In the world of exotic derivatives, it is no longer enough to know just one product class well. The most sought after specialists are conversant with three or more.
A few years ago, you were hot property if you specialised in derivatives based on credit, equities, foreign exchange, commodities or interest rates. But as the derivatives market matures, banks' tastes have evolved. These days, the hottest staff are on hybrid desks.
Mix n' match
As their name implies, hybrid derivatives are a mixture of other derivative classes. Hybrid specialists combine credit derivatives with equity derivatives, or commodity derivatives with interest rate derivatives to form a new product with higher returns.
James McNabb, head of hybrid derivative trading at ABN Amro in London, says hybrid activity will grow this year: 'Investors are looking for returns in an environment where rates are low and credit spreads are very low.'
Previously compartmentalized product ranges are being combined, says McNabb. 'You used to have a rates group, a commodities group, a credit group, etc. But dealers are starting to realize there are some interesting things to be done in the spaces between those pillars.'
Who knows hybrids?
McNabb set up ABN Amro's hybrid team last year and plans to add additional staff in the middle of this year. According to headhunters, he's not the only one.
'There is a definite desire by all the main banks to do hybrid structuring, trading and marketing,' says Lee Thacker at Highland Partners, a search firm. 'They are looking for high quality people who can work across product classes.'
'It's the hot product area,' says Clare Harris at Alexander Mann. 'We are seeing more and more interest from banks looking to hire there.'
'This is going to be the year of the hybrid,' says another consultant. 'Combining products is becoming the only way to make money. We're already seeing a lot of mandates.'
The best known hybrid teams are at JP Morgan and Goldman Sachs. Citigroup, Barclays Capital, ABN Amro, and BNP Paribas also have hybrid capability. Headhunters say others such as Morgan Stanley and CSFB are expected to go deeper into hybrids this year.
Many of the staff on hybrid desks are moved internally from existing teams, but banks also recruit on the open market. In future, JP Morgan could be among them: Chris French head of exotics and hybrids at the bank, retired earlier this month.
Bringing in new hybrid talent is a problem because there isn't much of it about. 'There are some hybrid specialists, but not many,' says one specialist headhunter. 'There is a bit of a war for them.'
Hybrid specialists can typically command guarantees of one or two years. Typical packages for traders and structurers are 150,000 (€217,000) for someone with three years' experience, and 700,000 plus for someone with more than eight years' experience.
Thacker says experienced hybrid traders and structurers can typically command a premium of 20% to 40% more than a standard derivatives specialist.
Even if you've never worked with hybrids, you could still see a chance of moving into the sector. Thacker says banks are willing to consider high quality people with a background in equity and credit derivatives, the most complex of the hybrid product areas.