Hedge funds and the increasing lure of percentage deals
Apparently scared away by Sarkozy's intense dislike of bonuses, 20 SocGen traders have left to set up their own hedge fund.
They are unlikely to be the last bankers to go that route. As we noted yesterday, hedge funds appear hiring again.
Reuters reported a few weeks ago that the likes of Citadel, Artradis and Tribridge are recruiting traders. In London, recruiters say Citadel, Brevan Howard, and Cheney Capital are in the market.
At the same time, banks are losing the ability to pay the kinds of percentage deals which helped them recruit and retain top traders in the first place.
"Quite a few hedge funds are hiring across the board," says Carl Harrison at search firm Kinsey Allen. "There's certainly more enthusiasm for working for them. A lot of traders want to secure a fixed percentage of their returns."
Claude Schwab, US hedge fund sector head at Heidrick & Struggles, says there's hiring at long short equity, distressed debt and high yield funds, and high frequency trading specialists.
Schwab adds that banks are still paying percentage deals to prop traders, albeit discretely. "I wouldn't take it as given that banks aren't paying percentage deals, it's a work in progress," he says. BarCap is rumoured to have hired Todd Edgar on a 50% package, for example.
Nevertheless, while banks face mounting political pressure to curb payouts, hedge fund traders such as Adam Levinson are free to be comparatively unrepentant about their compensation. In an interview yesterday with the BBC, Levinson stressed the differences between hedge funds and banks, pointing out that if you don't perform in a hedge fund you really don't get paid. In banks this is supposed to be the case, but often isn't.
