The tide is suddenly heading out to sea for aspiring hedge fund traders. Ilana Weinstein of the IDW Group, which specializes in hedge fund recruitment, says that the new financial regulation bill has fundamentally changed the supply and demand balance for hedge fund managers.
Star traders at major investment banks with great track records used to be able to pick and choose among the large funds bidding for their services. Now there is a torrent of talent pouring into the marketplace fleeing the onerous restrictions of the Volker Rule, pay caps, greater disclosure, and more scrutiny from the SEC. Low trading volumes have caused the banks to scale back from a first half hiring binge.
Hedge funds, whose own recruiting is driven more by capital flows, have also crimped new hiring, their own modest first half returns keeping new investors at bay. With short interest rates near zero, and the yield curve flattening beyond all recognition, the double digit returns of yesteryear are but distant memories. Instead, many hot shots are heading out on their own, setting up new boutique firms with substantially smaller amounts of capital.
Could we be setting up for a bonus draught like the one we saw in 2008?