NEWSLETTER - NOV 2011
FRONT OFFICE QUANTS
2009 had seen a slowdown in the recruitment of traditional Front-Office Pricing Model developers, followed by a healthy resurgence in 2010 and Q1and Q2 of 2011. However as Front-Office hiring has been scaled back in Q3, so has Quant recruitment.
Certain asset classes – including Interest Rates and Commodities – have remained active, and candidates with solid statistical modeling skills, strong implementation experience and systems development abilities are still in demand.
We have also witnessed an increasing appetite to relocate to Asia, where candidates are being offered fantastic opportunities to increase both their responsibilities and compensation levels, as the “hot market” is scarce of seasoned talent.
On the junior side, the market has been very tough for the top Ph.D.s seeking to enter finance. The competition has been fierce due to fewer open headcounts, and the continued interest from top Science and Math Grads looking to enter finance.
Despite a somewhat less active market, Quant Recruitment is now a space where moving good candidates is becoming increasingly difficult. Institutions have been increasing compensation levels, changing titles and/or augmenting responsibilities in order to keep their employees: the market has become too tough to easily replace any losses, and so retaining talent has become key. This trend has been widespread across the Buy and Sell Side, meaning that recruitment challenges (especially for flow businesses) seem set to continue into 2012.
MARKET RISK, RISK ANALYTICS and VALUATIONS
Market Risk hiring has generally been quite slow, as has been the trend since the beginning of the year. This is also a reflection of the frozen budgets that have kept many trading desks from growing.
Market Risk, perhaps more than any other area of Risk, has always been closely correlated with trading volume and overall risk exposures. As a result, the cautious optimism of early 2011 resulted in sporadic and anemic Market Risk recruitment in Q1 and Q2. As Q3 progressed, the recent market volatility and Front-Office freezes have severely limited Market Risk hires at most Investment Banks. Broker-Dealers and Hedge Funds have picked up some of this talent, but the demand has not been great enough to compensate for the slowdown from Banks.
Low recruitment in the space has resulted in fewer candidates looking to move, creating an extremely illiquid market and causing substantial difficulties when attempting to find good “plug-and-play” candidates.
Regarding asset classes, there has been relatively more activity across Equity and Commodity Market Risk Mangers than there have been for those in Fixed Income, Securitized Products and Credit Products Market Risk.
Market Risk Analytics, which never recovered from the first crisis, has continued to be a relatively quiet area. Occasional areas of growth have been seen in
a) methodology to develop metrics for quantifying idiosyncratic and tails risks and
b) candidates who have experience in documentation of traditional methodologies for regulatory purposes, and who can explain traditional models (VaR), etc. to less numerate audiences.
Valuation has remained an area of continued focus for Investment Banks, with evolving accounting standards, regulatory requirements and new policies in place. At the junior levels, candidates from MS programs have provided a steady pool for entry level applicants, while the rapid expansion of the field in general has left a void of experienced candidates at the more experienced levels. These shortages have been most acute in complex / exotic products where the level of technical skills / product knowledge is higher and also in Equities, Commodities (and to some extent IR/FX) where the activity in the market has consistently pulled valuations professionals into Market Risk and junior Front-Office roles.
Going into Q4, it is unlikely that most institutions will see Market Risk or Valuations as an area they can afford to cut, but it is also unlikely that we will see much growth until the market stabilizes and new Front-Office hiring begins again.
PRIME BROKERAGE/ CLEARING
Competition between Prime Brokers for lucrative fees has increased in recent quarters – although this has tailed off slightly in Q3 as banks have looked for new sources of revenue in the face of falling trade profits. This competition has been heightened by the aggressive plays by new entrants into the space who have looked to gain market share.
OTC Clearing businesses continued their rapid expansion in Q3 – although we’ve seen a slowing from the fevered pace of Q1/Q2 and 2010, the momentum of business plans and expansion has been difficult to slow down.
We anticipate this growth to continue in 2012, and although there appear to be uncertainties across the board about the timelines and exact regulations different Financial Institutions will face, the benefits of getting ahead of the curve seem to far outweigh the costs.
Risk Methodologies and Quantitative Development have been two of the largest focuses of growth within this space. This has spanned from Credit and Operational Risk procedures/processes all the way to the systems/infrastructures for margin and risk.
In Q3, we saw a continued push for talent and knowledge within Interest Rate Products. There is a high demand for candidates with solid experience pricing IR Swaps as well as those who have experience in different margining methodologies.
We forecast a substantial slowdown in PB/Clearing growth in Q4 – budgets are too tight for growth to continue unabated. However this dip is unlikely to continue past Q1 2011. The longer-term trends, particularly within OTC Clearing, will re-assert themselves as soon as the markets begin to stabilize.
For more information, or to send in your CV, please contact a member of the team:
wchny@webberchase.com
+1 212 302 8822 |
www.webberchase.com | info@webberchase.com
Webber Chase Europe | 12 Tokenhouse Yard | London | EC2R 7AS
Tel: +44 (0) 207 073 2851
Webber Chase US | 1440 Broadway | New York | NY 10018
Tel: +1 212 302 8822
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