Fixed-income business is back in the limelight

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Fixed income is back in the limelight. After years in the shadow of equities and M&A recruiters, fixed- income headhunters are now bringing in the business. In the first six months hiring has been up.

Rupert Channing of Heidrick and Struggles says: 'Equity capital markets are pretty much shut. Debt markets have been significantly more active.'

Firms with a particular focus on the sector have proven well placed. Mantaray Partners (formerly Devonshire Executive) has won the International Securitisation Report's award for executive search for the past three years. The sun has also finally risen for fixed-income specialists such as Futures International and the US-based Options Group.

Generalists are also benefiting. Armstrong International, Baines Gwinner, Russell Reynolds, Heidrick and Struggles, the Rose Partnership and Spencer Stuart, are prominent in fixed-income search. Some larger firms have moved consultants on to their fixed-income desks, redeploying resources away from less active areas. At Heidrick and Struggles, Channing, normally an M&A specialist, is currently working on debt mandates.

In many cases, this redeployment of consultants was undertaken to make the most of a hiring boom by European banks. Commerzbank, BNP Paribas, Dresdner and Barclays Capital, were among the prominent hirers in the first half. JP Morgan Chase took Tamara Adler, Stephen Stonberg and five others from Deutsche Bank in August.

Firms have also rushed to take advantage of pockets of geographical strength: Lee Thacker of Mantaray Partners says that hiring has been strong across the board in Asia, while there has also been hiring activity in the Italian securitisation market and a continuing need for originators in Germany.

However, hiring has not been up across the fixed-income sector as a whole. JP Morgan Chase's London hires were designed to strengthen its securitisation practice. Recruitment activity has been strong in structured finance and credit derivatives. But vanilla products such as foreign exchange and government bonds continue to be overstaffed.

This focus on complex areas may well be barring the entry of new headhunters keen to operate in the fixed-income market. James Hogarth of Hogarth Davies Lloyd says that his fixed-income experts receive regular calls from rival headhunters seeking to poach their skills. Established firms question the ability of novices to deliver in the more complex areas. Amy Russo, head of fixed-income search at Baines Gwinner, says: 'Debt markets are complicated. To be effective you have to be able to understand the differences in the skills people want - for example, between structuring consumer-asset deals and whole-business securitisations.'

Shaun Springer at Napier Scott says that the complexity of the products is not the only sticking point for novice firms. The pool of suitable candidates is small, making it doubly necessary to know everyone in the market, and so far very few desirable people have been let go.

Springer and others anticipate that search in the sector may be made easier if bonuses are lower than expected. Disappointment is likely to increase an individual's willingness to move.

However, they may have fewer places to move. Fixed income's turn in the limelight may already be over. Armstrong International's Sam Styllaniou disputes that 2001 will be been a boom year for fixed-income headhunters. Styllaniou says that is only alongside the absence of activity in the investment banking and equities sectors that fixed income looks good. 'The underlying businesses may have done well, but all the sensible firms had stopped hiring by June or July. In the second half of the year fixed-income hiring has died a dramatic death. Banks are still making money, but they are extremely selective.'

Russo at Baines Gwinner concurs. Most firms have postponed hiring, she says. This is partly a result of the disaster in New York. But it is also seasonal: autumn has always been a poor time of year for headhunters in all sectors.

Nevertheless, there is consensus that the fixed income market offers continued growth potential longer term. Russo anticipates an improvement in 2002. He says: 'Compensation may be lower in future, but European credit markets are still not mature. There are still appointments to be made.'

Mantaray's Thacker even thinks that mandates in the more specialist areas of the UK market are likely to remain plentiful in the immediate future. Barclays Capital, Royal Bank of Scotland and HSBC are improving product offerings.

Alternatively, areas such as balance sheet restructuring are also expected to create future staffing needs and mandates for fixed-income consultants. This is becoming the holy grail for banks, says Russo.

Armstrong's Styllaniou says: 'There is a shortage of expertise when it comes to balance sheet restructuring or capital raising. This will be an area in which all banks are looking to expand. People need to be fairly technical, but they also need client knowledge. Securitisation people or credit derivatives structurers are best.'

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