Traders to quit hedge funds for banks: headhunter

By Laurence Fletcher

LONDON (BestGrowthStock) – Traders could start deserting hedge funds and move back to banks in search of bigger salaries, says the head of one recruitment firm, reversing a trend that fueled the growth of start-ups for much of the past decade. Nicholas Wells, founder of Carrington Fox, a headhunter in both sectors, said hedge fund and private equity start-ups could struggle to compete with the salaries and stability offered by banks as new European regulations increase hedge funds’ costs.

“I think we’re going to see a heavy move back out of hedge funds and into investment banks,” Wells told Reuters on Friday.

“We’ve seen salaries rocketing at investment banks for the last 12 months … The biggest problem with the (hedge fund) regulation is that people are just not going to be offering the salaries.”

Wells said that whereas an entry-level analyst joining either a hedge fund or bank could expect to earn between 50,000 pounds ($79,200) and 60,000 in their first year, this could grow to between 80,000 and 90,000 at a bank in the second or third year, while the rate of growth would be slower at a hedge fund.

A vice president at a bank could earn between 150,000 pounds and 250,000, he added.

WORKING ENVIRONMENT

In contrast, the average hedge fund, which several years ago would have been able to match the remuneration on offer at banks and could offer a more casual working environment in London’s upmarket Mayfair district, would now struggle to compete on pay.

“Enjoying the lifestyle in a hedge fund is probably going to be eclipsed by higher salaries,” Wells said.

His comments come as hedge funds struggle to win back investors’ assets, on which they earn fees, after a seeing clients withdraw billions of dollars during the credit crisis.

Funds have also been battling proposals by European regulators for stringent rules on the sector.

While the rules eventually agreed were not as tough as some funds had feared, they are nevertheless expected to add to compliance costs and impose rules on how hedge fund executives are paid in line with those in the banking sector.

Wells said start-ups, which were often founded by former bank traders during the hedge fund industry’s rapid growth earlier this decade, could be disproportionately hit, further damaging their ability to attract new talent.

“Start-ups are going to be absolutely crucified by it,” he said. “They’re not going to be able to pick up the third-year analysts … It’s going to reduce competition.”

Hedge fund industry body AIMA said on Friday the global industry employs an estimated 300,000 people worldwide, of which around 100,000 are employed directly and a further 200,000 are in roles such as administrators and lawyers.

(Editing by Sinead Cruise and David Holmes)

($1=.6313 Pound)

Traders to quit hedge funds for banks: headhunter