Traders Leave Hedge Funds, Return to Banks

Traders who fled banks for hedge funds are on their way back to Wall Street.

This month, Barclays Plc hired Chris Leonard, a founder of two hedge funds in the decade since he left JPMorgan Chase & Co., to turn around US rates trading. At the end of last year, ex-bankers Roberto Hoornweg and Chris Rivelli, both of Brevan Howard Asset Management, left that London hedge fund for banks, Bloomberg reported.

Recruiters say these moves and others aren’t just the usual attrition: banks in New York and London are interesting employers again a decade after the financial crisis, and may get involved in more proprietary trading if President Donald Trump eases regulatory burdens. There’s also another factor: many macro funds just don’t make money anymore.

“In the last quarter of the year or first quarter of 2018, you will find more people leaving the hedge funds to join banks to run proprietary money,” said Jason Kennedy, chief executive officer of the Kennedy Group in London, which hires for banks and hedge funds. “The banks will become more attractive in terms of jobs and pay.”

That’s due to expectations that Trump will be good for bankers. In a report released June 12, the US Treasury Department urged federal agencies to re-write scores of regulations that Wall Street has frequently complained about in the seven years since the passage of the Dodd-Frank Act. They include adjusting the annual stress tests that assess whether lenders can endure economic downturns, loosening some trading rules and paring back the powers of the watchdog that polices consumer finance.

Meanwhile, “the bar within the hedge-fund world has increased dramatically over the last year,” Kennedy said. Hedge funds, stung by years of underperformance and revolts from investors, are increasingly under pressure to dump their traditional 2% management and 20% performance-fee model, curtailing their ability to hire and retain talent.

Louis Bacon’s Moore Capital Management, Tudor Investment Corp., Och-Ziff Capital Management Group LLC, Canyon Capital Advisors and Brevan Howard were among money managers who cut fees last year. More hedge funds shuttered last year than started, a trend that continued in the first quarter of 2017, according to data from Hedge Fund Research Inc.

“It is not surprising that traders are looking for a safe haven, and if banks have more room to operate these moves could make sense,” said John Purcell of Purcell & Co., a London-based executive recruitment firm.