A wave of executives leaving Wall Street to work for hedge funds has been occurring the past few years, but now some of those employees might be coming back, according to the Financial Times. The hunt for long-term capital, wanting to build more than a short-term moneymaking machine, and the need for resources are fueling the desire to come back to the Street. Also, investment banks and other financial institutions are starting to invest directly in hedge funds or hire executives from them, further fueling the trend. “If Wall Street wants to attract these people in a way that is acceptable to shareholders and boards, they are not going to do it by paying hedge fund-like salaries, so they are resorting to acquisitions,” said one New York-based hedge fund banker. The large players offer employees the backing of a large organization and, in some instances, senior roles at group level to make sure they don’t leave. This is the case for Gil Caffray, vice-chairman of FrontPoint Partners, a hedge fund conglomerate, who is now also the vice-chairman of Morgan Stanley’s fund management unit after the investment bank bought his company late last year. Caffray said that Morgan Stanley convinced FrontPoint’s management of its commitment to building a world-class alternative investment franchise, with Front-Point as a cornerstone of that effort. “It does give us the ability to attract and to retain very high quality investment teams,” Caffray said. FrontPoint’s investment expertise and distinct set of strategies provide Morgan Stanley’s existing clients with a broader range of alternative investments than they had access to before, said Stu Bohart, head of alternative investments at Morgan Stanley Investment Management. Besides Caffray, other employees of FrontPoint’s management team have also assumed leadership roles with Morgan Stanley. The move of hedge fund executives back to the Street also comes at a time when hedge funds and investment banks are converging on common territory. More and more hedge funds are being viewed by bankers as partners in the capital markets, especially in buy-out deals. Investment banks are starting to become similar to hedge funds in certain areas. “You are certainly seeing more convergence between hedge funds and Wall Street, be that through acquisitions of hedge funds by Wall Street firms, staff moving from one to the other, or the two working in concert on restructuring and turnarounds,” said one fund of hedge fund managers. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.
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