Hottest Skill Areas For 2010

With financial institutions' hiring widely expected to pick up early in 2010, it's worth thinking about which skill areas are most in demand in the post-crisis landscape. The following rundown is based on my off-the-cuff impressions, gleaned through speaking with headhunters and professional colleagues and keeping tabs on news and rumors about sell-side and buy-side recruiting plans.

FIG Bankers

While the worst of the financial crisis appears to have passed, it will take another few years to pick up all the pieces. That spells robust demand for "FIG" (financial institutions group) bankers who specialize in arranging mergers, acquisitions, divestitures and other deals involving banks themselves.

At least eight investment banks and boutiques are actively seeking senior FIG bankers and teams, Financial News reports. They include Barclays Capital, Lazard, Jefferies, Fox-Pitt Kelton, Greenhill and Fenchurch. And they've succeeded in luring top dealmakers away from strong boutiques such as Evercore and Moelis that in recent years had successfully recruited many a big-name player from top-tier global institutions.

Within Europe, banks took in $6.9 billion in fees from FIG deals for the year to date, or 42 percent of the total M&A fee pool, according to Dealogic figures cited by Financial News. That's up from 26 percent a decade ago.

Trading Technology

While some model-driven trading strategies (i.e., long-short equity) have had their ups and downs, the need for quants to devise trading models and developers to code them hasn't eased. Indeed, some headhunters see a big burst of hiring coming in this sphere. The continued growth of high-frequency algorithmic trading is a major spur. With institutions using such systems believed to account for more than 40 percent of daily stock exchange volume, dealer firms are racing to build trading systems that can process and execute the consequent high order volumes with minimal latency. For instance, more and more exchanges are building "co-location centers" - big computer facilities that let participants originate trade orders physically near the clearing exchange. (When even nanoseconds matter, the 186,000 miles per second that light - and electrons - travel from order site to execution site no longer seems infinitely fast at all.)

Fundamental Credit Analysis

Fixed-income investing and trading - both government debt and various spread products - is back in a big way. But with participants still wary of both credit risk and exotic structures whose evaluations rest more on quant modeling than on credit analysis, there is heightened demand for in-house credit skills. As a result, the big three credit rating firms, whose reputations and business models were severely damaged by their role in the crisis, could be a fertile recruiting ground for hedge funds and other institutional investors.

Reversal of Fortune

Top talent may seek to jump from buy-side to sell-side in substantial numbers next year. That would reverse what was seen throughout 2008 and the initial months of 2009, when banks were deeply wounded but hedge funds and asset managers hadn't yet felt the full force of the crisis.

Now, the buy-side's inherently backward-looking revenue model - fees calculated from prior-period average assets, and in the case of hedge funds, limited by a requirement to recoup prior-period losses (high-water marks) before incentive fees may resume - means some fund firms will lack the means to pay their investment professionals top dollar. Worse, many buy-side pros may not grasp this yet - which will only magnify their discontent upon learning what their 2009 bonus will be.

Apart from clear areas of overlap such as proprietary trading, it's always tricky for experienced professionals to jump the aisle in either direction. But bank HR staff might find it worthwhile preparing to recruit opportunistically from the buy-side in 2010.