Global Markets & Equities

1. How would you describe the current recruitment market? How has this impacted on compensation?

Global Markets/FICC: Still fairly subdued to be honest. And not a lot of movement.
Most teams are pretty settled post GFC (yes, it was a while ago) and if there is movement it appears a good portion will be internal between products or cross-product i.e. adding to areas of cover.
Add to this the fact most international banks are running much smaller FICC operations locally, it doesn’t translate to much activity currently that we are sensing.
Compensation levels have been flattening for the past five years given decline / flattening in FICC revenues – a lot of it off the back of reduced risk appetite, regulatory changes and compliance.

Equities: Sell side equities have seen some improvement in the last year from a low base. Equity research teams in global banks were mostly unprofitable going back 1-3 years, whereas it is now mostly profitable based on the willingness of active equity funds to use them for research. This slight expansion in revenue has translated to team size.

2. Any client or candidate trends observed over the last 12 months?

Global Markets/FICC: The constant theme is sell-side FICC sales/traders wanting to move to the buy-side. The challenge is that the (lack of) FI/credit funds in the local market – in terms of active risk taking – means a lot less opportunities to do that.

Per our comments in the ‘Risk Management’ section, should the funds start to take a more active risk management approach in areas like market risk, this might translate to some activity. The next 12 months could be an interesting time given global bond markets.

Equities: The average age of lead analysts has continuously trended down as expensive lead analysts are slowly leaving, mostly due to redundancy. In their place, hires are being made at a less senior level at lower cost.

Bonuses are trending higher from a very low base.

Due to increased hiring from funds, the graduates from the global banks are becoming more highly sought after. We expect the banks’ graduate recruitment ranks will be larger from 2018 to attempt to cover for these inevitable departures.

3. Predictions:

Global Markets/FICC: Whilst a little optimistic, some of the international banks (not global IBs) that have been active in loan markets (corporate lending, project finance etc.) have a desire to enhance revenue streams via ancillary income – read global markets, derivatives etc. – so corporate versus institutional side.

The key, as always, is the business case and headcount approval. Should the case be proved and hiring given the green light, the supply of candidates should not pose an issue.

Equities: A low level of increased headcount and revenue from these teams. This is based on fund managers moving from $1 billion under management to $2 billion, so have an increased ability to pay fees. New fund ‘set ups’ have accelerated over the last 12 months, which will assist the fee pool.

4. Any interesting case studies?

Global Markets/FICC: Given the lower activity in this space, to be honest not a lot. Perhaps only 1-2 hedge funds cross-asset trading businesses, off the back of (potential) opportunity combined with the strict regulatory environment governing banks and their trading activities.

Equities: The majority of new funds setting up have been in the global equities space or for Australian funds that now have a mandate to invest globally. It also means more options for sell side analysts to step into, so we should start to see some more rotation in sell side teams onto the buy side. One interesting merger was between Magellan (global equities) and Airlie Funds (domestic equities).

Patrick Everest
02 9235 9440

Mischa Bennett
02 9235 9430

Michael Lee
03 9653 8620