Fixed-income job market remains flat

Headhunters say hiring by bulge-bracket banks focuses on upgrades - replacing existing staff with more able performers - rather than expansion.

This strategy is highly effective with so many talented staff on the job market, either because they have been made redundant or see little future in staying where they are.

Credit derivatives is an example.

Though still a rapidly expanding area, most banks finished putting their teams in place last year and have little need to hire further. Equally, teams have little room for more bodies to issue or trade bonds, strong though these areas have been.

One headhunter says: 'Often, the banks get rid of someone they don't like, on some feeble pretext or other. They then immediately replace them with one of the many well-qualified people, whose CVs are landing in droves across their desks.'

Matthew Osborne, a consultant at Armstrong, the headhunting firm, says many banks have continued to slowly reduce staff in debt capital markets. Some, notably Morgan Stanley and Dresdner Kleinwort Wasserstein, have been seeking cost savings by combining debt capital markets and equity capital markets teams. Goldman Sachs and Credit Suisse First Boston have also done this in certain areas.

Some banks have gone against the trend by beefing up. Tom Wilson, head of human resources in London at Bank of America (BoA), says: 'We are up slightly in fixed-income headcount in the last two years.'

Hany Kamel, who leads debt capital markets origination for financial institutions in Europe at BoA, says: 'In the second half of this year, there will be continued strength of volumes in origination. Some banks are net hirers in debt capital markets, but recruiting remains selective.'

BoA transferred Kamel this year from New York to London. He works alongside JC Perrig, who joined in March from Credit Suisse First Boston as European head of debt capital markets origination for corporates. Both moves were replacements for existing staff.

Headhunters say other banks expanding their teams include Royal Bank of Scotland (RBS) and Barclays. One says RBS had been trying to poach staff from other banks in recent weeks. Société Générale (SG) says it is hiring, with plans to appoint up to 100 staff in fixed income and equity derivatives in the next six months.

Lacklustre economic growth in continental Europe is taking a toll on recruitment. Vincenzo Trabacca, a consultant at the search firm Antal in Milan, says: 'The market is flat. Banks are hardly recruiting in fixed income, including bonds and credit derivatives. We used to do work for banks, such as JP Morgan and BNP Paribas, but not now.'

However, Nicolas Manset, a consultant at Russell Reynolds in Paris, says banks have been hiring some credit analysts and salespeople and the outlook is improving, partly because of SG's plans. Valérie Barthès de Ruyter, a consultant at Whitehead Mann in Paris, adds: 'Banks are recruiting selectively to further strengthen profitable value-added activities. Some bulge-bracket international banks are developing their local fixed-income coverage.'

However, with the sellside job market still generally slow, some fixed-income specialists are looking to the buyside for their future career path. Petra Rickmeyer, a consultant at the search firm Hoggett Bowers, says: 'We have been trying to interest a number of sellside credit analysts in the buyside with some success. There is often no difference in total pay these days.'

Moves to the buyside include the departure of Caroline Brown, a high-yield credit analyst, from Goldman Sachs last year to join Credit Suisse Asset Management as head of European credit research. Pimco, Gartmore Investment Management and Schroders have also hired experienced credit analysts. In March, Bruce Carnegie-Brown, head of European and Asian debt capital markets at JP Morgan, said goodbye to the sellside by joining Marsh, the insurance broker, as chief executive.

Hoggett's Rickmeyer says one US fund manager recently recruited a number of analysts from the sellside, while another failed to find suitable people. She says: 'Sometimes people do not have the right personality, whatever their skills. And, of course, many sellside people are perfectly happy where they are.'

Simon Bell, a consultant at the headhunter Napier Scott, says some fund managers plan to continue to strengthen fixed-income teams even if the equities rally is maintained. He says: 'They will still need to rebalance their efforts in favour of fixed income, compared to their performance in the past.' Fund managers in Milan, Madrid and Frankfurt are among those interested in limited hiring. In Paris, Manset says fund managers have also been hiring analysts, sometimes from the sellside.

The Centre for Economics and Business Research (CEBR), a think-tank, believes securities staff numbers in the City of London this year will fall 4.2% before rising 2.1% next year and 4.3% in 2005 - though much of this gain will be in equities. Further increases will take securities staff in 2007 up to 84,500 - or 15% higher than the peak in 2001.

Staff numbers in derivatives and foreign exchange will rise more slowly, at around 0.5% this year and in each of the next two years, the CEBR forecasts.

Bonuses in 2002 were mixed. They were higher in debt origination than in 2001, but lower in securitisation, according to a London survey by the headhunter Longbridge. Bonuses in 2003, as well as hiring prospects, will depend largely on whether the fixed-income sector can maintain its strong performance.