Junior convertibles employees lose out

Hanover Financial Markets, the recruitment firm, said some heads of sales, trading and product desks in convertible divisions earned bonuses worth up to 1.2m (€1.8m), 1.3m, and 2m respectively.

Duncan Gray, a convertible bond specialist at Hanover, said bonuses for convertibles were generally 20% to 25% higher than comparable figures for 2002 but junior staff received substantially less than they were expecting. Gray said: 'Multi-million dollar bonuses have returned but only for a small minority. For a lot of people rewards have been well below expectations.'

He said some convertibles staff were paid entirely in deferred stock and that deferring bonuses had become more common. 'In some cases bonuses have been deferred by up to five years.'

Junior sales staff can expect salaries of between 50,000 and 75,000 plus bonuses of 30% to 125%, according to Gray. Junior traders' salaries are between 45,000 and 80,000, with bonuses from 30% to 150%. Junior research staff can expect salaries of 45,000 to 70,000, plus bonuses of 30% to 150%.

Poor bonuses for some came despite a record year for European convertible bond issuance in 2003. Issuance has been less impressive during 2004, with European volumes at just €710m, according to Dealogic, the investment banking research firm.

Banks have not been deterred from hiring. In January, ABN Amro Rothschild recruited Chris Coleman, former head of Europe and Asia convertibles trading at Morgan Stanley, to become head of convertibles trading. Morgan Stanley also lost two other members of its convertibles team to hedge funds.

Mark Horlock, a convertibles recruiter at Alexander Mann, said there was little hiring last year with the result that many banks will be looking to upgrade in the next nine months. He said: 'Although last year was strong, it came on the back of a difficult 2002. Teams were considered correctly geared.'

Industry practitioners remain cautious. Steven Roth, head of convertibles trading at Deutsche Bank, said last year was likely to prove exceptional: 'Convertibles benefited from the favourable credit environment in 2003. This year will be less good in terms of credit. Volatility is at an historic low and may remain there for a while and straight equities are becoming more popular.'

Lorraine Lodge, head of convertibles research at Nomura International, said prospects for 2004 looked more positive in Asia and Japan. She said: 'If volatility picks up and interest rates remain low, we expect greater issuance in Europe further into the year.'

If banks do decide to upgrade their convertibles teams they may not have to look very far. In July last year, Nomura poached 14 members of ING's 25-strong convertibles team for its new convertibles division. The nine remaining team members were made redundant when ING closed its convertibles division in January.