Making sure laid-off workers don’t walk off with more than they’re supposed to has become a growing security issue lately as tens of thousands of financial sector employees lose their jobs. The list of recent layoffs is long. Well-known alternative-asset management firms that have trimmed their workforces include London-based GLG Partners (100 layoffs) and Gartmore Capital (70); Chicago-based Citadel Investment Group (40); New York’s Highbridge Capital Management (35); and Dallas-based Highland Capital Management (30), which closed two funds. Back-office providers have also slashed positions. Global hedge fund administration giant Citco Fund Services is letting 1,000 people go.
The trend raises two security concerns: first, that assets or intellectual property may be stolen; second, that breakdowns in compliance may occur when one or two people are left doing the work of several.
“Investors want to know what kind of controls a hedge fund has in place when it has to show people the door,” says Kenneth Springer, a former FBI agent who is now president of New York–based Corporate Resolutions, a business investigations firm. During the boom years, Springer helped funds of funds vet potential managers. Now hedge funds have him setting up hot lines that welcome tips about executives who might be planning a preemptive departure or forming rival outside partnerships.
In this environment, Springer notes, behavior standards have been tightened. “In the past few years, investors would tolerate a manager who was partying, taking drugs or doing things not typically considered acceptable,” he explains. “Now they won’t, and they look to us to collect reconnaissance on a manager so they can be fired cleanly, without lawsuits or fuss.”
Springer says his firm helps investors avoid the unexpected. “There is way, way more to consider than an employee leaving with a laptop or a box of files,” he says. “It’s a different world, and both investors and managers need to realize it.”
