Is There a Future for Middle and Back Office Employees at Hedge Funds?

Late last year, Bridgewater Associates announced that it would outsource its entire middle and back office staff to BNY Mellon. According to COO Connect, this meant that somewhere around 100 of Bridgewater’s accountants, business analysts and software experts (among other operational staff) would join BNY Mellon’s asset servicing team. Initially, these employees would remain with the $125 billion hedge fund manager. But long-term they would be moved from Bridgewater Associates’ headquarters in Connecticut to BNY Mellon.

COO Connect quoted Lou Maiuri, the executive VP and head of outsourcing for BNY Mellon Asset Servicing.

“Outsourcing is becoming a key aspect of alpha generation as it creates economies of scale,” Maiuri said in 2011. “More and more funds are increasingly outsourcing their middle and back offices so they can focus exclusively on trading and managing money. With Bridgewater, the lifted-out employees will join BNY Mellon in December, and we will migrate Bridgewater’s staff onto our OnCore platform over the next two years.”

StreetID feels that this is a trend that will continue in the years to come for larger hedge funds, which (as COO Connect points out) are struggling to deal with their enormous overhead costs. These costs are increasing with the rise of financial regulation around the world and a growing number of investor requirements. Consequently, outsourcing is on the rise. But this is one of those times when it doesn’t mean the end of the world for thousands of employees. In this case, it might actually mean that they get to keep their job.

Going forward, StreetID is confident that this will create opportunities for new outsourcing firms to rise up and support Wall Street.

Where will these outsourcing firms go to acquire the talent they need to meet the growing demands of the financial sector? They should turn to us – we built StreetID from the ground up to become the ultimate financial career matchmaking site. We have a growing community of financial professionals, allowing current job seekers and those looking to move on in the future to sign up for a free account and make a direct connection with relevant candidates and employers.

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I think there is a future for back office and middle office, but it surely isn’t as bright as it once was. Banks are creating operational groups at a price that many hedge funds can’t pass on, especially the larger ones. I knew of a larger mutual fund company who despite being one of the larger financial services firms in the world, we’re going to shift operations to State Street.

My only reservation is that many hedge funds like their information and systems to be in-house. Big banks have a history of crappy systems that are suppose to evolve.