Salary survey: Equity derivatives pay soars
Equity derivatives staff have won large bonus increases this year and are in growing demand as the market for derivatives expands. Headhunters said staff with hedge fund sales experience are particularly valued.
Malcolm Pace, a consultant in equity derivatives at Global Executive Search, a headhunter, said bonuses for top performing equity derivatives staff in Europe were 100% higher than last year, while mid-ranking performers received 20% to 50% more.
The rises followed a fall of 40%-50% on average last year, Pace said.
Banks say hedge funds are increasingly important clients, especially in the German market where legislation restricting hedge fund investment was eased last month.
The head of structured products at a European bank said the value of equity derivatives issued globally in 2003 grew 20%-25% last year. 'Low interest rates meant the average investor was not very interested in putting money on deposit or in bonds. They were also weary of the cash equity markets and so were more interested in structured products,' he said.
Banks recruiting equity derivatives specialists in 2003 included Société Generale, Deutsche Bank, CSFB, UBS and BNP Paribas. Barclays Capital was also active and headhunters expected it to continue hiring in 2004, particularly in continental Europe.
Other recruiters this year are likely to include Merrill Lynch, JP Morgan, Morgan Stanley, Goldman Sachs, Lehman Brotherrs and Bear Stearns, according to headhunters.
Alex Blair, a search consultant at Mantis Partners, said demand is strong for salespeople and traders to work with exchange traded or over the counter (OTC) equity derivative products, as opposed to more complex tailored structured products.
Simon Worthington, a consultant at Sheffield Haworth, said demand for flow specialists was related to growth in the hedge funds sector: 'Hedge funds tend to prefer the exchange traded vanilla products which are easier and cheaper to deal with.'
As the volume of OTC equity derivatives sold to hedge funds has risen, Worthington said salespeople in this area had benefited. 'Eighteen months ago, structured marketers were earning a lot more than people in OTC. But higher hedge fund volumes mean pay in the two areas is now comparable.'
Salespeople in equity derivatives typically earn between 3.5% and 5% of revenue production, said Worthington. However, Pace said high bonuses this year have put pay-out ratios in the top US and European houses at 5%-7% of revenues, with tier two houses paying 8%-12% of revenues.
Pace said bonuses next year should be even higherr than this year for many staff. 'Million-dollar-plus bonuses are back, even for VPs. It will be the best year for bonuses since 2001.'
