Nick Robinson knows about trading on the buy-side. Until he left in June this year, he headed up Schroders fixed income trading function for more than 23 years. During that time, trading underwent a revolution: technology, regulation and big data reshaped the landscape, and humans became increasingly superfluous.
"Before the Big Bang you could come in on an apprenticeship and switch across into trading roles," Robinson says. "If you want a trading job now, you to be very well-qualified and experienced. It’s a cliché, but if I were applying today, I might never have made it into the City.”
When Robinson joined Schroders' fixed income trading team in 1993 there were just three traders. The team had expanded to 15 people by the time he left earlier this year.
Robinson left as part of a broader shake-up in the asset manager's trading team which also saw the departure of its global head of trading Rob McGrath - who oversaw 40 traders across equities, fixed income and FX. Following the departures, Schroders has combined its fixed income and FX trading division and cut staff.
It's a trend that's being replicated across the industry: Fidelity has merged its equity and fixed income trading desks and BlackRock, Baring Asset Managers, Axa Investment Management and Standard Life have all lost long-standing heads of traders. Juniorisation is taking hold of trading on the buy-side too - recruiters suggest that some heads of trading are being replaced by younger, cheaper alternatives.
“Buy-side traders used to be primarily about execution, but they have to add much more value now. The industry is changing rapidly and in two years time, the role of the trader will have changed even further,” says Robinson.
Instead of going into another buy-side role, Robinson has set up his own consultancy offering advice on everything from trading methodologies, transaction cost analysis in fixed income as well as the impact of regulation like Basel III and MiFID II. The latter will increase the need for transparency on best execution on the buy-side.
Traders in fixed income asset management earn an average of $325k, according to figures from Greenwich Associates and Johnson Associates, and $244k in equities. This is still the lowest paid front office job in asset management, it suggests, but head traders can earn up to $637k. Asset managers have been under pressure to cut costs and traders have been in the firing line, particularly as the buy-side increasingly switches across to passive management, which has moved much of the trading to the end of the day, and meant less trading expertise is needed.
To survive, traders have had to show their worth, says Robinson. “The skills needed are changing. Buy-side traders need to add value to portfolio managers now. There are so many distorting factors in markets now, QE and other central bank, that the same trade can require different responses to market conditions," he says. "MiFID II has meant a more of a focus on demonstrating best execution, so buy-side traders need to advise on this."
Traders also have to show that they can identify opportunities as portfolio managers are increasingly overwhelmed by data.
“Another other factor is data mining. There’s so much information that can inform what and how you trade that being able to get that data quickly and distil it in the most effective way to give your asset manager a competitive advantage is a key skill for buy-side traders now,” says Robinson.
Robinson says that old school skills like "attention to detail and the right attitude" are still key in a trading job in asset management, but it's inevitable that tech skills have crept in too. The electronification of the equity markets that's well-established on both the sell-side and buy-side is now moving across to fixed income. Robinson has been involved with Project Neptune - a fixed income electronic trading initiative between 42 banks and asset managers - and believes that it's important for the buy-side to have a greater voice in shaping how fixed income trading evolves. Nonetheless, as some asset managers have merged equities and fixed income trading this year, technology has closed the gap and cross-asset trading teams are more common.
Longevity in one firm is less unusual on the buy-side than in investment banking, but Robinson admits that a 23-year-old tenure is not common on a trading desk.
“It’s not common to stay in the same job for a long period of time now, but there are advantages to it. The one thing you always wonder is what you’re missing out on, but we were hiring in talent from all the other big asset managers in the City, so I was always learning about news ways of doing things,” he says.
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