Jobs still on offer in equities portfolio trading

The head of UK sales at a big portfolio trading house said: 'There is not a huge amount of hiring in portfolio trading. But there are jobs and when just about every area in every firm in every nook and cranny in London is laying people off, a handful of vacancies in one sector feels like a boom.'

The head of portfolio trading at a rival bank agreed: 'Portfolio trading is much more buoyant than any other equities sector.'

Portfolio trading is the purchase or sale of a number of stocks simultaneously. The NYSE defines portfolio trades as those involving more than 15 stocks, with a minimum value of $1 million altogether.

Trading an entire portfolio is cheaper and easier than undertaking block trades, where traders might sell many different stocks separately. New technology enables portfolio traders to check their performance quickly and slice the portfolio into smaller and more manageable tranches.

Combined with factors such as the Myners report, which has put the spotlight on trading costs in the UK, this has contributed to strong growth in portfolio trading, or programme trading as it is also called.

A report by the consultancy Greenwich Associates said portfolio trading accounted for 21% of European share trading volume in 2001 and is likely to account for 30% in 2003.

Hence hiring is up, albeit not enormously. 'The market is small and very tight,' said Paul Tapp, a recruitment consultant at Longbridge. A head of portfolio trading in a bank said: 'It is a tiny, tiny market at the top. There are only 10 really senior personnel across the whole of Europe.'

Mark Horlock, a recruitment consultant at Alexander Mann said the bulk of demand is for staff at vice president level. One head of portfolio trading confirmed this: 'Each house needs a senior sales person, but there are more opportunities for younger guys with 3-4 years' experience.'

Not everyone is suited to portfolio trading. Quantitative skills are required, as is familiarity with derivatives, which are widely used to hedge against risk in portfolio trades.

'Portfolio traders need a strong technical and mathematical grasp of various scenarios,' said the head of portfolio trading at a leading bank.

There is also plenty of competition for vacancies. Horlock said successful candidates are almost all experienced and drawn from existing portfolio trading teams. In the past, many came from a cash sales or equity derivatives background.

Internally selected candidates fill many positions and junior staff are drawn increasingly from the pool of graduate recruits.

'Nowadays most graduates are coming to our desk and deciding they want to stay. In the past people wanted to go on to equity cash sales and trading,' said a portfolio trader.

It is not difficult to see why portfolio trading is so popular. Prospects and pay are better than for ordinary cash sales.

Base salaries for senior portfolio trading staff are typically between 90,000 (€137,000) and 120,000, headhunters said. Horlock said managing directors usually receive a total package of more than 800,000; but this year bonuses have been between 30% and 80% down.

Vice presidents in portfolio trading can expect a base salary of at least 60,000, with total packages this year no more than 200,000.

Associates' base salaries are typically 40,000 to 60,000. Horlock said associates suffered most from bonus cuts this year. Some received nothing at all.

There are two types of job in the portfolio trading market: those for risk traders and those for agency traders.

Most vacancies are for agency traders, who implement portfolio trades for a fixed fee. Margins in the agency business are low; pay is accordingly at the lower end of the scale.

Conversely, risk traders can earn higher commissions. They risk their bank's own capital.

Risk traders are few and far between, but their pay can be more than 1,000,000.

Portfolio trading is a costly and difficult business in which to build a franchise. But some headhunters expect JP Morgan, Bank of America, Merrill Lynch and Dresdner Kleinwort Wasserstein to be among the firms hiring in 2003.