Morning Coffee: Tough new rules on hedge fund pay, MBAs’ fast-track to the private equity executive suite

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In what has been deemed ‘Super Tuesday’ for banking regulation, when a series of new EU rules aimed at fixing the European banking system were unveiled, a new proposal that could severely impact the way that hedge funds pay their staff has also been quietly released.

European Parliament has backed a proposal that would require fund managers working within hedge funds with a UCITs structure – which swelled in popularity over the past few years – to defer 40% of their variable remuneration over a minimum of three years. If this figure seems eerily familiar, it’s because the 40% figure is exactly the same proportion of pay that any ‘significant risk takers’, or code staff, within the banks are being asked to defer when the EU bonus rules take effect.

Hedge funds largely fell under the category three and four companies under the FCA’s remuneration rules, meaning that they escaped the more stringent requirements, but it seems that the EU is attempting to ensure more pay parity across the financial sector.

Separately, while private equity firms have been scrambling to hire junior candidates from investment banks and targeting MBA candidates for associate-level positions, it appears that MBAs are demanding more.

A talk to 100  Harvard business school students yesterday highlighted the value of starting a ‘search fund’, which is at its most basic level an opportunity for one individual to invest in one small company, attempt to expand it and then sell it at the right time. This is a microcosm of a broader move towards these types of funds by MBAs, which allow them to tap into their managerial and entrepreneurial skills rather than simply going into a relatively junior private equity role where competition for places is stiff.

“It’s all about the company: an average manager can do well if he/she buys a good company,” Jim Southern, a search fund veteran who is a partner at Pacific Lake Partners told the Financial Times.


Goldman Sachs wants to become a major player in stock trading again (Wall Street Journal)

Corporate monitoring consultants earn millions at companies accused of wrong-doing, but do little to change the way a firm operates (Dealbook)

Henderson Global Investors is hiring for its emerging market credit team (Financial News)

CVs are useless recruiting tools for hedge funds, only competition can sort the wheat from the chaff (Quartz)

RBC still not entirely sure what to do with its prop trading business (Bloomberg)

Barclays’ shareholders will protest bonuses, despite the shake-up of its remuneration team (Financial Times)

Deutsche Bank has tapped Citi exec as head of its Indonesia operations (Wall Street Journal)

How Europe is trying to fix its banking system (Financial Times)

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