The vice-chairman of UBS has acknowledged the threat posed by hedge funds to investment banks to secure the best young talent.

Ken Costa, who is also chairman of Europe, Middle East and Africa at UBS investment bank, said: "The big challenge for banks is to grow the next generation of talent. Bright people who used to go and ‘do something in the City' are finding other avenues more exciting, such as hedge funds. It is a challenge for investment banks to find ways of attracting entrepreneurial talent."