Recent events are bearing out our recent forecast that a number of once-resilient financial sectors were poised to lose their status as havens of career growth. On the bright side, two niches are gaining ground: litigation-related work, and trade finance.

Former havens now taking a battering include hedge funds, traditional long-only asset management firms, and jobs located within emerging market economies like China, Russia and the Middle East. Even the distressed-investing business - a niche we've touted repeatedly as a major beneficiary of the broad market meltdown - seems to be hitting some potholes.

Hedge Fund Growth to Unwind?

For the hedge fund community, just posting smaller losses than free-falling equity benchmarks is no longer enough to keep assets and fees rolling in. And shrinking assets and fees augur shrinking job opportunities. In November alone, Citigroup reportedly pulled the plug on its corporate special opportunities hedge fund, Steven Rattner’s Quadrangle Group planned to shut its fund that invests in publicly traded media and communications stocks, Tontine Associates told investors it's winding down two flagship funds and JO Hambro Capital Management moved to shutter one of its two funds. Two of the industry's biggest names, Emmanual Roman of GLG and George Soros, predicted that one-third to two-thirds of all hedge funds will be forced to exit the business.

Meanwhile, plunging asset prices are compressing assets under management and fee revenue for traditional asset management firms. That's prompting a blizzard of layoffs from firms that include Fidelity, Janus, Legg Mason and BlackRock.

Private equity is under pressure too. A prolonged global recession threatens to block off IPOs and other exit routes, compressing fund returns for years to come. Massive new funds raised from 2005 through 2007 were invested at peak market prices, creating a likelihood those vintages will suffer crippling losses in coming years.

The leading emerging market economies, which retained their luster as career boosters as recently as August, are belatedly feeling the chill. Citigroup plans 1,000 layoffs from its India lending operation as part of a recently announced plan to eliminate 50,000 jobs worldwide. HSBC said it's laying off 500 employees in Asia.

No Picnic for Distressed-Debt Pros

A long, deep recession has a downside even for professionals who could hardly wait for the last bull market to end: bankruptcy and restructuring groups, and investors who specialize in buying distressed assets.

Court-supervised bankruptcy reorganization, for instance, seems to be going the way of the Tasmanian devil. The former practice of operating under Chapter 11 protection while restructuring a company's debts is being decimated by lack of financing. Reorganizing requires an investment in the company’s future, but investors now aren't optimistic enough to make such bets, attorney Mark D. Collins of Richards, Layton & Finger told the New York Times. As a result, even the relatively few firms that do file for bankruptcy protection often proceed immediately to liquidation, the Times says. That could crimp demand for financial experts who help troubled companies overhaul their balance sheets - right after numerous investment banks and law firms launched or beefed up restructuring services departments during the past year or so.

For distressed investors, meanwhile, the lesson seems to be: Be careful what you wish for. Throughout the last economic expansion and the early months of the credit crunch, managers of cash-rich distressed funds eagerly looked forward to a run-up in defaults that would create a sizable pool of beaten-down assets to feast on. New distressed funds sprang into being at a hectic pace during 2007 and the first half of 2008. Now that the downturn is here, some of these professional bargain-hunters appear to have bought too soon. A former colleague who runs a distressed fund sounded depressed when I spoke with him a few months ago, because his holdings were tanking. If that's how he felt in August, I can just imagine how he's doing now. It's a good thing my 33rd floor office isn't within sight of a window.

On the other hand, the market and housing meltdowns are boosting demand for financial research and analysis to support regulatory investigations, civil litigation and criminal defense. We'll get into those in our next column.