other asking if we were hiring yesterday. Someone called from Engineer’s Gate,” he says. “We received a lot of resumes.”
Last month we reported that 100 people were locked out of London hedge funds in the macro space alone. Since then, departures have become parabolic. It was a sharp and rapid turnaround, says Alfaro, citing a portfolio manager in his 40s whose fortunes suddenly changed. “Earlier this year it was up 14% with a supposedly fully hedged, market neutral portfolio and now it’s down 9% and has been fired,” he says. This same portfolio manager had received offers from large multi-strategy funds promising signing bonuses of $15 million. He expected more and a $6 million year-end bonus where he was. Now he is unemployed.
Many of those who were laid off only recently joined the group. Anil Gondi, who ran Walleye’s long short equity business, only joined in 2025, following a year of gardening leave after leaving Balyasny in June 2024. Engineers Gate reportedly cut its “equity synthesis team”, including Mike Daylamani, who didn’t join until January 2025. Brevan Howard fired David Heinau, who only joined in December 2025. in London.
And now ? Hedge fund jobs have never been a sure thing. Daylamani has at least already been removed – in 2019 his team was also reportedly sent by Balyasny. Daylamani bounced back, moving first to Schonfeld and then to Engineers Gate, where he implemented his strategy based on “a hybrid human-machine structure that separates (human) idea generation from (machine) idea monetization” and advised analysts to become “research architects” and become “AI natives.” Perhaps he will come back to say this again elsewhere.
It’s at the bottom of the hedge fund hierarchy that we feel the most pain, among junior traders who have only joined the funds in recent months. One told us they were going through a “tough time” and the buy side was “crushed.” – “It was hard enough going from the short side to a fund, but now there’s this rate movement and the wars and it’s too much to handle,” he said.
It is not yet clear how the difficulties of portfolio managers will affect the broader recruitment market or the bonuses awarded to bank salespeople and traders. Bank equity desks had a bumper year, with per capita revenues up more than 30%, according to market information provider Tricumen. They will expect big bonuses, but if the market is full of hedge fund talent, the pressure to pay will be less.
A lot depends on what happens next in the market, says Alfaro. “If there is a V-shaped recovery, you will see a V-shaped recovery in dynamic demand,” he says. “I don’t think there will be a V-shaped recovery,” he adds.
If recovery doesn’t happen, Alfaro predicts there will be a reconsideration of what portfolio management entails. In the bond markets, credit PMs have been accused of being “morons” and just buying bonds. In macroeconomic terms, they have been accused of “simply using EGBs as a carry asset. Buying bonds, sitting on the carry and getting a percentage discount.” In equities, Alfaro says PMs who presented themselves as market neutral were really just market “pops.” “That’s why so many guys will be laid off,” he says. “They all do the same thing: they have a thesis, but as soon as the market moves against them, they no longer have confidence in their investment ability and don’t chase their momentum.” Its equity increased slightly in November and is “stable” over the year. There will be more emphasis on finding true risk-takers, Alfaro says. “There are some good people and it’s really going to be known now.”
This liquidation could create opportunities for a new generation of traders. It can also suppress hiring and salaries. “I can’t imagine this being a good year for anyone,” says one veteran credit trader. “Hedge funds now have a larger pool of talent to choose from, but I’m not sure many of them will be hiring.”
There could be beneficiaries of the rout. The junior trader who recently joined a fund says he would have preferred to join Jane Street or Citadel Securities. “I would have been better off there,” he reflects.
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