Hedge funds pay about 35% of the trading commissions on the exchanges. To attract more of this business, prime brokers are adding recruiting to the normal suite of services (such as trade settlement, financing and consolidated reporting) that they provide. Positions are mainly in the back office and accounting. The advantage for hedge funds is that they do not have to pay the recruiter's fee. This has been done for many years but has been formalized only in the last few years.
As with any resource, there are some obvious conflicts. Banks could hire staff away from one of their clients. They are privy to inside information on the fund if an important person, say a portfolio manager, wants to leave his firm. Other departments at the prime broker may act on this information by reducing the fund's financing.
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