The growing complexity of structured finance products, particularly in securitization, is fueling an ongoing demand for skilled professionals that will likely continue through 2007. But not even a coveted MBA will guarantee admission to the field, since successful candidates often have doctorates and experience in highly technical fields such as mathematics, physics and statistics.
Quantitative skills are now so desirable within structured finance, the industry isn't shy about using the term "rocket scientist" to describe ideal candidates, says Mitch Feldman, President of A.E. Feldman, a New York-based executive recruiting and management consulting firm. Investment banks and boutique firms specializing in securitization are actively recruiting highly educated analysts and structurers, he says.
A back-end industry that services securitized instruments is also growing, generating a demand for positions such as trustees, paying agents, and analysts, who are all involved with overseeing and systemizing payments that arise from securitized products. The skills and experience required for each position varies with the complexity of the deals an employer handles, says Feldman.
Securitization is the process of bundling of loans and receivables that have steady payment streams - such as mortgages, credit card loans and automobile loans - into securities that are sold to investors. Broadly speaking, these products are considered part of the structured finance market. Lenders who extend the underlying loans are able to replenish their cash by selling these securities, which in turn allows them to extend new loans. Investors buy and sell the securitized debt as part of their overall strategy to increase returns.
Since more sophisticated deals are becoming the norm, boutique firms that specialize in securitization are now common. "We'll see a shift in terms of where the hiring is going on," says Feldman. "Investment banks often contract out the structuring of the deal - everything from legal issues, to pricing and assembly." Margins are decreasing since pricing the securities is less of a guessing game. Today, firms rely on computerized mathematical models to project a product's behavior, making it easier for more firms to take on the business, says Stuart Julis, a recruiter at A.E. Feldman specializing in quantitative individuals and risk.
"Candidates must understand how to integrate these products into a fundamental strategy that will increase returns ... They don't just run models," explains Cara Myers, a recruiter for Capital Search Group in Boston. Myers reports increased placements and interest in the field during the past six to eight months. She says that specialists, such as candidates who are knowledgeable about mortgage products or credit default swaps, are in greater demand than generalists.
The ongoing securitization of debt will continue to drive the industry, says Julis. "Unsecured personal loans were never collateralized, and now they are. Things we never looked at before are being securitized."