Amaranth underscores need for risk managers

The Amaranth debacle could prompt banks to add headcount to risk management teams within their prime brokerage businesses.

"Amaranth clearly shows the need for prudent risk management policies within prime brokerage firms. There's an absolute need for it," says Steve Yendell of recruiter Selby Jennings. "We've already seen a bigger emphasis on this from our clients. Thanks to what's happening with Amaranth, this can only increase."

Morgan Stanley reported record results from its prime brokerage business yesterday. However, thanks to the problems at hedge fund Amaranth Advisors LLC, which is rumoured to have lost as much as $6bn since the beginning of September through bad bets on the natural gas market, Goldman Sachs is understood to have suffered prime brokerage losses.

According to Reuters, Amaranth had a total of nine prime brokers working on its behalf.

Adrian Marples, risk specialist at recruitment firm Sheffield Haworth, tells us hiring for prime brokerage-related risk roles was high already. "We have seen an increase in demand for prime brokerage risk managers this year," he reflects. "Teams are expanding and prime brokers are looking for people to actively market their risk offering. We have also seen people moving from credit risk into front office prime brokerage, which is something I haven't seen before."

And as for pay? Yendell says, "I think pay going up will depend on how the market reacts to the risk issue. If there's a swell in demand, naturally salaries will increase."