Morning Coffee: Millennium founder has got an idea for cutting hedge fund pay. Deutsche Bank tells traders it’s time to do something for the shareholders

efinancialcareers.com:

You wouldn’t necessarily think that multistrategy hedge fund “pod shops” had much in common with the characters from “Sex and the City”. But Millennium’s Izzy Englander is lamenting that successful portfolio managers are like New York men over the age of 30 — all the good ones have been taken.

Specifically, the pod shops have grown in market share, and locked up their best performing managers with long and bindingnon-compete agreements.  That means that the talent pool is artificially restricted, and firms like Millennium are faced with a choice between settling for second best, making financial sacrifices or going through a sequence of exciting but ultimately disappointing relationships in the hope of finding The One.

Although it might enliven a quiet Friday afternoon on the trading floor to decide which of Millennium, Citadel, Balyasny and Point72 are most like Carrie, Charlotte, Miranda or Samantha, the most interesting point here is the idea that non-compete agreements are pushing hedge fund compensation up.  Most employees would instinctively believe that they would work the other way.

But the paradox is more apparent than real.  If non-compete agreements are causing a “talent bubble” and pushing up salaries for new hires, then that would imply that they’re holding compensation down for existing employees to a similar extent.  The hiring premium for the small number of proven portfolio managers who are free to move is mainly a reflection of the inability of much of the labour market to take advantage of their relative scarcity.  It’s enough to give you a fear of commitment.

That’s why lots of places like New York and California (and London) are legislating to ban or restrict non-compete clauses. However, the