The historical trend of hedge funds acquiring talent from financial institutions could be reversed going into 2011, as new regulations for alternatives come into play.
Banks are now seen by many as a more stable option, according to headhunting firm Carrington Fox.
“Compensation issues will be replaced by bigger salaries for candidates hoping to work in banks,” says Nicholas Wells, one of the firm’s directors.
Wells says investment banks and hedge funds have been battling for the same talent as of late, which in 2008 and 2009 would simply not have happened.
“In the past, hedge funds have acquired talent from financial institutions as the direct percentage payout and lifestyles within that world were more attractive – which is less so now.
“If in 2011, banks leverage the more attractive salary propositions off against hedge funds, it will snuff out many new start ups and reduce the attraction of this market for new ventures – and we will almost certainly see a decline in the hiring of candidates in this space.
“Hedge funds often do not have the capital to pay comparable salaries to banks due to the cost and impact on their cost base. These issues may force them to move overseas to remain competitive because they can position traders in any geography to make use of the local execution traders and remunerate offshore. However, if anyone has a chance of outflanking the new laws, it is the alternative investment space.”
Wells believes hedge funds may manoeuvre staff to explore opportunities where tax and risk restrictions make business more attractive.
“If London was stripped of its crown as a financial hub because of tighter regulation, there could be an exodus to other global financial centres, but for the most-part – talent would move Stateside and perhaps more so to the Far East – where there is plenty of appetite to harness the youthful entrepreneurs of the West who can capitalise on the markets they are leaving behind,” he adds.
