Exotic credit derivatives are the place to earn money

A salary survey conducted by Sheffield Haworth, the City of London headhunting firm, says that the need for complex hedging solutions in a bear market is driving demand for exotic credit derivatives traders; pay is rising accordingly.

David Reynolds, a director in the global markets division of Sheffield Haworth with responsibility for derivatives recruiting, said that pay will be even higher in the future: "Exotic credit traders are the cutting edge of derivatives solutions and are in massive demand. Salaries will continue rising; this is still a new and growing market."

Sheffield Haworth found that senior exotic credit derivatives traders in first tier banks are on total packages of between $1.18 million (€1.21 million) and $1.73 million.

Although the size of the credit derivatives market doubled between 2000 and 2001, higher remuneration was not a feature of the sector as a whole. Poor overall market conditions meant that pay fell by up to 20%. David Reynolds said: "There are still a lot of people taking out credit protection, but lower volumes in the equity market have affected remuneration across the board."

The average salary for managing directors in credit derivatives at first tier banks was between $180,000 and $230,000 Sheffield Haworth found. This held true for positions in sales and marketing, structuring and trading. Bonuses varied between $800,000 and $1.5 million, with exotic credit derivatives traders receiving the most.

Salaries were up to 20% higher in second tier institutions. Second tier banks are increasingly prepared to pay more in order to entice high calibre individuals and enter the market, said Sheffield Haworth. However, bonuses at second tier institutions tend to be less, with the result that total compensation can more than one third lower.

The survey also showed that although trading is the most lucrative place to be for senior credit derivatives experts, juniors are better off in sales or structuring. Reynolds said that this was because of junior traders' relative lack of clients: "Traders start slowly but their pay rises exponentially when they build a portfolio and have a history of success."