Given the exodus of top trading talent to hedge funds, now seems as good a time as any to get a handle on what's driving the moves.
One could easily pinpoint the downturn and the dismantling of prop desks in anticipation of the Volker Rule. But it seems as if the recent moves have also been helped by the money flowing into the sector, as fund managers flee equities and bonds.
For those with a strong trading pedigree, the short-term gains are too good to pass up. But few can be a John Paulson. And despite the reports of gains over the past decade, much of that information doesn't really take into account the hedge funds that have gone by the wayside. Plus, managers are notorious for keeping earnings secret, making real data hard to come by. When you consider how much easier it is to court clients sitting at a cushy and well-connected Goldman Sachs, the grass may not be as green on the other side of the investing world as you'd think at first blush.
But the allure of hedge funds remains. Some insiders cite the ability to go back to the relatively freewheeling days of the market, unfettered from many of the banking world's constraints. That's a big misconception, for sure. Given the step-up in SEC investigations in the hedge fund space, the Wild West days are surely dust.
Expect the increased supervision to have one big benefit. Market surveillance posts, especially supervisory roles in-house, are certainly going to increase. Hedge funds are already scouring for seasoned VPs for trade surveillance. Broker dealer experience is a big plus.