The current crisis may prove a blessing in disguise for some Bear Stearns employees - even those who worked at its failed hedge funds.
The credit-market turmoil engulfing Bear Stearns will continue taking a toll on financial markets, but won't harm many careers, recruiters say.
Stung by the collapse of two credit hedge funds it ran, Bear replaced its asset management chief in June and last weekend ousted co-president Warren Spector. But any career taint will most likely be confined to a small number of individuals directly responsible for failed trades, according to recruiters. Indeed, the current crisis may prove a blessing in disguise for some Bear Stearns employees - even those who worked at the failed hedge funds.
"This will create more opportunity for the people that are best-in-class and genuinely know what they're doing," says Jay Gaines, chief executive of Jay Gaines & Co., a search firm serving Wall Street and other industries.
Bear Stearns is well run and is "doing all the right things" to contain the crisis, says Craig Stocksleger, a recruiter specializing in fixed income and structured credit at Comprehensive Recruiting, based in Tempe, Ariz. "I wouldn't encourage anyone to jump ship."
It's not unknown for professionals at troubled hedge funds to become more marketable as their employers' difficulties attract attention. Earlier this year both UBS, after shuttering its money-losing Dillon Read hedge fund, and Goldman Sachs, amid a second year of negative returns at its Global Alpha fund, had to fend off attempts to poach each unit's best individual performers.
Gaines suggests that a similar feeding frenzy might develop around Bear Stearns' most knowledgeable fixed-income professionals, especially if any high achievers get pushed out amid the current housecleaning. "The market is so hungry for people that really understand credit, that meritocracy will prevail and I believe this will strengthen the hand of those that are best-in-class," he says.
"The Street will end up putting more emphasis on grasp of credit, grasp of details, grasp of analytics," he continues. "Bear Stearns was very strong in all those areas. Bear Stearns really knew what it was doing in general, so what happened here was inconsistent with its legacy.... If we had a need for this kind of expertise, I would definitely see a buying opportunity."
Who Could Be Hurt?
Stocksleger says portfolio managers and traders who personally directed poor trades for Bear's High-Grade Structured Credit Fund and High-Grade Structured Credit Enhanced Leverage Fund could find themselves stigmatized. But quant analysts who built models won't be blamed for the funds' failure, he believes.
Likewise, Gaines sees a risk that employers and/or regulators may punish individual risk managers or traders who "looked the other way" or "missed some details" they should have spotted in particular trades. On the other hand, he says, "if you're an earnest professional who knows what you're doing, this will come out right. You shouldn't panic."
He goes on: "Some people may take some temporary bumps. But in the end, for the people reputed to be the good guys in this, there will be opportunity."
That assessment is applicable to Wall Street as a whole. "People I trust seem to feel there is more pain ahead, but that this will pass without killing us," Gaines says of the recent market-wide credit spread blowout and drying up of new LBO financing. "It's premature to look for a doomsday scenario. I would not look for a major shift in the career trajectory of private equity or Wall Street."