Hedge funds lure cream of banking

Boutique investment firms and top hedge funds are slowly lapping up the cream of global banking talent as the financial crisis forces banks to cut staff and limit the pay of their top risk-takers.

From Singapore to New York, leading traders and sales honchos are making the switch as government pressure piles on Wall Street and European banks to cut multi-million-dollar bonuses. “The firms that still have a lot of assets under management, the hedge funds that have not been hit by redemptions, they are still picking up some of the money-makers from the big banks,” said Pernille Storm at executive search firm Hudson in Singapore.

Singapore’s largest hedge fund, Artradis, said this month it had hired a high-profile risk trader from RBS and a New York-based Credit Suisse executive, while investment advisory firm Fox-Pitt Kelton recently picked up five people from banks such as Merrill Lynch and HSBC to focus on Asia.

In London, UBS last month lost two senior European investment bankers to boutique Close Brothers, another to Lazard, and at least three energy bankers to Lexicon Partners.

In the US, where the credit crisis led to the failure of Lehman Brothers, the fire sale of Bear Stearns and the takeover of Merrill Lynch, the trend is even more visible.

Earlier this month, investment banking boutique Moelis & Co said it had hired Chris Ryan, former global head of credit fixed-income at UBS, as a managing director in New York, its second high profile hire in a month.

Boutiques have also been growing their clout globally, highlighted this week in Asia when US M&A boutique Evercore Partners announced a strategic partnership with China’s CITIC Securities.

“It’s possible for boutiques to actually hire top talent, which was almost impossible for them while the market was going ballistic from 2005 to the middle of last year,” Thomas Hester, head of equity at Fox-Pitt Kelton, told Reuters.

Andrew Sibbald, a founder of Lexicon Partners in London, said boutique firms’ partnership model meant “creative, bright people who are unfettered by all the woes of the big banks can just get out there and find business”.

“There’s greater freedom to spend your time advising clients rather than focusing on internal issues, and the compensation model is untainted,” he said.

One trader who recently made the move to a smaller investment firm said, along with the cultural differences, money was a big driver. “The chances for getting paid a lot from bulge bracket firms for most people in equities has gone down enormously,” he said, declining to be identified in commenting on rival firms.

Many boutique banks have weathered the crisis relatively well, winning clients keen on independent advice and largely avoiding big leveraged bets on risky credit products that bought bigger Wall
Street and European rivals to their knees.

Their hiring spree has also spread to smaller finance centres such as Mumbai. Centrum Capital this month hired Munesh Khanna, a former banker with Merrill Lynch’s Indian joint venture, as managing director of investment banking, and Aarthi Ramakrishnan as head of equity capital markets from Credit Suisse.

“I can see a situation, subject to funding constraints, of senior bankers moving en masse as a team or possibly setting up a boutique themselves,” said Nick Hellen, a partner at Executive Access, a Hong Kong-based executive search firm.