Puerto Rico’s Dorado Beach, long known for its luxury resorts and pristine beaches, isn’t an obvious hub for hedge funds. But when a prized portfolio manager at Millennium — Izzy Englander’s $79 billion multistrategy powerhouse — requested to relocate there to take advantage of Puerto Rico’s lucrative tax incentives, the firm quickly agreed.
A similar story unfolded at Point72, Steve Cohen’s $41.5 billion fund. When one of its portfolio managers wanted to move to Milan, another low-tax locale, the firm supported the move. Point72 set up a small WeWork office there that now hosts a six-person investment team, according to recent regulatory filings.
Such examples highlight how fierce the global hedge fund talent war has become. The world’s largest funds are locked in an escalating arms race to recruit and retain the most skilled portfolio managers — and employees are the clear winners.
The result: stratospheric compensation packages, tax-driven relocations, and a fundamental shift in power dynamics across Wall Street’s elite trading firms.
The Age of the Superstar PM
Top hedge fund managers can now name their price — and often their working conditions. Firms are dangling pay packages worth tens of millions, with some deals reportedly reaching $100 million, just to secure or retain top talent. Portfolio managers (PMs) who once quietly toiled under tight risk limits are now setting their own terms.
These new demands go far beyond compensation. Some PMs insist on relocating to tax havens like Puerto Rico or to lifestyle-friendly outposts like Boulder, Colorado. Others invent new job titles or negotiate quirky privileges — such as being guaranteed the first question when meeting a corporate CEO.
The balance of power has shifted so decisively that firms, historically quick to cut underperformers, are now far more forgiving. Hedge funds that once prided themselves on a ruthless “cut the bottom decile” culture now allow PMs to ride out a losing streak, hoping they’ll bounce back rather than bolting for a rival.
“It used to be that capital was scarce,” said one investor in several top hedge funds. “Now, talent is.”
Founders on the Back Foot
The very traders hedge fund founders once molded into elite competitors are now using that independence against them. When a longtime Citadel PM left for Balyasny after a rough year, Citadel publicly complained it was “extremely disappointed” he didn’t stay and make back the losses. The unusually candid statement reflected a deeper frustration: the mercenaries have become too powerful.
Hedge funds were built on an “eat what you kill” ethos. Historically, capital and talent flowed to whoever produced the most alpha. Those who stumbled were quickly replaced. But today, as competition for PMs intensifies, that transactional mindset is softening.
In a striking reversal, billionaires like Englander, Cohen, and Citadel’s Ken Griffin are now appealing for loyalty.
Machines Built on People
The $5 trillion hedge fund industry has evolved into an ecosystem dominated by massive multistrategy platforms. These firms — Millennium, Citadel, Point72, and Balyasny among them — deploy armies of PMs across equities, fixed income, commodities, currencies, and quant strategies. Collectively, the “Big Four” control roughly half of the $425 billion in assets allocated to multistrategy funds, according to Goldman Sachs.
Their model is systematic: allocate capital across hundreds of teams, each with tight risk limits, to deliver steady, uncorrelated returns. During the market chaos of 2022, when the S&P 500 fell nearly 20%, these funds posted stellar performance — prompting an influx of new money from pensions and sovereign wealth funds.
But scaling up has created a structural problem: people.
The Hiring Frenzy
Millennium has doubled its headcount since 2020, surpassing 6,000 employees. Citadel, Balyasny, and Point72 have each added over 1,000 staff. Yet churn remains high. Revelio Labs data shows annual portfolio manager turnover near 20% across multistrategy funds.
To sustain growth, firms need to hire dozens of PMs each year — simply to maintain their existing platforms. Millennium reportedly hired 160 PMs last year, or about three per week. As one rival executive quipped, “Does the universe even create that many qualified people annually?”
Recruiters describe the market as more competitive than ever. “The compensation is the smallest piece,” said John Pierson, founder of P2 Investments, a leading hedge fund recruiter. “Firms are getting creative with flexibility, autonomy, and culture. Loyalty is the new currency.”
Pay Wars and the “Pass-Through” Revolution
At the height of this talent boom, Englander reportedly offered a $100 million package to poach a top Balyasny stock-picker. Around the same time, Balyasny lured Peter Goodwin from Point72 with an $80 million offer, while Point72 countered by hiring Kevin Liu from Marshall Wace for at least $50 million.
