Daniel Stern: Volcker Rule Driving Talent to Hedge Funds

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The Volcker Rule is driving talented traders to leave large, well-known Wall Street investment banks for hedge funds, Reservoir Capital founder Daniel Stern said at the Skybridge Alternatives (aka SALT) investor summit Wednesday.

"I get a call a day from head hunters looking to place talent," he said.

The Volcker Rule, part the Dodd-Frank financial reforms, limits proprietary trading by investment banks.

"The best talent is coming to market within the next year," Stern said.

Stern also said that people were underestimating the way the Volcker Rule would impact market making and liquidity at investment banks.

Capital for market making at investment banks is going to become very limited, Stern predicted. Some hedge funds will have to step in and begin acting like market makers in less liquid credit instruments, he said.