Recruiters say US high yield salespeople and traders can increase their pay simply by hopping on a plane across the Atlantic. Despite a difficult few weeks for high yield globally, the discrepancy is likely to persist.
"Below managing director level, most high yield salespeople and traders in the City of London are earning 25% more than their counterparts in New York", says Lee Thacker, a consultant at Highland Partners in the City.
It's a view echoed by Shaun Springer, CEO of London-based search firm Napier Scott. High yield salespeople and traders are paid as much as 35% more in London than New York, says Springer.
Little surprise therefore, that the European high yield sector is littered with US émigrés. Take David Lofts, head of European high yield debt at Jefferies International, Chris Turner, head of European high yield capital markets at Merrill Lynch, or Derrick Herndon, head of European high yield trading at Credit Suisse First Boston (CSFB).
What makes London a golden goose for high yield salespeople and traders? The answer is simple: supply and demand. "There are fewer good high yield people in London and banks looking to build good teams are willing to pay a premium for them," says Thacker.
In April, HSBC hired Julian Gurcel, a senior debt banker from Barclays Capital and Chris Zilla, a senior high yield trader from Morgan Stanley, to spearhead a move into high yield for the first time. Other banks moving into, or returning to the European high yield market during the past six months include Calyon, Société Générale and BNP Paribas.
Hiring is driving higher pay. Alice Stundl, a high yield recruiter at Armstrong International in London, says London high yield teams were paid up as much as a third in 2004 over 2003. "Last year high yield was coming back and banks threw their guys big packages to keep them."
Recruiters resisted attempts to pinpoint current packages for London high yield sales people and traders, citing wide variations based on houses and ability. An excellent senior associate in European high yield sales can expect a total package of more than 400,000 ($700,000), says Thacker. At the other end of the scale, weak senior associates are earning less than 80,000 ($146,000), he said.
By comparison, Mike Karp a high yield recruiter at the Options Group in New York, said associates working in high yield sales and trading on Wall Street can expect packages of between $125,000 and $140,000, and VPs can expect up to $600,000.
Recruiters said the discrepancy is likely to persist, if only because banks in Europe are still hiring. "HSBC, Royal Bank of Scotland, Merrill Lynch and Calyon are looking," says Stundl.
The continuing appetite for hires comes despite a shaky few weeks for the high yield market. Earlier this month Standard & Poors downgraded General Motors and Ford to junk status and flooded the market with over $85 billion of bonds. More than $13 billion of new issues are threatened as a result, with African mobile operator Cell C, and Greek telephone operator Tim Hellas, among those expected to pull forthcoming issues.
This follows a 40% drop in global high yield issuance in the first quarter of 2005 compared to the same period of 2004, according to Dealogic, the data provider.
Privately, European high yield recruiters admit banks may have over-recruited. "They could have been more conservative," says one. "A team of three high yield specialists with knowledge of other debt products would be the safest thing right now."