Australian investors are leaping aboard CDO bandwagon. Recruiters say it's creating demand for people who know how to deal with these complex products.
Put simply, collateralised debt obligations, otherwise known as CDOs, are securities which allow banks to sell slices of securitised loans according to the risks of default.
Global growth in the CDO market has been huge in recent years. But growth in synthetic CDOs has been bigger still. US-based investment bank JPMorgan estimates that investors' pursuit of higher yielding assets has helped push the CDO market towards the US$1 trillion (A$1.3 trillion) mark.
Patrick Everest, a partner at Sydney-based Jon Michel Executive Search, says the appetite for CDOs has hit Australia, and is in turn leading to recruitment. "The Australian CDO market was slower to develop than overseas markets," says Everest. "But banks are now looking for staff who can work on new products that offer more yield."
Babcock & Brown Securities is among those entering the market this year. In March, it launched its first collateralized debt obligation, worth A$1.5bn after recruiting Ashley Burtenshaw, a credit arbitrage trader from Credit Suisse.
Recruiters say ANZ needs to rebuild its CDO team after losing several staff to international rivals during the past six months.
However, while CDO staff are hot, it is synthetic CDO staff who are hottest of all. Everest says specialists in synthetic structures, which are based on underlying credit derivative products, can command a definite premium.
A salesperson with some experience structuring synthetic products could expect to earn total compensation of A$500,000 to A$700,000, says Everest.