Quants' Pay Rides Perfect Storm

Quantitative professionals working in the fixed income market are highly sought after, and highly paid - on both sides of the Atlantic. But according to a recent salary survey, remuneration in the sector could be on its way down.

Fixed income derivative products have been flavor of the month for more months than most people care to remember. Recruiters say good quant researchers working in the sector are pursued by every bank in the market, and handsomely rewarded for their efforts.

Quantitative analysts working with credit derivative products are among the highest earners in both New York and London. A survey of 150 fixed income quant analysts by Mantis Partners, a London-based recruitment firm, found average packages for credit derivatives analysts with 4-6 years experience in London averaged 270,000 ($451,000) for 2004.

Hemendra Rai, a U.S.-focused recruiter at Huxley Finance, says Wall Street packages for credit derivatives analysts with similar experience average around $450,000. Barry Franklin, of Arizona-based recruiter Integrated Management Resources, put U.S. packages even higher at $600,000 to $700,000. "This is the product everyone is looking for right now," he says.

Quant analysts working on exotic interest rate and foreign exchange (FX) products are also benefiting from their sectors' popularity. Mantis found pay for quants with four to six years' experience working on exotic interest rate products averaged 280,500 last year, while FX rates quants with a similar history earned an average of 203,000.

Rai puts pay for mid- ranking U.S. exotic interest rate quants and FX analysts at $400,000 and $450,000, respectively. But Scott Gerson, managing director of Focus Capital, a quant-focused Wall Street recruiter, says packages are more modest: $150,000 to $350,000 is the typical range, he says. People on $400,000 to $500,000 typically have more than five years' experience.

Russell Clarke, a director at Mantis Partners London, says quant pay could become more modest still in some areas. Although pay for FX, commodities and equities quants is still rising, Clarke says current packages on offer in London, including base pay and guaranteed bonuses, are down 20% on totals for last year in credit derivatives and are flat in interest rate exotics: "Credit derivatives hiring has shifted away from trading structuring towards distribution," he says. "At the same time the asset class has matured and there's been a correction in terms of P&L. This is taking its toll on pay for quants."

U.S. recruiters say the new pay modesty has yet to cross the Atlantic. "Pay isn't falling at all," says Gerson, "There is real momentum in the job market: I call it the perfect storm." Rai's description is less elemental, but he says quant pay is robust: "There's a willingness to pay more for talent: it's a small community and hiring managers are not scared of selling their roles hard."