these kids that defected to hedge funds(ZT)

Bonuses on Wall Street Threatened by Credit Crunch...	qqq bear	NEW 8/22/2007 8:11:51 AM
Bonuses on Wall Street Threatened by Credit Crunch By Jenny Strasburg and Christine Harper Aug.22 (Bloomberg) -- The credit-market freeze that's paralyzing leveragedbuyouts, mergers and myriad computer- driven trading strategies may cutWall Street bonuses for the first time in five years. ''There'sa lot of pessimism out there,'' said Gary Goldstein, chief executiveofficer of executive-search firm Whitney Group in New York. ''Lookingat the world today as we see it and the impact the crunch is likely tohave, it looks like bonus pools will decline.'' Bonuses, thefinancial industry's annual rite of compensation typically calculatedas a multiple of salary, probably will decline as much as 5 percentfrom 2006, according to Options Group, the New York-based firm that hastracked pay and hiring trends for more than a decade. While the payoutsoften far exceeded the average of $220,650 at the biggest U.S.securities firms last year and increased as much as 20 percent from2005, the subprime-mortgage collapse already has drained the punchbowl. Hardest hit will be employees who create and sellsecurities backed by mortgages or pools of debt, Options Group said.One out of every three people in those roles may lose their jobs unlessbusiness picks up by the end of the year, the firm estimates. Bonusesmay fall as much as 40 percent. Hedge Funds Hedge-fundinvestment managers, whose average payout climbed as much as 15 percentlast year, may see a drop of 5 percent to 10 percent in 2007. Bonusesfor employees in fixed- income units may fall as much as 10 percent,compared with a 10 percent gain last year, Options Group estimates. Exceptat the most junior levels, traders and bankers receive most of theirannual pay in year-end bonuses that are determined in part by therevenue produced by the individual, their division and the firm as awhole. The average bonus per employee at Wall Street's five biggestfirms rose 18 percent in 2006, according to Bloomberg calculationsbased on company reports. Individual bonuses vary, with someadministrative staff receiving nothing and executives such as LloydBlankfein, Goldman Sachs Group Inc.'s CEO, getting more than $50million on top of his $600,000 salary. Even Blankfein's pay, which isbased partly on the firm's operating results and stock performance, maybe lower. Goldman's stock, after climbing 56 percent last year, hasdropped 12 percent in 2007. Revenue, which gained 49 percent in 2006,rose 11 percent in the first half of 2007. The AMEX Securities Broker/Dealer Index, which includes Goldman shares, has declined 8 percent this year. Lucas van Praag, a Goldman spokesman, said Blankfein wouldn't be available for comment. Time for Turnaround Recruiters,who are seeing a pickup in resumes from hedge funds and leveragedbuyout firms, cautioned that it's too soon to know what will happen bythe time banks start bonus discussions, typically in October. They alsonote that traders involved in equities, commodities and distressed debtare having a good year and are likely to reap bumper payouts. ''Thisis the quarter that is going to determine whether compensation is goingto be lower or not,'' said Michael Karp, CEO of the Options Group,which bases its estimates on interviews with senior industry executivesand information gathered by the firm's network of consultants. Thecrisis that started with the mortgage loans to the riskiest borrowershas sent equity and bond prices worldwide on a rollercoaster ride. Themarket for mortgage-backed securities has dried up, hurting those whotrade the bonds or sell them to investors. Investment banks haven'tbeen able to find buyers for leveraged-buyout loans. Prime brokers maysee fees drop as some hedge funds close and others reduce borrowing. Resumes Arrive Fundsthat have already shut or failed this year include two credit poolsmanaged by Bear Stearns Cos., UBS AG's Dillon Read Capital ManagementLLC and Sowood Capital Management LP of Boston. ''We'realready seeing a lot of resumes from hedge funds, and we're seeing themat the more junior level, a lot of these kids that defected to hedgefunds for more money or a better lifestyle,'' said Deborah Rivera,founder of the Succession Group, a New York-based executive-search andconsulting firm. ''We're seeing resumes from private-equity funds thathave also let some people go.''...