Area of front office hiring hotness: equity derivatives and ETFs

It surely says something that at the end of last week, when everyone was feeling despondent at the sight of such revenue deterioration in fixed income, currencies and commodities, UBS announced two major hires in equity derivatives.

Equally, significance can surely be derived from the fact that every man and his dog is expanding into ETFs this year.

Deutsche has launched another hedge fund ETF, HSBC's launched a Bric ETF in Europe. Last year, assets held in exchange traded products rose 28%.

Tepid truth of the matter

Unfortunately, the reality is that while equity derivatives hiring is warm, it's not exactly boiling.

"Banks will be hiring selectively across equity derivative sales" says Ted Tracey at search firm Kinsey Allen. "Morgan Stanley and Citi hired aggressively last year but we doubt there will be big build outs on a similar scale."

Away from ETFs, the big candidates for expansion in equity derivatives this year are: UBS under Yassine Bouhara (Dr Marcus Overhaus, one of those hired last week is said to have joined to drive expansion in global structured equity and securities derivatives products) and Deutsche Bank under Dixit Joshi. BarCap is also said to be interested in upgrading following Joshi's departure last year.

Some of this hiring is far from certain, however. "UBS are putting a hiring map together, but there's no budget," alleges another equity derivatives headhunter. "They're ok if they can get people on base only, but they won't pay guarantees."

The ETF exception

The exception to all this hiring tepidity appears to be ETFs, where we understand there really is a lot of hiring and the outlook is really very promising.

"The key hiring area in equity derivatives this year is going to be across ETFs" Tracey predicts. "Asset Managers and ETF issuers already have a strong presence, but banks want to ramp up their own ETF product offering.

"Ideally, they'll need a product development and strategy team, a dedicated sales force and trading group and competitive pricing strategies to make an immediate impact in the ETF market." he adds.

Actually, ETF people don't want to work for banks

The only problem with this happy ETF hiring fantasy is that most ETF talent is currently residing on the buyside. And most people on the buyside don't get bonuses which are subject to large mandatory deferrals.

"Most of the asset managers have paid a lot of cash and very little stock. They know that by staying on the buyside they'll be able to get a large proportion of their compensation in cash," says another equity derivatives consultant. "This can make it hard to tempt them over to banks."