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The Cooling Market for Hedge Fund Traders

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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?


To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on "Hedge Fund Radio Archives".

 

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Thu, 11/04/2010 - 21:02 | 701588 rocky89
rocky89's picture

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Mon, 08/16/2010 - 12:41 | 523996 VWbug
VWbug's picture

if they are any good they can start their own fund or just trade with their own capital.

or retire now and enjoy life. You can live like a king on $5,000 or $6,000 a month in lots of warm climates.

that's chump change to any trader who has more than a year's experience.

Mon, 08/16/2010 - 11:15 | 523798 alexwest
alexwest's picture

...

With short interest rates near zero, and the yield curve flattening beyond all recognition, the double digit returns of yesteryear are but distant memories.

..

again this asshole... i wonder does he even run any money

or just shows off to get laid.. :)

 

#nterest rates near zero,

who said its bad??

since when cost of money equals almost zero

is bad... ????

 

#the yield curve flattening beyond all recognition

you can easily bet  on flattening or expanding 2-10

of course if you have balls for directional betting..

...

and on on ...big guns make money off volatility cause

THEY'RE MARKET..volatility is great..

 guy dont have a clue.

alex

Mon, 08/16/2010 - 10:45 | 523731 islander
islander's picture

Most biological androids base their value of themselves on what they own. If you  currently allocate most of your assets in US equity markets, than you may soon have a very low  opinion of yourselves.

There s a hard rain coming , and  the  run

(drain) off will effect the world in a big way. 

Yes, even mighty Germany and Fascist China will be hit  hard. Hold on baby, its a one way ride to a world currency.

Mon, 08/16/2010 - 10:12 | 523675 TrulyStupid
TrulyStupid's picture

Who'll be left to take the losing side of the bankster's manipulated trades?

Mon, 08/16/2010 - 09:31 | 523645 Dr. No
Dr. No's picture

Makes sense to me.  As technology replaces other careers, HFT algos can replace hedge fund traders too.  Has your investment hotline moved to India yet?

Mon, 08/16/2010 - 09:30 | 523644 Mitchman
Mitchman's picture

It couldn't happen to a nicer bunch of people.

Mon, 08/16/2010 - 09:17 | 523631 jdrose1985
jdrose1985's picture

Does that make them "mad hedge fund traders"?

Guess you'll have to change your handle to "daft hft"

Mon, 08/16/2010 - 08:10 | 523563 ZackAttack
ZackAttack's picture

All together now, circling index finger over thumb pad in the universal gesture of the world's smallest record player, playing 'My Heart Bleeds for You'.....

 

AWWWWWWWwwwww!

Such terrible, onerous restrictions! I'm sure this hardy libertarian lot would all be gajillionaires if it weren't for the heavy hand of government and its wretched injections of taxpayer capital. Anyone so brilliant and talented would be well-served simply to forego the banks and brokerages entirely and make their billions all on their own.

Actually, the only thing that would make me happier is to see it begin to be outsourced to the PacRim to someone making $9 an hour, without the wherewithal to buy congressmen.

 

Mon, 08/16/2010 - 12:06 | 523910 Fred Hayek
Fred Hayek's picture

Why would you assume that they're a libertarian bunch?  A recent New York magazine cover feature on Blankfein and Dimon and the progress of their relationship with Obama pointed out that Blankfein and Dimon like, the article said, most all their colleagues, are democrats.

There's actually a degree of honesty in that in so far as it's them admitting that they think gov't, with the help of extra super special people like, oh, investment bankers, should run everyone's life.

(not to say that there aren't plenty of repubs similarly deluded)

Mon, 08/16/2010 - 09:30 | 523643 aerojet
aerojet's picture

Seriously.  I can't think of another group of people so in need of a comeuppance.

Mon, 08/16/2010 - 10:12 | 523674 Mr. Anonymous
Mr. Anonymous's picture

The only good hedge fund trader is an unemployed hedge fund trader.  They are far too dangerous to give a desk and access to tradeable capital.

Mon, 08/16/2010 - 07:46 | 523557 binomial
binomial's picture

While 2008 was a rather dry year for me, if you're ordering a "bonus draught" for 2010, then I'll have a Guinness!

Mon, 08/16/2010 - 04:14 | 523504 mephisto
mephisto's picture

The word is "there's no money in banks any more". Have heard that more than once this summer. As long as those are FDIC insured banks, I don't have a problem with that.

I think GS/MS are banks forever, the next generation of pure IBs may be Citadel etc, if they can figure out a business model that works.

drought not draught, no?

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