Top Hedge Fund Trends to Consider

Asset managers always need to be aware of emerging developments in the investment and securities business, to guide their organizational and fund growth strategy. Here are the current and upcoming hedge fund trends to take note of:The growing popularity of advanced, cloud-based portfolio management systems. Aside from maintaining a well-trained talent pool, an asset management firm needs the right portfolio management system to ensure its smooth-sailing operations from day-to-day. After all, it will serve as the backbone of various aspects of the front, middle, and back office procedures. The best-of-breed software should be able to handle all the following portfolios: multiple 401(k) accounts, brokerage trading accounts, investment portfolio accounts, stocks and bonds, derivatives, high-yield savings accounts, fixed assets, and international assets.

Tightened regulatory standards. Across the globe, hedge funds are being subject to more stringent regulations established by the industry as well as governments. The tightened standards are a logical response to the controversies faced by the sector, as well as a growing awareness among client-investors regarding issues of transparency, accountability, and corporate governance. While this calls for rigorous procedures and greater investment towards compliance management, it can also be seen as a great opportunity and motivation to streamline business operations, boost efficiency within the organization, adopt the best innovations, and hone the skills of all staff, and ultimately, promote fund growth.Shift towards passive investments. The debate between active and passive management of funds has been on for sometime. Active management refers to monitoring the market by the hour, and buying and selling based on the viability of opportunities that emerge. The appetite for risk is increased, which, during good market conditions, could lead to superior returns for the client investor. The goal is to generate growth that beats the overall performance of the market. Passive management, on the other hand, only involves market monitoring, and gains will only reflect the volatility or stability, if not upward tenor of the market. The latter means less risk, and also less fees to pay for, on the part of the investors. Today, there is a palpable shift to passive funds, especially in the pensions domain. Some factors driving this trend include the buyout of companies, and reduction of allocations to equities.

Helping many companies adapt to these hedge fund trends are asset servicing solutions that are equipped with the technology, strategies, and talent to navigate the challenges of fund management in today’s age.

What Determines the Effectiveness of Training?

In my earlier Article, “Six Levels of Training – A Renewed Perspective”, I had remarked that the current trend is to treat training as an option that management can choose to disregard. However, as the competition toughens and the knowledge & skills become obsolete at a faster rate, the trend will be to treat training as a business strategy. Such a trend will then call for efforts on the part of the HR Team, for making training more effective, efficient, and absolutely aligned with the business targets.

Interestingly, there is at least one HR topic on which the Management & business managers have convergence of views and that is, the effectiveness of training. Both think that the HR Department delivers training programs more as an agenda-fulfillment and these programs do not add much value to performance of either the employees or business. Consequently, the Management & business managers end up giving lesser importance to training programs & process, in comparison to other priorities.

What are the sources of this misplaced belief that the training is not effective? Let us look at some of the possible sources.

Inaccurate identification of training needs:

Most Indian organizations, decide on the employees’ training needs through the annual performance appraisal process. Since the main focus in the appraisal process is on evaluating and assessing the employees’ performance for administrative decisions (salary revision, rewards, promotion, retrenchment, job change, etc.), quality of time spent on identification of training needs is poor.

In fact, the business managers follow the “tick mark” approach to wrap up the need-identification process fast and that too after massive follow-up. Further, the HR Head is more focussed on closing administrative decisions to ‘appease’ the business managers, who want declaration of such decisions as fast as possible. Eventually, the process of identifying training needs becomes a mere paper exercise and lacks depth.

Injudicious consolidation of training needs:

After identification, training needs must be consolidated properly to convert them in suitable programs. Such a consolidation requires knowledge of employees (individually and /or collectively) and a sound appreciation of the business targets.

It is an unfortunate reality that the HR Mangers responsible for consolidation of training needs, are neither well-acquainted with the business targets nor they know employees’ aspirations or requirements adequately. Hence, they are unable to group the training needs meaningfully. Consequently, the HR Head then relies on his gut feeling to decide on the types of training programs, which in many cases do not conform with the identified training needs. This mismatch of training needs and training programs reinforces the notion that training is not effective.

Identification of trainers:

In my opinion, this is a major factor affecting the effectiveness of the training. The HR Head engages external trainers primarily based on their past association or professional colleagues’ references and not based on trainer’s capabilities to deliver.

In most instances, the discussion that should take place between the potential trainers and the HR Head is either missing or is just an ‘over-the-tea’ affair. As a result, the ‘selected’ trainers deliver programs that are ill-aligned with the identified needs. So even if the training needs are decided & consolidated correctly, the choice of a trainer still can affect the intended delivery. Again the belief that training is not effective gets reinforced.

Follow up after training programs:

Though not perfect, the analogy I would like to draw here is the care taken by the doctor and mother-in-law after the woman has delivered a child. In case of the training programs, the doctor is the HR Team and mother-in-law is the business manager.

If the employees have to gain from the training program, it is all important to make sure that the HR Team and the business manager work together to encourage the concerned employees for implementing their learning from the programs, especially in the first 2-3 months after participating in the program. If this step is not given due attention, then transfer of learning would happen haphazardly and hence, there will not any visible alteration in the concerned employees’ performance and/or work behaviors.

The business manager believes that the follow-up is the HR Team’s responsibility and vice-versa. It is obvious that in such a situation, the business manager will make the HR Department scapegoat for not having an effective follow-up schedule. This is an area where the HR Team has to work like a dictator and make sure that the concerned employees are given enough support by their business managers for converting learning into action.

Integration of learning into work behaviors:

The organization provides training to the employees for their personal development, professional growth, and in turn for business growth. If the acquired training is not integrated in work behaviors effectively, sustainable changes in the employees’ performance will not come about. Therefore, the HR Head should systemically make sure that all the business managers provide suitable opportunities to the concerned employees, give them feedback and help them integrate their learning from the training programs with their day-to-day work.

Also, the HR Head can persuade the management to give special recognition to those business managers who drive the knowledge-integration process seriously. If the employees firmly believe that by integrating their learning with their day-to-day work, they will be able to do better and grow faster, they will surely be motivated intrinsically.

Wrapping up:

In a nutshell, the training can become more effective when the:

  1. business managers decide the training needs more accurately,
  2. HR team consolidates the training needs judiciously,
  3. HR Head identifies the trainers more logically,
  4. HR team follows up with business managers in a pre-planned way, and
  5. business managers and HR team give encouragement & support to the employee for integrating their learning with their day-to-day work.

HR Heads have their task cut out and they are responsible for ascertaining that the management invest not just only in training, but also in post-training efforts. They, then can concentrate on developing a work environment wherein experimentation is promoted, the business managers give sufficient importance to the post-training process, and real learners feel rewarded. Strategically, it will be always prudent to have a dedicated manager in the HR team to oversee training related processes.