Fixed income researchers trump equities counterparts

City of London: Research bonuses going down; junior credit salaries going up

Two new salary surveys paint a conflicting picture of conditions for fixed income researchers and credit analysts in the City of London.

A survey by recruitment firm EM finance found bonuses for fixed income researchers in London plummeted in 2004. But a separate survey by rival recruitment firm Morgan McKinley, suggests junior credit analysts in London are earning more than ever before.

EM Finance surveyed 200 employees in the fixed income research sector, and found research associates working with fixed income products such as investment grade and high yield corporate bonds earned base salaries of between 45,000 and 56,000 in 2004, plus a 20,000 to 50,000 bonus.

Senior analysts earned in the sector earned base salaries of 50,000 to 80,000 and bonuses in the 10,000 to 60,000 range; lead analysts earned 80,000 to 120,000, plus a 20,000 to 80,000 bonus.

Rebecca Hogg, a consultant at EM, says bonuses for fixed income researchers were down an average of 50% in 2004 compared to 2003. 'There is a general trend for bonuses to be down across research,' she says. 'Equities bonuses fell even more - by around 75%.'

Morgan McKinley's survey, which covered 287 junior credit analysts and 50 financial institutions, is more upbeat. It found junior credit analysts, who analyse the risk associated with loans to corporate customers, enjoying salaries 10-15% higher than a year ago.

'Demand at the junior end has pushed up salaries,' says Christine MacKenzie of Morgan McKinley's credit division. 'Analysts with 2-4 years' experience can now earn between 35 - 45k as opposed to around 30 - 40k this time last year.'

MacKenzie says banks need additional credit analysts as they expand their loan portfolios and trade at the edge of their credit limits. Juniors are particularly needed because banks hired insufficient graduate in 2002 and 2003.

By comparison, Hogg says falling bonuses for senior researchers of traded fixed income products reflect lacklustre hiring. Monima Siddique, at specialist recruiter City Analytics agrees: 'Unless you're specialised in researching complex derivatives, there's no new headcount this year', she says, 'It's all replacement.'

Top fixed income researchers are able to move to the growing number of debt and credit-focused hedge funds, says Siddique. Last month, for example, Stephan Michel, co-head of European credit research at Barclays Capital moved to Cairn Capital, a specialist asset manager with a fund of around $100m.

Paris: High yield and structured products drive demand

Recruiters say banks in Paris are looking for fixed income researchers to work with high yield products, and complex derivatives.

'Everyone's looking for skilled high yield researchers now,' says Antoine Morgaut, managing director at recruiter Robert Walters in Paris. 'But it's difficult to find the right profile. They want international exposure, good corporate knowledge, and good quantitative skills.'

With between five and seven years' experience, the right high yield candidate can command a base salary of €100,000 plus a €50,000 bonus, says Morgaut. This compares to a base salary of €80,000 and a bonus of €40,000 for researchers working with vanilla investment grade bonds.

Morgaut says French banks are also hiring quantitatively-focused fixed income researchers to support proprietary traders. Denis Marcadet, managing director at Vendômes Associés, says the role of the fixed income researcher is changing as a result: 'Some banks have stopped publishing external research reports and are redirecting research services internally.'

Recruiters say Credit Suisse First Boston, Société Générale, Crédit Agricole, Calyon, BNP Paribas, Natexis and CDC Ixis are looking for fixed income researchers to support trading teams. Researchers working with traders can earn premiums equivalent to or greater than researchers in the high yield sector.

Wall Street: Demand for fixed income researchers warming up; quant researchers already hot

Peter Arian, managing director at Wall Street recruiter Analytic Recruiting, says demand for fixed income researchers in the US is warming up: 'There's been a pick up in demand for researchers who can work on things like single name credit default swaps.'

Demand reflects soaring growth in the CDO market. JP Morgan estimates the global value of CDOs will rise 50% between 2002 and 2005, to $445 billion. By comparison, information provider Dealogic says the value of new issues in US debt capital markets fell 20% in the first quarter of 2005, to its lowest level since 2001.

Arian says researchers are moving into CDOs from investment grade bonds: 'The underlying research approach is the same.' He says pay is up 20% versus 2004: 'A junior fixed income researcher can expect a total package of $175,000 to $300,000.'

But a rival research recruiter says demand is hottest for quantitatively-focused fixed income researchers to work with proprietary traders: 'Banks are looking for people who can think out of the box and on their toes. We're seeing some big premiums for the right profiles. - Candidates making $350,000 to $400,000 have been coming in at $750,000.'

Banc of America Securities, HSBC Securities and RBS Greenwich Capital have made senior fixed income research hires in the US this year. Banc of America hired Stephen W. Weiss from Bear Stearns as a managing director and senior media and cable analyst on its fixed income research team. HSBC hired Arthur Tetyevsky, a top investment-grade strategist from Lehman as its chief U.S. credit strategist. RBS hired Kris Grimm, a credit research analyst covering the auto sector, also from Lehman Brothers.

ABN AMRO has been letting people go, however. The Dutch made 30 redundancies in its US fixed income research team in March.