Earlier in the year, hedge funds were providing an oasis of hiring activity for techies with financial services experience. But recent pressure on the industry has meant that they are likely to spend 40% less on IT in 2009 than they did in the previous year. Not surprisingly, recruitment has slowed.

New research from the Tabb Group suggests that shrinking assets under management and more hedge funds falling by the wayside means that the pot for technology next year is likely to shrink to $882m.

This means a change of focus on where the budget is going to be spent, with the majority of hedge funds refusing to compromise on front-office areas like electronic trading, specifically the ability to trade multiple asset classes electronically. Investment in back-office functions is more likely to suffer.

Cheyenne Morgan, research analyst and author of the report, says: “Any software or service that directly supports the investment process stands a far better chance against this inevitable tide of cost cutting.”

Hedge funds’ appetite for taking on techies has diminished in recent months, says Darren Pearce, sales director at hedge fund IT recruiter Options Technology.

“Some of the bigger funds have either made redundancies or released contractors, which have been a luxury over the last 18 months and are a quick way to cut costs,” he says. “However, technology remains a key area of focus and there are still more opportunities than in other areas of finance.”

Stephen Feline, manager at financial technology recruiters the Kaizen Partnership, tells us: “A number of the major funds have put hiring freezes on, but we are still seeing exceptional hires going through. As cost savings have become paramount, these tend to be focused on the junior level, or in areas like support, RAD [Rapid Application Development] and implementation.”

Pearce says that competition for places is heating up, due to the glut of talent available from areas like investment banking. Some are keen to take i-banking techies on, he says.

“It’s the bigger multi-billion dollar funds that these individuals would look to move into – the smaller funds would be less likely to consider them,” he says.