ABS Structuring/Banking --> Secondary Market Trading?

Jumping from ABS structuring/banking to secondary market trading is a realistic move, but it depends on your skill set, networking, and timing. Based on the most helpful WSO content, here’s a breakdown of your questions:

1. Transition to Secondary Market Trading:

   • Moving from ABS structuring/banking to secondary market trading is feasible, especially if you develop a strong understanding of the products and markets during your time in banking. Your experience in structuring will give you a solid foundation in understanding the underlying assets, legal structures, and cash flow mechanics, which are critical for trading these products.
   • Networking within your firm and with traders on the desk is key. Expressing interest early and demonstrating quantitative skills can help position you for an internal move.
   • Timing is also important. Opportunities to transition may arise during periods of growth or turnover in trading desks.

2. Primary Market vs. Secondary Market (Long-term Compensation and Exit Opportunities):

   • Primary Market (Banking/Structuring): Compensation at the junior level is similar to traditional IB roles, with a slight haircut in bonuses (10-15%). Long-term, staying in banking/structuring can lead to senior roles with strong compensation, but the trajectory may plateau compared to trading or buy-side roles.
   • Secondary Market Trading: Trading roles can offer higher upside in compensation, especially if you perform well. However, trading is more volatile, and compensation is closely tied to desk performance and market conditions.
   • Exit Opportunities: Banking/structuring roles often lead to exits into ABS-focused hedge funds, private equity, or other buy-side roles. Trading roles can also lead to buy-side opportunities, particularly in hedge funds or proprietary trading firms, but the skill set is more specialized.

3. Working at a Structured Credit Fund:

   • At a structured credit fund, the work involves analyzing and managing investments in structured products like ABS, CLOs, and other securitized assets. The focus is on evaluating credit risk, cash flow modeling, and optimizing portfolio returns.
   • Compared to trading, the pace is less intense, as you are monitoring and managing investments rather than actively trading. However, the work is still highly analytical and requires a deep understanding of structured products.
   • Compensation: Structured credit funds typically offer competitive compensation, with junior/mid-level roles comparable to other buy-side opportunities. Long-term, compensation depends on fund performance, AUM, and your economics with the fund.

In summary, transitioning to secondary market trading is realistic, but it requires proactive effort to build the necessary skills and relationships. Both primary and secondary market roles have their pros and cons in terms of compensation and exit opportunities, so your decision should align with your long-term career goals and interests. If you’re aiming for the buy-side, either path can lead there, but trading may offer a more direct route to roles in hedge funds or proprietary trading.

Sources: Role of Quants in Credit Investing/ Trading: ABS, Structured Credit, Corporate Loans, https://www.wallstreetoasis.com/forum/investment-banking/structured-finance-outlook-and-exit-opportunities?customgpt=1, Distressed debt / special sits investing - On the job, Debt and Structured Finance Brokerage Exit Opps, Undergraduate Opportunities - Credit Funds