2008 Hiring Trends: Fixed Income

Hiring across all areas of Fixed Income Investing (including Product Management) falls further in December, bringing hiring over the whole year down to around half 2007’s volume.

The sharp fall in Fixed Income hiring seen from October onwards continued in December, with hiring running at only 17% of the December 2007’s figures.

This brought hiring for the 4th Quarter of 2008 down by 76% on the previous year, highlighting the sharp fall in sentiment from October onwards, in response to market falls and subsequent loss of fee income by asset managers due to asset devaluation.

This was the fourth consecutive quarter to see a fall, and brought overall hiring figures for Fixed Income for 2008 down 48% from 2007.

After the initial market shocks in March 2008 (Bear Stearns, etc) many firms imposed hiring freezes. This led to an overall reduced level of hiring activity, as large numbers of searches were cancelled or placed on hold in March. This resulted in two effects:

• First, an immediate fall in the number of announced job moves in the 2nd Quarter of 2008 (April – June), with announced hires 49% down on the same Quarter in 2007.

• Secondly, because less people had moved, there were less gaps to fill, so hiring activity during this Quarter was also lower than usual levels, given that one of the main drivers of the hiring effort between May and June is usually firms seeking to fill gaps from departures announced after bonus season.

So hiring in the 2nd Quarter was also down, by 41% over the previous year.

Lehman Brothers' unexpected demise in September, followed by widespread volatility led to severe falls across most markets and asset classes in October. This proved to be the final straw for hiring sentiment; most firms' hiring budgets were placed on hold, as the sudden decline in fee revenues prompted Finance Directors to call for re-submission or freezing of headcount requests. There was also a rapid shift from a hiring stance to a firing stance - deciding how best to wield the axe on staff costs, in line with sharply falling fee revenues.

Hence, for the last quarter, we saw the pace of hiring fall still further, to only 24% of the previous year’s volume.

There was a similar downwards trend across the board, with hiring in Equities Investing and Institutional Sales & Client Servicing both down between 41% and 28%, respectively. Unsurprisingly, though, Fixed Income was the worst hit in terms of hiring activity.

Within the asset class, we saw several trends occurring as various investment areas came into, and then out of fashion:

• One of the big ‘winners’ was the Rates area, with several headline moves announced – including Brevan Howard and Blue Crest’s team moves as they built out mainstream Institutional Fixed Income Market – and an general retreat to the perceived safety of government bonds by Pension Funds. Hence hiring in Rates increased by 3% over 2007, to 15% of all hiring in Fixed Income.

• On the Credit side, demand polarised up and down the risk curve, leading to a slight fall in High Yield hiring (from 9% to 6%), with a slight shift up the risk curve into Distressed debt (2%), and strong demand (16%) in the Crossover area. As in previous years, the least active area remained Investment Grade credit, comprising only 4% of all hires - though we believe demand will increase in 2009 as spreads offer increasingly attractive returns for less risk than High Yield.

• In the Emerging Markets area, hiring started the year strongly, dying away as the markets themselves fell sharply in the second half of the year, to fall overall 2% down on last year, at 10% of all hiring.

• Demand for Product Managers (that is, Client Servicers or Salespeople with a strong background in Fixed Income) also remained relatively buoyant, though with the general scarcity of skills, a number of firms chose to redeploy staff to this role internally rather than hire externally, hence hiring increased only 2% over 2007, to 12% of previous years’ volumes.

**Our prognosis is that hiring in Fixed Income will continue to be very depressed until the end of 2009 and, in particular, in the first quarter of 2009). With firms still reeling from the impact of sudden fee revenue falls in the 4th Quarter of 2008, we think that most firms are still in the mood to cut costs rather than expand headcount.

There may well be an increase in opportunistic team moves, as firms seek to break into new product areas (eg. equity boutiques building in Fixed Income, Hedge Funds building long only Institutional businesses, etc), taking advantage of corporate instability within their competitors. We also feel that further consolidation is highly likely as firms lose critical mass and decide to sell off their non-core asset management businesses.

In terms of asset classes we would expect any Fixed Income hiring that does occur to be mainly focused on Investment Grade Credit, Government Bonds, and Distressed Debt.**

• Hiring Trends: Fixed Income

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