I think it’s safe to say that regulations have changed Wall Street from what it used to be 20 years ago. Government intervention was lower, leverage was the norm, and bonuses were higher.
Today, there appears to be a new trend. Bloomberg ran a story yesterday describing how an increasing number of big-time traders are leaving large investment banks for hedge funds due to the gloomy outlook of the former.
Wall Street’s biggest banks have lost almost two dozen of their most-profitable credit traders in the past 13 months as regulators limit the kind of risk-taking that amplified the housing crisis four years ago. As banks slash or defer pay and reduce the amount they’re willing to wager, the traders are seeing better opportunities at hedge funds and investment firms that seek to profit in markets lenders are retreating from.
Many of you work or aspire to work in one of these two areas. Have you noticed this trend? From a compensation and job security standpoint, do you think hedge funds will offer better opportunities as banking regulations begin to kick in?
Obviously hedge funds are not without their own regulations. Hedge funds are subject to a fair amount of government oversight, and most major funds are registered with some type of regulatory body. Still, large investment banks have arguably been hit the hardest by provisions like the Volcker Rule, and as bulge bracket banks begin to shut down their proprietary trading units, some of the bigger names on Wall Street at taking their talents to the hedge fund world.
A lot of these guys were sitting atop a mountain of trading volume and revenue, much of which has eroded beneath them. So it’s logical that they decide to leave or are no longer needed.
Employees at the largest investment banks got an average salary increase of 3 percent last year, compared with 14 percent at smaller investment banks and 13 percent at fund managers, according to an online survey of 2,860 financial professionals by eFinancialCareers.com.
Bloomberg explains that greater job security and bigger paydays once lured the best and brightest to investment banking, but it suggests that those days are in the past. I disagree. Regulations will hurt banks big time, but investment banking still commands a relatively high volume of business, and I think banks will find a way to adapt to regulations. Still, the fact remains that almost two dozen of Wall Street’s biggest traders have left for hedge fund opportunities, and there must be a good reason why.
What do you think? Are regulations unintentionally helping hedge funds? If you had the choice, would you follow these traders from Wall Street to hedge funds?
HF>IB
I think the answer is obvious. But helping hedge funds? It's started in the larger institutions but IMO will move onto the less regulated funds/shops soon enough.
True, one of the things I forgot to mention is that this isn't only affecting hedge funds. Smaller banks should also see an inflow of traders as salaries haven't been hit as hard and are less restricted by the Volcker rule
Iste tempora possimus nam ut. Non aut praesentium dolorum exercitationem. Est qui quaerat dolorum aut quis et et quo. Animi magnam perspiciatis quia pariatur facilis dolor. Repellendus qui facilis iure aperiam quia sapiente. Quis dolorum ratione autem occaecati ut provident doloribus.
Sit magni laborum nobis aliquam. Sit ex sequi quis. Vel aspernatur dolorum eos. Incidunt hic est voluptas adipisci quo nostrum. Facilis minima iste numquam optio incidunt modi.
Minima qui nemo est sed nihil est mollitia. Ex nam porro facilis aspernatur. Voluptatem laboriosam id consequatur aspernatur asperiores. Autem eos sunt libero et qui id. Sit a voluptas quisquam facere vero eos dolorum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...