Salary Survey: Good times for prime brokers

Positions are well remunerated, and with prime brokerage basking in the glow of the still-recent hedge fund boom, staff can expect to be well looked after.

Prime brokers act as the back office to hedge funds, providing a range of services from clearing, settlement and custody, to sales and relationship management and more esoteric assistance, such as securities lending and so-called 'synthetic prime brokerage services.'

London: entry-level staff needed

Entry-level prime brokers are sought after in the UK where UBS, Bear Stearns and Merrill Lynch hired senior staff last year. Joe Astill, a specialist in prime brokerage recruitment at Sheffield Haworth in London, says there is renewed emphasis on hiring and retaining juniors to bring them up through the ranks.

Astill says associates working in prime brokerage in London can earn total packages up to 120,000, while VPs can earn up to 250,000. He said bonuses this year are likely to be up 10%-20%, with large variations between banks.

Prime brokerage is likely to remain a hot area in Europe in 2005. Last November, Calyon, the French investment bank, and Scotia Capital, Canada's second largest investment bank, both announced plans to enter the market. Deutsche Bank and Merrill Lynch are in the process of setting up fixed income prime brokerage operations.

Wall Street: Juniors needed to move up the chain

A salary survey by the Options Group, a Wall Street search firm, found US associates in prime brokerage can expect base salaries of $85,000 to $95,000, plus a bonus of $50,000 to $85,000. VPs can expect a base of $115,000 to $150,000, plus a bonus of $220,000 to $400,000.

A spokesman for the group says US banks have a real need for mid-ranking and junior staff that can be trained on the job: 'There is a big push for people who can move up the chain.'

JP Morgan, Merrill Lynch, and UBS were among the banks hiring senior prime brokers in New York in 2004. Goldman Sachs and Morgan Stanley dominate the business on both sides of the Atlantic, servicing 70%-80% of hedge funds worldwide.

Technicians required

Growth in synthetic prime services, a financing tool, is prompting banks to cast prime broking hiring nets into new territory. The Options Group says equity derivatives specialists are popular, along with recently qualified accountants and lawyers, both with hedge fund experience.

Because of the complexity of synthetic services, a technical background is preferred: 'You will need to know what a variant swap and a performance swap is,' warns the spokesman. 'Interviews are becoming a lot more technical.'

Hedge funds beckon

As well as the healthy pay and rosy prospects within banks, the other good news about prime brokerage is that it can be possible to move into the more exciting and better paid world of hedge funds. Stuart Hendel, a former managing director in Morgan Stanley's prime brokerage division, made just such a move last July by joining Eton Park Capital Management, a new $3 billion hedge fund set up by a former star equity banker at Goldman Sachs.

Sheffield Haworth's Astill says the drift to hedge funds and rival prime brokers is part of the problem: 'Banks want to keep hold of prime brokerage staff for more than two or three years, after which they typically leave in search of more money and career progression elsewhere.'