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Investment banks turn to hedge funds and out of the market traders as FICC hiring suddenly surges

Fixed income recruitment is back, and juniorisation is over. Investment banks on Wall Street are hiring more effusively for their fixed income currencies and commodities (FICC) divisions than at any point since the financial crisis, and banks are eyeing long-term growth rather than looking at quarterly fluctuations in revenues.

“Virtually every prominent bank has recently made several key hires for its fixed income business," says James Borger, managing director and head of fixed income at Greenwich Associates. "They’re not thinking about quarterly changes to revenues when signing off on hiring – they’ve made a conscious decision to build their business for the medium- and long-term.”

“It is as busy now as it has been any time since 2010," agrees Canice Hogan, the former head of interest rate/FX/ EM and credit sales at Nomura who now runs headhunters Shadowhound. "Distressed European banks who can’t afford to lose any more senior people have been aggressively buying back. But hiring is across the board from associate to MDs.”

The timing of the hiring push is strange. Most large investment banks have released second quarter earnings results with double digit year on year declines in fixed income currencies and commodities. Goldman Sachs was bottom of the pile with a near 40% decline in fixed income revenues, while the top performing U.S. investment bank - Morgan Stanley, down 4.5% - continues to espouse the notion of doing more with less after chopping 25% of its fixed income team at the tail end of 2015.

But Borger insists this is about getting back in the game over the long-term. Goldman is an example of doing just that - despite calling out commodities as being a particularly weak area of the business in Q2, the bank is reportedly making a renewed hiring push in the division with a focus on senior people. This is the approach at most banks, says Borger.

“These are senior hires. The recent hiring we’ve seen has not been about filling a few junior seats or replacing experienced people with a cheaper hire," he says. "We’ve seen numerous banks poach senior sales, trading, and research professionals, which then of course creates a hole for the original bank to fill.”

Greenwich, which interviewed over 1,000 people at 500 institutions for its latest fixed income survey, says that banks have stopped cutting costs in fixed income and are anticipating an increase in revenues after recent interest rate rises by the Fed and an expected increase in volatility. Investment banks also have significant wounds to lick - figures from consultancy Coalition suggest that the top investment banks have cut 14,700 front office jobs in fixed income since the beginning of 2012.

This stripping out of the ranks, combined with investment banks' tendency to replace senior traders with cheaper juniors, has resulted in slim pickings at the senior end of the market, headhunters suggest. As well as buybacks - Deutsche Bank is reportedly offering 35% pay increases to stop senior people leaving - investment banks are rehiring people who have left the industry, or luring back traders from the buy-side.

Deutsche Bank, for example, has just rehired Eric Zijdenbos, who headed up its rates sales division for the Netherlands and Northern Europe but left in 2014. He's since been working as a consultant for Scotia Bank and running his own real estate development business, but returned to Deutsche Bank earlier this month as a managing director in its rates business.

Barclays, meanwhile, hired Chris Leonard as managing director and head of U.S. rates trading from his own hedge fund, Arcem Capital, in June. Sources also suggest that former J.P. Morgan managing director Eric Childs - who joined Bluecrest as a portfolio manager in its rates and FX team in New York - is set to join Barclays to run US$ swaps trading, while senior rates trader Ian Dai is set to join hedge fund Bluecrest in San Francisco.

Standard Chartered is also said to be hiring extensively across its fixed income division following the appointment of former Brevan Howard partner, Roberto Hoornweg, as global head of financial markets late last year. This month it brought in Jens Andersen and Molly Duffy as co-heads, financial markets in the Americas.

BNP Paribas hired Robert Boeheim and Eusta Qin, a former Goldman sterling corporate bond trader and investment grade financials trader respectively, in June and has also been building its emerging markets credit trading business this year. Goldman Sachs, meanwhile, is also building a cash credit business.

Unusually, new hires have been landing in the summer months. Credit Suisse has just hired Peter Schmidt, the global head of high yield sales at Nordea Markets in Copenhagen, as a director in its rates business in London. Chris Heffernan, a credit trader at Nomura, has moved across to HSBC, while Jiaxi Chen, an associate in interest rates options trading at Deutsche Bank, joined Goldman Sachs and Silvia Borsetti, who worked in FX sales at Morgan Stanley, has just landed at Credit Suisse.

FX is the one area that remains relatively quiet, however, suggest headhunters.

“In the U.S. there’s a big focus on hiring in trading, especially US treasuries, mortgages and swaps - most large investment banks are active in this area," says Hogan. "In Europe, the big focus for a lot of banks has been on recruiting for rates sales and trading.”

Not all recruiters are so enthusiastic about the level of recruitment, particularly in London where banks are more reticent to sign off on new hires until they've started to implement Brexit-related moves out of London.

“Virtually every bank has been hiring this year, but it’s more a case of replacement and upgrading rather than significant expansion," says Kumaran Surenthirathas, managing director at Rosehill Executive Search. "Across the FICC space in London, all 12 of the top banks have been hiring, but only 10% of those have added more than one person net to their teams over the course of the year. It’s more of a reshuffling of the deck.”

But Borger suggests that growth is back on the cards, with banks who retreated from FICC business areas in the past returning to the market.

“It used to be that fixed income dealers had the knives out for the competition, but there’s been so much reduction of headcount, or wholesale pulling back from various products, that a lot of people we speak to on the sell-side want to see a healthy number of competitors actively trading in their space," he says. "You don’t want to have just a handful of banks doing most of the trading in a particular product – that’s not a great market.”


Photo: Getty Images

AUTHORPaul Clarke
  • ph
    22 August 2017

    This is surely the best indicator that most banks think rates are going up soon, and that there will be trading opportunities in a less moribund less close-to-the-zero-bound market!

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