Musical Chairs for Hedge Fund Traders

It’s the best time in 15 years to hire traders if you run a hedge fund. So says Israel Englander, founder of Millennium Management LLC, a global investment management firm with approximately 800 employees and $8.2 billion in assets under management, headquartered in New York City.

The reason is that so many big banks have been forced to shed their proprietary trading arms, according to an article in News Times. Banks such as Goldman Sachs, JPMorgan Chase and others are dismantling their trading divisions in the wake of the Dodd-Frank financial overhaul that prohibits banks from risking capital in their own accounts. Plus, says Englander, there’s a glut of traders at hedge funds that still haven’t recouped losses from the financial crisis and risen above their previous high water marks. Thus, these firms can’t generate performance fees yet.

“There’s a lot of musical chairs being played right now,” Englander said. “The hedge-fund industry is in a state of flux.” Englander’s own firm has snapped up 45 teams of traders this year.

He also took the industry to task for straying from its original model of seeking alpha that’s uncorrelated to the general markets. “The origins of hedge funds are forgotten and confused,” Englander said at this year’s Hedge 2010 conference in London. Instead, the tsunami of cash that poured into the hedge fund industry in the mid 2000’s essentially turned many funds into asset gatherers, who ventured into strategies and geographies they didn’t fully understand.

Hedge fund traders will need an extra edge in 2011 to find and land a new position. What are your thoughts? Join the discussion below.

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