Is this the most simultaneously interesting and underpaid trading job in an investment bank?
If you want to work as a trader in an investment bank, you probably haven't thought of targeting the 'capital management desk'. That might be a little remiss of you. By all accounts, capital management traders have become a thing.
"Capital management desks are an area of banking that has significantly grown," says Christian Robbins at London-based search firm Cherry Bull. "Three or four years ago they weren't recognized as a standalone operation, but there's been a lot of selective hiring for this area and there are still some banks that are behind the curve."
As the term suggests, capital management is all about banks managing capital in the new capital-constrained regulatory environment. That means optimizing the use of the scarce capital they do have and optimizing the allocation of that capital between product and business areas. However, it also means hedging against risks taken by the bank - either by aggregating counterparty risks in the case of CVA desks, or by hedging against the present value cost of funding a banks' derivatives exposures over their entire lifecycle in the case of FVA desks. It can also involve 'collateral transformation', which fundamentally involves structuring products from existing collateral held by a bank so that this collateral becomes more acceptable to new centralized clearing houses.
Another headhunter who recruits traders, and spoke on an off-the-record basis, said capital management desks can be interesting places to work: "These guys get to take a lot of proprietary trading risk in order to mitigate the bank's liabilities. There's not much pure prop trading that goes on in a bank these days, and they get to work on multi-asset books, which makes it even better."
There have been a few recent indicators of capital management desks' growing importance. When it released its remuneration report last week, UBS said capital management is one of the key determinants of pay in its investment bank. Lloyds recently hired Hugues Lasalle from Deloitte as a director and capital management trader in its capital and collateral management unit. Credit Suisse recently replaced its EMEA CFO with a new EMEA CFO and head of capital management. And Barclays is said to have been shifting traders into its capital management unit.
It seems there's only one problem with traders jobs on the capital desk. And that is the pay.
Because capital management traders sit within banks' treasury units, they get paid like treasury professionals not like traders. And treasury professionals don't get paid well. "These guys are taking prop risk, but they're getting paid like administrators. Most of them are desperate to leave for hedge funds," said the headhunter.