Salary survey: Exotic credit traders' pay rises

Exotic credit traders and credit structurers took home bumper pay packages in 2003, a survey shows.

London-based managing directors in top tier firms earned an average of 1.625m (€2.45m) in credit trading and 1.225 in credit structuring, including bonuses, according to the report by Napier Scott, a recruitment firm.

Shaun Springer, chief executive of Napier Scott, said this was a rise of 50% to 60% compared to 2002.

This was partly the result of a big shortage of traders with the right skills, he said. It also reflected growth in the market for single tranche CDOs and a push into indices trading.

Napier Scott said its survey was based on interviews more than 100 traders, or more than 10% of those work in the structured credit market in London.

First and second year associates also benefited from rising pay, with average total packages of 160,000 in exotic trading and 150,000 in credit restructuring in tier one banks.

Springer said this is 30% to 40% above pay for associates working in some other areas of fixed income. 'There is huge demand for people with two or three years' market experience. They are a scarce commodity. Heads of desks are looking for someone they can bring in at low cost, without any political baggage.'

The survey found pay in exotic credit trading and structuring in London is now as much as 30% higher than on Wall Street. Springer said this was due both to the decline of the dollar and to European investors' higher acceptance of new exotic products, such as single tranche CDOs.

US traders currently based in London might return to the US ahead of a probable increase in exotic products trading on Wall Street, he said.

Traders working with credit default swaps also did well in 2003. London-based managing directors received an average package of 1.1 m in top tier banks, according to the survey. Vice presidents earned 510,000.

Senior associates earned 275,000 and junior associates 150,000. Springer said 2003 bonuses for integrated credit traders were as much as 50% above those for 2002.

Recruitment by hedge funds helped push up compensation for credit traders last year, said Springer. He said hedge funds were attractive employers because of their lack of bureaucracy and higher pay:

'It's quite simple: as a trader you can make 20m for your bank and keep 4% of that for yourself. If you work for a hedge fund, you might keep 20% yourself.'

He said pressure for pay to rise will increase as the number of hedge funds grows.