If you’re a trader in an investment bank approaching 30 – even if you’re at the top of your game – you might want to consider your career options. It is, quite simply, incredibly difficult to maintain performance as you get older, believe former traders and experts, so it’s wise to have an exit strategy.
Working as a trader can be punishing for your body. As John Coates’ book The Hour Between the Dog and the Wolf documents, traders are battered by hormones – excessive testosterone when on a winning streak, and risk-reducing cortisol when on a losing run. What’s more, it’s a less hierarchical environment, where traders are judged on their performance rather than their experience.
“There’s a clear hierarchy in investment banking and it takes years before you get enough experience and client contact to become an originator,” said one investment banking MD who also works in career coaching. “In trading, though, it’s all about performance, so a talented younger guy can really make their mark early on, and usually see the senior people as competition.”
There are numerous examples of ‘star’ traders under 30. Joshua Bertman is a partner at Brevan Howard in the U.S. at the tender age of 29; Manuel Stotz runs a portfolio at THS partners – having worked at Goldman Sachs’ internal hedge fund – and is just 28, while 27-year-old Andrew Silverman is regarded as a star bond trader on Goldman’s distressed trading desks. Kweku Adoboli was given charge of UBS’s $50bn ETF book at 28, along with John Hughes, who was 26 at the time following the departure of senior colleagues. Age is clearly not an impediment to success, or at least being trusted with a large book, on the trading floor.
Ziad Awad, a former Goldman Sachs managing director who now runs his own M&A boutique Awad Advisory and works for consultancy Boardroom Metrics, started his career as a fixed income trader. After seven years, as he was approaching 30, his manager advised him to start considering alternatives.
“Being a trader is like being a footballer – you don’t meet many who stay in the job well into their 30s as people tend to burn out,” he said. “My boss asked me what I wanted to do when I was close to 30. Did I want to stay as a trader? Did I want a bigger job on the bond trading desk? Did I want to join his team in derivatives trading or do something on the capital markets side?”
One trading coach, who advises hedge funds about who they should hire and how to get the best out of their traders, said that the main reason people don’t last into their 30s is because “they have grown up with a particular set of markets”.
“Patterns of market momentum, such as we saw in the late 1990s and very early 2000s have given way to less trending markets as capital has become concentrated in a smaller set of liquid assets,” he said. “The struggle is not age per se, but the difficulty of unlearning markets once they have been learnt. It’s the same reason many businesses cannot survive changing consumer climates.”
Nonetheless, burnout is more likely to occur as age increases, he admits: “Especially among those who have to make rapid, frequent decisions with considerable risk on the line. The demands of family and declines in stamina and focus can make it difficult to sustain an active trading career.”
So, what should you consider doing next? Awad advises looking internally and persuading your managers to offer alternative career paths within the bank. He initially transitioned across to debt syndication, before eventually switching to debt capital markets and finally taking a broader advisory role at Bank of America Merrill Lynch. However, most people stick closer to their roots.
“In my peer group, which were some of the best traders of our generation at Goldman, most are now investing money for third-parties, either hedge funds or fund managers, or shifted into capital markets. Others have done something completely different and left financial services altogether,” he said.
The obvious option, assuming you don’t have the star quality to start your own firm, is to join a hedge fund. As we’ve mentioned previously, BlueCrest Capital Management, BlueMountain Capital Management and Millennium Partners have all been poaching investment banks’ prop traders. However, the pressures of working as a trader in a hedge fund will do little to alleviate stress levels or burnout.
“Those on the sell-side who generate original ideas for the buy-side clients they cover and who demonstrate superior knowledge of markets and the capacity for independent thought will find interest among hedge fund PMs looking to add to their teams,” said the hedge fund trading coach. “Having a very specific skill that can add to a PM’s business, such as deep experience with options or extensive product knowledge in a certain world region or asset class, is also very helpful to making the move.”
Within asset management firms, there also appears to be respect for older workers. One analyst working for a large asset manager in the City, who is not authorised to speak to the media, suggests that portfolio managers’ experience of market cycles is something that serves them well.
“It’s frustrating, but you become a better trader and investor over time. You get to the point where you think you’re doing well, but then something bad happens and the more experienced guys’ depth of knowledge and experience puts you to shame. It’s demoralising.”