Things are evolving in the world of off-shored investment banking. Once upon a time, rooms of 20-something Indians worked on trade settlements, then came pitch-book assembly. Now it’s all about risk management and proper – ‘empowered’ – analysis.
“The future is no longer about having people based off-shore who are doing number crunching," says Darren Sharma of Frontline Analysts. "That stuff is being automated or just abandoned as a headache to manage. It’s about having high-end, high-calibre people who are fully integrated into your global team.”
Sharma should know. A former credit researcher at SocGen and BNP, he’s spent the past 11 years running Frontline and developing small teams of senior credit researchers based in Bengaluru, India. In the process, he says he’s demonstrated that off-shoring isn’t just about, “number crunching” in a “call-centre” environment. It's about allowing the brightest young Indians to develop their own analyses and investment theses, at a fraction of the cost.
“Off-shored analysts were traditionally used to support the opinions of people based in London or New York. They weren’t allowed their own opinions,” says Sharma. “But that’s changing.”
Frontline's Indian analysts develop trade ideas for fixed income desks based in Europe and the U.S. For this, they are paid the equivalent of £20k-£30k a year in local currency. Former Frontline employees have moved into front office roles at investment banks. Brajesh Kumar, now works for SocGen (still in Bengalaru), where’s he written (among other things) on the implications of the Vickers’ Report on UK bank restructuring. Priya Viswanathan, another former Frontline analyst, has also moved to SocGen and is a VP in credit research for the French bank (also based in Bengalaru).
“If you’re [an India-based analyst who’s] just doing pitch books, your career doesn’t have much of a trajectory,” says Sharma. “Pitch books and other off-shore number crunching tasks don’t require much insight. This is work which is going to be automated.
“The smartest Indians realize there’s nothing for them in that career," he adds. "There’s no analytical upside and the only way you can get promoted is to become a manager.”
Sharma says the future of off-shoring is, instead, in risk management. Banks’ spending on regulation has gone through the roof in recent years, with UBS for example, predicted to see its regulatory spend increase from CHF400bn in 2013 to over CHF1.2bn this year.
“Risk is the new frontier,” says Sharma. “The new off-shored risk units already have a far higher level of sophistication than most of the off-shored teams supporting the front office.”
He points to a UK bank, which just mandated him to run the induction process for 20 PhD statisticians, based in India, to be part of their global model risk team. “They’re being told that they’re being hired as equals to team members in London. That would never have happened in the past.”
Of course, off-shoring now isn’t just about India. UBS is hiring its new risk managers in Kraków and Wroclaw, in Poland. Deutsche is hiring in Birmingham. Goldman Sachs in Salt Lake City.
Sharma is cognizant of this, but he says the underlying trend still holds: off-shored positions, wherever they’re based, are now created as level with rather than subsidiary to, roles in major financial centres.
This sounds ominous for jobs in London and New York. But Sharma says it was always thus. “When you’re applying for a seat in London, you’re up against the best young Italian, French, Chinese, Nigerian and American students. London has never been a closed shop.”
In future though, the number of jobs in London is likely to be fewer as more are shifted to cheaper locations overseas. And while high pay in London comes under-pressure, top off-shored analysts can expect the kind of lifestyle junior bankers had a decade ago.
“All of the people who’ve worked for us for more than a few years have property and stock portfolios in India,” says Sharma. “If someone works for me and makes good calls on their trades, they’re in a position to retire in their early 30s.”