Wall Street talent wars

NEW YORK (CNNMoney.com) -- Wall Street bankers have jumped to private equity in droves in recent years, but the tide may be starting to turn.

Huge paychecks and the opportunity to work on the front lines of one of the hottest games in town have given private equity firms the upper hand when it comes to attracting top talent - often at the expense of investment banks.

"The trend for the last few years has been investment bankers, especially traders and senior management, migrating to hedge funds or private equity," says Michael Karp, CEO of executive search firm Options Group.

The unabated flow of executives to private equity has been a result of sizzling buyout activity, says Alan Hilliker, a former investment banker and head of the private capital group at executive search firm Egon Zehnder International.

"By and large, private equity has been able to get anyone they want," said Hilliker. But that's starting to change. "Everything is picking up, and investment bankers are making big money again," he said.

Driven by the loads of money sloshing around the world, global M&A deal activity has already topped $2 trillion this year, and is on pace to top last year's record $3.6 trillion, according to Thomson Financial.

The deal frenzy has helped line the pockets of many Wall Street firms and executives. A report recently issued by executive compensation firm Johnson Associates forecasts that bonuses for investment bankers will increase 10 to 15 percent this year.

But the move to private equity oftentimes is about more than just money. Many banking executives make the move in order to work at more streamlined outfits where decisions can be made swiftly and efficiently, experts say.

And investment banks are doing more in this regard, according to Options Group's Karp. "They're giving [executives] more leeway and allowing them to take more risk when doing deals," he said.

Wall Street firms are also attracting talent by becoming heavyweights in the private equity world in their own right. At $20 billion, Goldman's latest buyout fund - the largest ever - puts it in the same league as private equity titans like Blackstone Group.

Meanwhile, the hedge fund arm of J.P. Morgan Chase (Charts, Fortune 500) was recently ranked as the largest hedge fund by Alpha Magazine, and Citigroup (Charts, Fortune 500) named Vikram Pandit CEO of its alternative investments unit last month after the bank bought his hedge fund Old Lane Partners.

As the line between private equity and investment banks blur, expect executives to keep jumping back and forth. Said Hilliker: "Right now neither side has the pure advantage when it comes to taking talent."