These numbers are shocking — but not accidental. They’re made possible by “pass-through” fee structures that shift hiring costs directly onto investors. This effectively gives hedge funds a blank check to spend whatever it takes to acquire top talent.
Unsurprisingly, some institutional investors are pushing back. In response, funds are experimenting with more subtle guarantees. Instead of promising $10 million in cash, for example, some firms allow PMs to keep 100% of the first $10 million in trading gains. The economics are the same, but the optics are cleaner.
Still, the effect is the same: rising fixed costs and increasing pressure on mid-tier funds. Smaller players, unable to compete on pay, are being squeezed out. In September, Eisler Capital announced it would close, citing the “challenge of attracting and retaining experienced money managers” under cost structures acceptable to investors.
Recruiting Like an NFL Team
For the largest firms, the talent race has become industrialized. Balyasny reportedly spends about 1% of assets annually — roughly $280 million — on recruiting alone. Citadel, meanwhile, disclosed $8.6 billion in compensation and benefits expenses across 2022–2023.
Internal recruiting teams now rival those of major corporations. Vetting candidates has become a high-stakes process involving nondisclosure agreements and forensic checks of trading performance. Some firms even limit interview time to streamline hiring; quant giant Qube caps interviews at five hours per candidate.
Griffin, for his part, has argued that the industry’s asset-gathering boom has shifted incentives. “The biggest sea change,” he said at the 2024 Robin Hood conference, “is the migration from performance-fee-driven models to asset-based models. Wherever the scarce resource is, that’s where the money flows — and right now, that’s talent.”
A Softer Culture
The competitive intensity hasn’t disappeared, but its tone is changing. Several fund executives admit that top PMs now get more leniency than in years past. The logic is simple: with the market for talent this tight, firing a PM could mean losing them forever.
The economics remain stark. A PM managing a $1 billion book who earns 20% of their gains stands to make $20 million on a 10% return. But if they lose 5%, they earn nothing until they recover. At a rival firm, however, they can start fresh — a powerful incentive to jump ship.
As one allocator put it, “These firms built systems to attract mercenaries. Now they’re surprised those mercenaries act like mercenaries.”
From Mercenaries to Partners
To counter this cycle, firms are investing heavily in training and long-term incentives. Citadel, Balyasny, and Point72 now run internal academies for undergraduates and early-career analysts to build loyalty from day one. Point72’s Academy program, launched a decade ago, has produced more than 200 analysts and counting.
Partnership tracks and deferred compensation structures are also gaining traction. Balyasny promoted three PMs to partner last year, while smaller firms are experimenting with bonus pools tied to multi-year profitability. In one model, PMs receive an additional percentage of profits only after generating $100 million for the firm — a way to align long-term interests.
“We have to make PMs feel like stakeholders, not free agents,” said one hedge fund executive.
The Human Element
Some industry veterans argue that money alone can’t sustain motivation. “Outcomes can’t be controlled, but process can,” said Jay Rajamony, director of alternatives for Man Group’s Numeric unit. “The most street cred should go to the person who’s most creative or bold — not just the one who gets lucky.”
This mindset signals a slow cultural shift toward valuing innovation and collaboration over pure P&L. For founders, though, it’s a tough transition. “You set up something to attract mercenaries,” said one pension allocator, “and now you want loyal soldiers. It doesn’t work that way.”
Implications for Advisors
For wealth advisors and family offices allocating to hedge funds, the lesson is twofold. First, people risk has become structural. The top multistrategy funds’ success depends less on market direction and more on their ability to attract and retain human capital. Second, rising personnel costs — and the “pass-through” mechanisms funding them — may subtly erode investor returns.
In this new reality, diligence on leadership stability, compensation philosophy, and cultural cohesion matters as much as performance metrics. Advisors who can read between the lines — understanding not just who’s winning trades, but who’s winning the talent war — will be better positioned to guide clients through the evolving hedge fund landscape.
The hedge fund machine has never run faster. But increasingly, it’s powered not by algorithms or leverage — but by people with the leverage to demand everything.
