Hedge funds looking to hire new talent face an aggressive market today with experienced candidates aware of the opportunities available to them as well as the realities of supply and demand. In such an environment, panellists at the MARhedge fund forum on recruiting and retaining talent told delegates that creative compensation and ?test driving? candidates are vital factors in the hiring process.

Adam Herz, founding partner of Hunter Advisors, said that today?s market has led to ?interesting compensation issues as well as some ridiculous demands by candidates?.

Two key trends have emerged for firms looking to hire, he said. With consolidation in the banking industry and fewer training programmes creating fewer investment banking analyst pools to draw talent, hiring junior analysts has almost become a ?competitive sport?. As such, more firms are focusing on hiring people who have raw intelligence rather than experience. They are looking at GPAs, SATS and IQ knowing that decision-making skills are the skills that matter.

?Should you find good junior people, the decision you need to make is figuring out how to keep them because at the end of the day somebody is going to try to take them away if he can,? he said adding that firms need aggressive strategies to attract good juniors.

Increased compensation is clearly the trend in hiring senior analysts with prices going ?through the roof in the last two to three years?.

It is also becoming harder to even attract seniors as incubators are making it easy for them to start their own funds and find the capital. Recruitment of seniors boils down to creative compensation structures, he said.

?In old days you would get a guarantee base plus bonus. Now what we?re really seeing are people providing percentage deals on portfolio and profits and people providing equity in the overall firm,? he said. There is also a trend to offer employees the option to breakout should they be able to raise the appropriate amount of assets to justify their own business. Hedge funds are also increasingly ceding funds in order to have a strategic relationship with people who they couldn?t otherwise hire.

Douglas Rothschild, principal at Ritchie Capital Management, which manages more than $3 billion and has 200 employees globally, said that his firm?s underlying philosophy of creating a culture that encourages a team-oriented approach also extends to how the firm attracts and retains talent.

?What we do may change but who we are will never change,? he said adding that the firm has five core values for attracting and retaining staff which includes trying to create a great experience and ensure that people are excited about what they do. The firm also looks for people who are ?humble hungry and smart? with humble being the most important of the three. The firm also has a passion for long-term interests and aims to create compensation structures that are attractive to prospective employees and will not handcuff them in the progression of their careers.

All of the panellists said that getting to know candidates was key to the hiring process.

For Mr. Rothschild?s firm, more than 90 percent of the junior people hired have taken part in the firm?s four year-old internship programme.

?We bring them onto our desk for 12 weeks, we give them a computer, Bloomberg, e-mail and phones and they sit with the portfolio managers. They do real work, real investment ideas,? he said. Because traders have ideas they have not had time to research, the interns add capacity onto the desk so the traders have embraced it too, he said.

Bob Chapman, founder of Chapman Capital, takes a different approach to learning about his potential colleagues.

?Every smart person in this business can put on a good show in the first interview. They are able to b**s*** their way through the basics and it is only once I begin to loosen people up and make them fell comfortable that sometimes I see real person,? he said. His drawn-out hiring process usually takes about 50 hours per candidate. He points out that while many co-workers spend more time with one another than with their own spouses, people can take years to decide to marry someone yet will hire someone after only getting to know them for several hours.

?I want to get to know somebody extremely well and vice versa and that involves at least 50 hours to get to know somebody because we have all been involved in personal professional relations where we have gotten to know somebody very well and it ends up changing,? he said. For him, it is also important to determine why a candidate is actually available for that job as there is little reason for somebody who is good to be on the market for very long.

Russell Hofmann, chief operating officer of Orange Capital, which only launched in July this year said that as a new firm the hiring process is all the more challenging because every new hire will impact on the future culture and success of the business and also signal future employees and investors on about the firm. The hires must say that you plan to bring on the best people, you have ability to attract to them and the resources at your disposal to do so, he said.

Start-ups are also challenged by the fact that candidates have a lot of options and they must compete against more established and bigger firms for talent. Mr. Hofmann said that his firm addressed the issues by establishing an outline of the type of person they wanted. For his firm, they want to see candidates who have an entrepreneurial spirit and are at points in their careers where they are willing to give up working for a household name.

Screening is also important and rather two-sided when it comes to a start up as the firm must sell itself to a candidate on who it is, what it is trying to achieve, he said.

As such, his firm encourages candidates to do their homework on the firm so that they know ?we were the real thing?.

To get the information to make the right hiring decisions, his firm has specific interview questions including where they want to be in five to ten years time.

The firm was ?adamant that the answer we wanted was that the person would be selling in a portfolio manager?s seat.? Mr. Hofmann said that the most revealing question is to ask candidates about a situation where they had lost money because people confident in their ability to make money are generally comfortable speaking about situation where lost money.

His firm also believes in test-driving candidates ? by having them spend a day at the firm ? to ensure the skills listed on their resumes are actually real.