The Swiss are scheduled to communicate bonus numbers today. In the meantime, those working in UBS's O'Connor fund are preemptively pissed re: the news their compensation will be structured as though they were regular old employees of the bank. What are they doing about it?

Making phone calls, is what!

Traders are contacting other hedge funds and recruiters after UBS AG (UBSN) moved them to a pay structure used throughout the firm, said the people, who requested anonymity because their plans to leave aren’t public. That resulted in immediate cash bonuses falling by 50 percent to 1 million Swiss francs ($1.06 million), and some deferred pay being tied to five-year UBS bonds rather than reinvested in O’Connor funds, the people said. The potential defections show the struggles the biggest banks may face in retaining top traders at internal hedge funds amid shareholder and regulatory pressure on pay and rules that limit how much of a firm’s capital can be invested in the funds. “This structure is analogous to working within a bank,” said Ilana Weinstein, chief executive officer of New York-based search firm IDW Group LLC. “But what’s the likeness of O’Connor? It’s a hedge fund, and this structure is not competitive with working at another hedge fund.” [...] The unit’s core Global Multi-Strategy Fund returned more than 8 percent to investors last year and more than 10 percent annually since its June 2000 inception, one of the people said. O’Connor’s trading teams report to Chief Investment Officer Dawn Fitzpatrick and the group’s traders include portfolio manager Kipp Schrage, the person said. All employees who made more than $250,000 in 2012 had at least 60 percent of their pay exceeding that amount deferred, UBS said earlier this year. The firm also lowered its cap on immediate cash bonuses to 1 million francs last year from 2 million francs for 2011. O’Connor traders will get half of their deferred pay in five-year debt that can be canceled if UBS’s Basel III tier 1 common ratio drops below 7 percent, the people said. The ratio under fully-applied Basel III rules stood at 9.8 percent on Dec. 31.

Unfortunately, while making a show of talking to recruiters might work at another firm, to the extent it'd get management to sweeten its offers for fear of losing talent to competitors, UBS doesn't appear to be concerned about the potential defections. According to alternative and quantitative investments head Bill Ferr, people aren't working there for the money anyway.

“We believe our people choose to be here based on a combination of our team culture, access to client capital and UBS distribution,” Ferri, said in an e-mailed statement.

UBS Said to Face O’Connor Hedge-Fund Defections on Bonus [Bloomberg]