The top 5 percent of hedge funds have increased the gap betweenthe amount they pay traders and what Wall Street banks offer,recruiter Ilana Weinstein said.

“The chasm there is great, and maybe it's time to stop comparingthe sell side to the buy side,” Weinstein, founder of IDW GroupLLC, said in a Bloomberg Television interview with Erik Schatzkerand Stephanie Ruhle. “It's never been bigger, that divide.”

The biggest investment banks, including New York-based GoldmanSachs Group Inc. and Morgan Stanley, are setting aside a lowerportion of revenue for employee pay amid regulatory pressure andshareholder demands for higher returns. Hedge funds run by Paulson& Co. and Elliott Management Corp. posted yearly gains, andBarclays Plc said this month the industry may see the largest netinflows since 2007.

Greg Fleming, president of Morgan Stanley's wealth-managementdivision, said on Bloomberg Television that the top hedge fundsrepresent fewer than 10,000 people and are not a good comparisonwith the bigger firms.

“Morgan Stanley has a lot of people. We've got 55,000 employees,and we've got a lot of people working with clients, doing a goodjob for those clients, and they're well-compensated for thoseroles,” Fleming said. “It's apples and oranges.”

While the hedge funds are much smaller, the gap in pay has grownso “enormous” that traders who are able to go to the top funds arelikely to leave banks to do so, Weinstein said. Fleming said manythings besides pay factor into traders' decisions on employers.

“The Street and Morgan Stanley still employ some traders thatare very good in specific areas,” Fleming said.

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