Hedge funds pass on traders from banks

Are you a trader in an investment bank with dreams of moving into the exciting world of hedge funds? Dream on.

David Durham, managing director of hedge fund-specialist search firm Durham Consulting, says hedge funds are noticeably less enthusiastic about engaging traders from banks than they used to be.

Funds' apparent reticence comes despite news reported in Derivatives Week that two equity derivative flow traders left Deutsche Bank this week headed to an unnamed hedge fund.

According to Durham, they are the exception rather than the rule. "Funds are now particularly after people who can bring in a systematic trading strategy," he says. "They used to be prepared to bring in proprietary traders or market makers from banks, give them some back office support and let them run. Now they want to see people who have a quantitative method behind their trades."

The search for systematic trading specialists is leading hedge funds into unusual territory, says Durham. He says he's just placed a former weather forecaster, turned investment banking IT specialist, turned trading strategist, in a position. Other hopefuls are former bank traders who've left the industry to develop a quantitative trading strategy in their spare rooms.

Successful candidates need to be able to prove their strategy works, says Durham: "Banks will be looking to back test your results."

If your trading strategy does work, the rewards can be considerable. The former weather forecaster apparently managed to return 55% with his strategy and is now on track to manage 100m by the end of this year. Durham says pay for systematic traders is typically in the range of 10% to 13% of profits, which suggests the forecaster's outlook is sunny indeed.