Paying for personal performance waning at hedge funds, rising at banks

As bankers and hedge funds harmonize the way they pay, there are suggestions the flow of bankers to the hedge fund industry may be waning.

"Compensation at banks and hedge funds is tending to move in the same direction,' says David Durham, managing director of search firm Durham Consulting. "They are learning from each other."

Durham says some hedge funds have begun rewarding employees for group performance, as opposed to their traditional strategy of paying individuals a percentage of the profits they themselves make. At the same time, he says banks are adopting pay formulae based on individual performance, and moving away from their group-focused models: "Compensation strategies are converging."

Durham says the convergence in pay strategies could be one reason for bankers' alleged reticence to move to hedge funds - something he claims not to have seen.

Institutional Investor reports that the flow of bankers to hedge funds is ebbing. Quoting Nicholas Roe, Citigroup's head of European equity finance, it says hedge funds are no longer seen as the pot of gold at the end of the rainbow that they used to be.

"People don't necessarily feel that running a hedge fund or moving to a hedge fund these days is a get-rich-quick scenario," said Roe, "If anything, working for an investment bank offers some stability and you haven't got the headache of running your own business."