The trend for cutting costs in investment banks by hiring younger and cheaper talent may finally be over. Killed by the coronavirus. At least this is the verdict of some of the top headhunters working in fixed income sales and trading.
"Banks are alert to the fact that they need good senior traders and are upgrading trading desks," says Russell Clarke, a partner at Figtree Search in London. "Headcount isn't going to increase because there is caution on overall costs, but the skill level that's required has risen. Previously you may have had a VP and juniors on some trading desks. Now, banks are selectively adding more senior traders with broader experience of different market conditions."
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There are already signs of "seniorization" on credit and macro desks. Deutsche Bank is understood to have a new head of European high yield loan sales in the form of Richard Caldwell from Citi, who's thought to have started this week. RBC Capital Markets hired Joe Sayers from Citi as head of high yield and loan sales in April. In New York, Barclays hired Jerry Minier, a macro products specialist with 14 years' experience at Goldman Sachs. Also in New York, RBC yesterday revealed four new senior recruits at director and managing director level (Stephen Berkley in rates sales, George Borst in energy trading, Callie Simpkins in leveraged finance sales, and Jim Russo in leveraged finance trading), each of whom have at least a decade's experience in the markets. In a memo announcing the appointments, Michelle Neal, U.S. head of fixed income, currencies and commodities at RBC Capital Markets, said the bank is focused on strengthening, "client connectivity across high yield and loans during this period of increased market volatility."
The push to add senior staff on credit sales and trading desks comes after a report from Greenwich Associates found that clients eschewed electronic trading systems for human beings during the initial pandemic market dislocation in March. With the future still highly uncertain, there are signs that banks are strengthening benches as volatility persists.
Fixed income sales and trading may be at the forefront of the renewed demand for experienced staff for the moment, but other sectors are likely to follow. With M&A deals slowing, boutiques are furloughing and even firing junior staff, while hiring and retaining seniors who can maintain a dialogue with clients. In equity research, Mike Mayo, a star analyst at Wells Fargo, produced 20 research reports on the virus in a single week as clients rushed to inform themselves. At the same time, however, spending on research is predicted to fall dramatically: if clients are paying for research, they will want the best.
In recruitment terms, headhunters say the reversal of the juniorization trend is part of the new unwillingness to add any front office headcount beyond what's absolutely necessary. Even essential hires are now subject to levels of scrutiny previously reserved for "nice to have" recruits, says Aaron Bartlett, a director at recruitment firm Elliott Ross.
The problem is that banks have committed not to make layoffs during the pandemic, says Bartlett. Until cuts happen, any new hire is therefore an increase in net costs. Only absolutely essential recruits are making it through.
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