The 20 Rising Stars of Fixed Income 2008

Last November, Options Group estimated year-end bonuses for 2007 would drop 30% or more for most U.S. and European fixed-income desks. Mortgage and credit-related professionals could suffer declines of as much as 50%, the firm predicted at the time. Since then, Wall Street's profit outlook has been battered by losses from mortgages and other credit-related assets. “As a result, a lot of the CEOs are concentrating on cutting expenses right now," said Karp. "They're not even thinking about how to pay their people." The securitization, mortgage and credit-derivatives businesses that propelled bank profits for the past five years have almost completely dried up. Although those markets eventually will recover, the void they've left won't be filled soon, Johnson said. On average, he estimated sell-side fixed-income bonuses will decline 20-30% this year. Mortgage traders might buck the trend and make more money this year, but that's only because their pay fell so deeply last year that they have little room for further declines, Johnson said. Many a vice president who in 2006 made $1 million trading mortgages at a top-tier bank took home $400,000 last year. However, other sources expect compensation for mortgage and structured-credit professionals on the sell side to drop again in 2008. "The economics of those businesses have changed as a result of the credit issues," said Geiger. "Firms have eliminated entire departments that assembled and marketed structured debt. People who still have their jobs and had their bonuses reduced by 50% probably feel fortunate." Those who trade plain-vanilla bonds in the secondary markets are in a better position. Distressed corporate debt, agency and Treasury bonds and interest-rate products are all trading actively this year, noted Chad Dean, director of fixed-income recruiting at Integrated Management Resources, a search firm in Tempe. On the other hand, volume in investment-grade corporate bonds is down substantially. That will depress compensation for investment-grade bond traders. High-yield bonds also are seeing reduced volumes and reduced bonus expectations, although not as severe as for investment-grade bonds. For a vice president trading corporate distressed debt at a toptier U.S. bank, Dean predicted total compensation for 2008 would be in a range between $500,000 and $750,000, little changed from last year. Johnson offered a more optimistic view, noting that year-end payouts for sell-side distressed debt traders could climb 10-20%. Quant Opportunities In the past few years, dozens of hedge funds and other capital pools have sprung up on the buy side to invest in distressed debt. Geiger, whose searches emphasize quantitative credentials, said funds need candidates who can ‘deconstruct’ structured securities and figure out what they're really worth. A senior quant analyst with a Ph.D. and three to five years' experience in a sell-side strucMAY 2008 tured finance group could earn $150,000 in base salary and $100,000-200,000 in bonuses. "There's no sell-side demand for those people, so the buy side can find some very qualified people now with relevant product experience," he observed. For quantitative risk managers, Geiger said compensation remains flat despite strong demand from both Wall Street and software vendors. "The Street still feels like there's enough float out there that they don't have to pay up for people at the moment," he explained. "There are enough strong minds out there, in both fixed income and equity." In addition, banks are hiring hard-core quants with deep knowledge of market risk and trading risk models, fundamental credit experts to rate counterparty credit risk, middleoffice risk analysts to be liaisons between trading and risk management departments and professionals who have implemented software for derivatives pricing, evaluation or risk management. Rather than sitting in centralized risk departments, these positions increasingly are being deployed to trading desks. According to Geiger, a director of risk for one product area can earn between $400,000 and $600,000. In research departments, Stocksleger sees the average fixedincome analyst making 10% less this year, barring a second-half market rally. On the sell side, an Institutional Investor-ranked senior analyst who earned $800,000 to $1 million last year might end up earning $600,000-700,000 this year, he said. Meanwhile, a senior fixed-income analyst at a traditional asset management firm won't see much change from the $400,000500,000 he made last year. According to Stocksleger, sell-side bond research analysts are finding opportunities to jump to credit-focused hedge funds, internal hedge funds run by banks or proprietary trading desks. There, they can establish a profit and loss track record - a prerequisite for getting paid. And now that big banks and insurance companies are popping up on value investors' radar screens, both buy-side and sell-side institutions are seeking senior financial sector analysts with seven to 10 years of experience and strong fundamental credit skills. eFinancialCareers, a Dice Holdings company, is the leading global career site network for professionals working in the investment banking, asset management and securities industries. The website provides financial services professionals with job opportunities, job market news and analysis, salary surveys and career advice. Recruiters and employers can post jobs targeting specific sectors within the financial services industry, both buy-side and sell-side, and can search the resume database for highly qualified and specialized professionals. eFinancialCareers has a network of co-branded career sites with leading trade publications and offers local websites in 15 markets and five languages across North America, Europe, the Middle East and Asia-Pacific. For more information, visit www.eFinancialCareers.com. FIXED INCOME RISING STARS 9 http://www.eFinancialCareers.com http://www.eFinancialCareers.com

Table of Contents Feed for the Digital Edition of The 20 Rising Stars of Fixed Income 2008

The 20 Rising Stars of Fixed Income 2008 Table of Contents From Bad to Worse Another Disappointing Year for Comp How Do You Rate? 20 Rising Stars of Fixed Income Mentors’ Page

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.