A panel of headhunters gives its assessment of typical London pay packages. Average salary: 120,000; bonus - 100-125%
One definition of strategy, according to the Collins English Dictionary, is 'the art or the science of the planning and conduct of a war.' Going into 2005, with financial markets as competitive as ever and professionals having to work harder than ever to justify their remuneration, this is no bad description of the responsibilities of the senior fixed income strategist.
Like a good general, he or she will be keeping a watchful eye on the terrain, staying abreast of moves made by competitors and only launching into action when the time seems right.
'Typically, they interpret and consider the extent to which the market outlook is good for or bad for fixed income and corporate bonds and make recommendations accordingly, writing reports and taking a view on events," says Richard Fraser of RJF Global Search, adding that at all times a global perspective is necessary
Fixed income strategists also have to be very broad in their outlook, working closely with fellow strategists, portfolio managers, traders, and researchers to design new core products and solutions.
James Richardson of Napier Scott says, 'With their roles dictating that they understand cross-sector, -currency and/or -maturity analysis as opposed to expertise in a single area, strategists tend to be more quantitative in their approach than pure research analysts.'
The good news is that such abilities are relatively hard to come by, meaning that the typical individual is well paid. Russell Adam of Adam Grant says a fixed income strategist working in investment management would typically earn between 70,000-120,000 basic, with a bonus of up to 100% on top; Fraser agrees, indicating that the basic could be as much as 140,000 with a bonus well in excess of 100%. Richardson says that last year a senior strategist at director level averaged total compensation of 275,000 while a managing director averaged nearly 400,000.
So what skills do you need to succeed as a senior fixed income strategist?
Russell Adam says most will have a good quantitative degree as well as a professional qualification such as CFA. In terms of background, the typical fixed income strategist will have a minimum of five years fixed income portfolio management experience or sell side portfolio strategy experience, combined with sales experience. A solid knowledge of fixed income derivatives (interest rate swaps, default swaps etc), instruments and strategies is also very useful.
Being able to present your views and ideas clearly, concisely and with conviction are central to the role. And equally important is good mathematical knowledge: Fraser says fixed income strategists can come from a quantitative analyst background, equipped with a PhD or at least an econometric background: knowledge of stochastic calculus, probabilities and statistical analysis packages are all useful.
The outlook for this role going into 2005? Pretty good is the consensus of headhunters working in the area. Fraser says there is selective hiring taking place at the senior level (and replacement hiring at the intermediate level) while remuneration also looks to improve. Richardson sees continuing increase year-on-year in total compensation to approach 2001 levels - something of a high water mark for fixed income professionals. By the time total remuneration for 2004 is calculated, he anticipates increases of about 5% across the board.
Figures and commentary by RJF Global Search, Adam Grant and Napier Scott