Mulsanne Market Overview
Our Q3 market overview shows continued cuts across the market, with the largest and deepest rounds now seemingly finished. Whilst there were pockets of hiring in EM and FX sales to RM & HFs, there has been a general inability and unwillingness to hire even where banks have lost staff to the buy side. With re-structuring having taken place and the need to adapt quickly to the new regulatory environment, banks are now gearing up for key and selective hiring in Q1 of next year.
Equities:
Significant headcount cuts have been made across the major global equities businesses. The European teams were most hard hit, specifically across the sales and sales trading disciplines. CEEMEA equities also saw substantial cutbacks, especially in Russia. The client flows depleted heavily over the summer and began returning to normality in September. Hiring Managers remain confident that an improvement in the European debt situation will allow a reasonable budget to hire in early 2013. The Electronic/DMA sales and trading spaces are where hiring is most likely to be focused in Q1/2 2013, as well as upgrading hires in equity research.
Credit:
The traditional summer hiring lull was compounded by continued concerns surrounding the Euro Zone. The ECB’s liquidity announcement brought a more optimistic outlook towards the end of Q3. Hiring managers are now positioning themselves for build-outs in early 2013, when hiring is likely to be focused on the Structured Funding and Financing spaces, where strong origination experience will be key. Flow trading remains uncertain, with on-going concerns about the implications of Basel III. Likewise the Distressed Debt market may be adversely affected if companies gain more funding following the ECB announcement.
FX:
Q3 has seen selective hires made across the market in real money and hedge fund sales. Banks who have lost staff have generally found it hard to get approval to rehire. In terms of volumes, Q3 was a relatively quiet period with July and August particularly inactive due to cyclical issues and flows then increasing in September. It is envisaged that hedge funds whose returns have been very poor this year due to the lack of events and on-going volatility will be far more active in Q4. In general volumes are down 20-30% YTD and revenues have followed this trend.
Interest Rates:
Interest Rate businesses have seen further movement of people into hedge funds. In general, internal solutions have been favoured over external hiring. As desk P&L in EUR government bonds and particularly EUR swaps remains on par with previous years in spite of smaller teams, there has been little incentive to prioritise replacement hires. The majority of this EUR government bond P&L is still being made from peripheral markets, but is spread more evenly across the curve than in the same period last year. On the trading side, GBP businesses have struggled over the summer which accounts for further reduction in headcount.
Investment Banking:
Although more redundancies will take place at some Investment Banks and advisory houses in Europe, the largest rounds of cuts have been completed. In some products and countries there has been a small number of high impact senior hires that has reignited discussions on strategy, hiring plans and budgets for 2013. Major hires in Q4 are unlikely although, once the compensation rounds in Q1 2013 have been addressed, we expect to see a shift in recruiting levels.
Emerging Markets:
Emerging Markets have remained comparatively buoyant in terms of performance and hiring appetite in spite of the slowdown in growth in key BRIC economies. Whilst compliance with new regulations has made it difficult for some banks to take full advantage of opportunities in the Tier 2 corporate space and some frontier markets, there has been renewed interest in EM to EM investment and cross-border transactions. It is likely that the privatization programme in Russia will stimulate further M&A and ECM activity across sectors in the region. We have also seen a few high profile Russian investment bankers move into the corporate space.
Risk:
Operational Risk Management (ORM) has continued to grow in importance as banks come to terms with recent Libor and rogue trading scandals. The prioritisation of ORM has triggered a need for individuals with cross-product, cross-division commercial skills, with the ability to build good front office relationships and promote the value of ORM across the business. A number of firms have conducted upgrading exercises that have included ‘upskilling’ existing employees, improving pay and hiring senior individuals with the necessary experience.