Sagging trading volumes and disappointing revenues have dampened expectations on Wall Street for a quick recovery. But industry insiders are cautiously optimistic about the hiring outlook for trading desks next year.
At first glance, the outlook doesn't appear so promising. Famed analyst Meredith Whitney likely sent a collective shudder throughout the industry with her prediction that securities firms will slash as many as 80,000 jobs over the next year and a half. Meanwhile, recent reports about a hiring freeze through year's end at Morgan Stanley and layoffs at Barclays Capital, Credit Suisse, Bank of America and JPMorgan have added to a seemingly bleak job outlook on the Street in the near term.
But while Whitney's forecast ultimately may prove to be correct, firms will nevertheless be on the lookout in 2011 for traders with proven track records, according to Alan Johnson, a compensation consultant at Johnson Associates in New York. "Successful traders are always in demand," Johnson says. "In an environment where it's tough to get capital and risks are contained, the good trader is more in demand than ever. So if you are a really good trader, at the end of 2010 you should be paid pretty well, and there should be plenty of opportunity for you."
Firms are likely to be on the lookout for fixed-income traders, along with players in the high-yield and distressed debt markets, Johnson says, though he cautions that companies are unlikely to offer long-term employment deals. "It'll be shorter than you would have seen in the past. The years of two- and three-year guarantees -- you're not going to see a three and you're not going to see too many of the twos," he explains. "The regulators have said, 'We want to see as little of that as possible.' "
Risk managers also will continue to be in vogue in 2011, as firms remain sensitive to potential losses caused by market volatility or credit exposure, Johnson adds. "If I were to say the two areas that were most in demand, it's of course risk and compliance people," he says.
Richard Lipstein, a managing director at Boyden Global Executive Search, predicts "robust" hiring on trading desks next year, particularly within fixed income, foreign exchange and commodities. "My clients are cautiously optimistic," he reports.
And while some observers may argue that Wall Street is overstaffed at the moment, Lipstein contends that widespread layoffs are unlikely because it would send a message to the broader market that times will remain tough -- with no end in sight. "The layoffs we've seen have been accelerated, year-end layoffs," he contends. "I don't know of any firms -- with a few exceptions, of course -- that are looking to start layoffs because they see business going down."
Hedge Funds: Kids in a Candy Store
In fact, one sector in particular is poised for very strong hiring, Lipstein suggests. With firms such as Goldman Sachs and JPMorgan shuttering their proprietary trading desks due to new regulations, hedge funds are primed to pounce on those displaced traders, he says.
"That's the binge area right now," adds George Michaels, the founder of software integration firm G2 Systems, pointing to a recent report that three former Goldman Sachs traders were able to raise more than $500 million each to start hedge funds."The hedge funds themselves are hiring more people. Hedge funds are raising money, which means people are willing to invest money, which is a good sign for the financial services sector."
Anecdotally, Michaels says he's having a harder time recruiting recent college graduates, with larger Wall Street firms poaching qualified candidates before he can get to them, a stark contrast from the height of the recession."We're having more difficulty trying to get folks to even submit their resumes to us," he acknowledges. "Being a small firm of 30 people, we don't get the name-brand recognition that a Citigroup does. Therefore, we're seeing just a trickle of resumes compared to the flood we were seeing last year."