Non-Competes, Garden Leave and Moving Firms

When a portfolio manager or trader resigns, their old firm usually doesn't want them walking straight into a rival with the same strategies and client relationships still fresh. Two overlapping mechanisms handle this. A non-compete clause, written into the employment contract, legally bars the employee from working for a named set of competitors for some period after leaving — commonly three to twelve months in finance, though enforceability varies hugely by jurisdiction (some U.S. states, like California, essentially refuse to enforce them at all). Garden leave works differently: the employee resigns, is immediately relieved of duties, but stays on the payroll and under the old firm's restrictions — often for the notice period itself — unable to trade, contact clients, or start elsewhere, even though technically still "employed."

The two are frequently combined: a resignation triggers garden leave (paid, but idle) followed by a separate non-compete period once employment formally ends. For a portfolio manager, the practical effect is a long gap — sometimes six months or more — between deciding to leave and actually starting at a new firm, during which their market knowledge and relationships gradually go stale, which is exactly the point from the old employer's perspective.

For anyone interviewing at hedge funds or trading desks, this matters directly: a firm hiring a PM away from a competitor needs to plan around that gap, and candidates need to check their existing contract's specific terms before assuming they can move quickly.