Steve Cohen's hedge fund is investing big time in trading talent

Hedge funds these days are in an arms race against each other to snap up the best possible talent.

Barclays' Capital Solutions Group highlighted this recently in a big report, noting that there's a confluence of trends making it harder for hedge funds to hire.

Business Insider recently caught up with Mike Butler, head of human resources at Point72 Asset Management - formerly SAC Capital - the $11.4 billion family-office hedge fund led by billionaire Steve Cohen.

Butler agreed that this is a trend we're seeing in the industry, particularly with young folks heading to Silicon Valley instead of finance.

"Financial services is not the draw for the best talent that it once was," Butler said.

He continued:

Really talented young people have lots of interesting opportunities, whether it is in Silicon Valley, whether it's entrepreneurial sorts of activities, so that the overall quality of the pool going into the traditional investment banking programs is not, in our judgment, is not quite what it was at one point.

Another issue is the class sizes for investment banks, particularly in capital markets and sales and trading, have been shrinking because of some of the regulations following the financial crisis.

Yet the hedge fund industry has continued to grow since the crisis in terms of assets, headcount, and number of firms.

"And there's more competition for it. So it's a shrinking pool and more and more people whether its private equity, real estate, other alternative investment funds are elbowing around this shrinking, and somewhat diluted, pool," he said.

Cultivating your own talent

To address this change in the financial ecosystem, Point72 has started cultivating its own investment talent.

Last year, the fund launched the Point72 Academy, a 15-month paid program that trains college graduates for potential analyst positions at the firm. The academy also offers a 10-week summer program.

Butler said:

Rather than relying on conventional approaches, letting other people develop our junior talent then trying to sort of pluck them out, we're moving towards a very intentional approach to identifying the very, very best very young talent and then growing them, developing them, training them to be excellent investors.

Word about the program has clearly spread among young candidates.

For this year's summer program, there were 1,500 applicants for 15 slots. For the graduate program, there were 1,500 applicants for 15 slots in the class of 2016, up from 400 applicants for the inaugural class of 2015.

Another program Point72 has implemented that's not as well-known is one where they identify superior analysts within other hedge funds and hire them to be portfolio managers. The idea is that these folks may have reached a point where they're ready to manage their own book, but that opportunity isn't currently available to them within their current firm. Point72 brings them over and trains them to be portfolio managers.

Today, approximately 70% of Point72's portfolio managers are homegrown. Eight years ago, approximately 80% were external hires.

"In a business that's characterized, that is, you know, fundamentally talent centric, it makes sense to invest in talent. It makes sense to be very focused on finding great people and cultivating that talent to be the best that it can possibly be," Butler said.