Canada's Fixed-Income Markets Could See a Nice Increase in Compensation

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Strong markets and wild competition for talent should spell some extremely good news this year for what Canadian fixed income professionals are paid, both on the buy and sell sides.

Since August of 2009, "investors both domestic and foreign directed new assets into Canadian bonds, and global dealers that had retreated from the Canadian market during the global crisis returned," says Connecticut-based Greenwich Associates report.

"Average buy-side compensation is expected to increase up to 10 percent in 2010 by the majority of buy-side fixed income professionals (surveyed)," Greenwich says.

Not only have Canada's leading domestic fixed-income dealers been busily competing for talent for the better part of a year now, they're also expanding their reach into the U.S. and other countries where the pace of fixed income investing has been lukewarm at best.

Why is Canada's bond market so hot right now? Morningstar Research senior fund analyst Al Kellett, based in Toronto, points to a stable government attractive to investors in government bonds, a preeminence in raw materials which makes Canada's economy seem stable as well, and the fact that Canada's fixed income market offers "the critial mass" for large institutional trades to be completed without major disturbances when major investors are trading in or out of the market in large volumes.

But Kellett questions the Greenwich findings that no less than 25 percent of Canadian institutions reward research providers by executing trades with those firms on a "non-competitive" basis, compensating research providers by making their companies the first call when executing a trade. "It's my personal opinon," he says, that "as electronic trading increases in Canada you'll see that kind of activity decrease."