Best Fixed Income / Macro Trading Desks
What are the preferred FI/Macro trading desks for non-quants (i.e. people that dont really code, econ background etc) to move to the buyside?
Like EM FX vol, EM Rates vol, STIRT, FX Options etc?
UPDATE: When I say the buyside, I mean to a MM hedge fund
Based on the most helpful WSO content, the preferred Fixed Income/Macro trading desks for non-quants with an economics background looking to move to the buy-side could include:
FX Trading: This involves the buying/selling of currencies. It's a dynamic and highly liquid market, making it a popular choice for many traders.
Emerging Markets Trading: This involves trading in financial instruments from emerging markets. These markets can be volatile, but they can also offer significant returns.
US Interest Rate Trading: This involves trading in US government and corporate debt. Traders in this area need to have a good understanding of macroeconomic trends and monetary policy.
STIRT (Short Term Interest Rate Trading): This involves trading in financial instruments with short maturities. It's a fast-paced area of trading that requires quick decision-making skills.
FX Options: This involves trading options contracts where the underlying asset is a currency pair. Traders in this area need to have a good understanding of both the forex market and options trading.
Remember, the best desk for you will depend on your own skills, interests, and career goals. It's always a good idea to do your own research and speak to people who work in these areas to get a better understanding of what they involve.
Sources: Best Desks for Sell-Side Trader --> Buy-Side Macro PM, https://www.wallstreetoasis.com/forum/trading/what-are-the-top-volatility-trading-desks-at-jpm-gs-and-what-differentiates-them?customgpt=1, What fx/rates/fixed income desk is best for macro/rates hedge funds?
STIR for sure
You don't really want to be stuck as a repo/short-term guy imo. I'm at an AM - so we don't get many people from vol backgrounds, but we get loads from structured credit / securitized desks (CMBS, RMBS, CLO).
Do you see these structured products traders move to HFs much or mostly AM?
I'd have to agree with STIR as well, so long as it's not strictly a Repo desk. Every bank breaks down STIR/FX differently but generally these desks have wide mandates between different regions and products they are able to trade (ie. short end rates, fx forwards/spot, XCCY-basis). These are great seats for those who want to trade macro directional strategies. UST desks are good as well for RV folks. Vol strategies can be less liquid and therefore funds may be more hesitant to get into them for risk management purposes but of course if it makes money they will happily jump in.
Ultimately when making the transition it all comes down to how clearly you can articulate your strategy no matter what assets you trade.
Is linear or derivs rates products trading background more attractive to MMs?
I’d say they are on par with one another. See people who trade derivatives (swaps) generally getting the same opportunities as their linear rates counter parts are getting.
From there it’s going to come down to region funds generally have more appetite for DM over EM but really depends on the funds strategy and overall purpose.
Have actually seen a lot of interest this year in lesser traded G10 regions like CAD and Scandies.
What about vol products like swaptions or even exotics? How do mm HFs view these products compared to linear products like swaps or treasuries?
That's great to hear. But would that apply also compared to rates options? I guess the corresponding strategies would be different. So is the amount of seats at the MMs focused on linear rates comparable to the number of vol focused seats? What could a junior trader (focused on linear/swaps) do to prepare a long term move to MMs?
Rate options again tend to be less liquid. Nothing wrong with building a strategy, many MM just tend to view it as more risky given the liquidity restraints.
In terms of making the move to HF long term, focus on building your edge by defining your process outside of market making activity. What markets/products are you an expert in? How do you develop your views? How do you measure your confidence in any given trade? How do you manage risk? Etc.
Of course, any type of technical skillset and proprietary model building you can bring the table will help as well.
I’d suggest reading Brett Donnelley’s book Alpha Trader.
Thanks so much and understood. How far into one's career do you think is ideal to make this transition? And if it's relatively junior, how would someone engage with headhunters or interested funds. Sorry if those questions are basic.
As you can imagine the answer depends on someone’s situation and the opportunity that’s presenting itself.
~1-3 years you are looking at analyst seats. For MM HF’s this means working within a Pod set up doing research analysis, building models, maybe doing some hedging. What the actual role entails depends on the PM. Working for one PM can look completely different from another even if they trade the same assets at the same fund.
~4+ years with a proven track record on the sell side generating alpha outside of market making activity you might be eligible for a sub-pm seat. These again work within a pod set up where you are essentially responsible for running a small portfolio within the main book. In terms of deal structure (salary, allocation, %payout, risk limits, netting risk) they are variable. IMO these are great opportunities because you will get to learn from the PM of how to operate a book outside of market making while keeping your risk taking responsibility.
~10+ years comes the full allocation PM seat. These are generally reserved for sell sliders who have an exceptional track record and a defined edge or strategy. Basically you are your own pod with full autonomy on how you want to run things. Of course you have management overseeing risk limits and all that.
please keep in mind this is a very basic outline and tailored to MMHF who trade Macro products
You can keep in touch with HH who know the space well and can serve you up opportunities that are available or go direct to BD teams at the funds. I’m biased so I understand the benefits of working with HH (can introduce you to multiple funds at once, give you insight on deals/offers, assist in the interview process, help tailor your pitch, etc). Just make sure you build a good relationship and you trust the person you are working with and representing you.
You can engage with them primarily through LinkedIn. Most of the time they will find you but can’t hurt to reach out to them directly. Just shoot a connection with a quick note. Use your network/LinkedIn to figure out who’s good and who’s not.
Again really appreciate your responses. Do you think there is sizable demand for junior talent in macro or is the demand more targeted towards senior risk-takers? I talked to some other headhunters who are more generalist and they say that headcount in macro on the buyside is much much smaller than equity/fundamental driven strategies. Do you think the uptick in seats at MMs this cycle is going to hold?
Can’t speak to anything L/S related as it’s not my area of focus. For Macro, BD teams at funds want to talk to anyone who has a strategy that makes money and they can allocate funds to, it’s an open ended process. Sometimes the fund is looking to cover specific gap they have in coverage within a certain strategy.
For analyst positions a PM will ask BD to find them an analyst with a criteria of needs but most of the time they may use their own network first before they will ask BD or HH to work these mandates.
Lots of time a good HH will get permission from a candidate to opportunistically send their profile to BD to see if there’s a fit with any of the PMs. I understand candidates hesitation in doing this but lots of times you get on BD’s radar early on and start building a relationship early so when an opportunity presents itself the intro is out of the way.
Many candidates are hesitant about that for one reason or another but I feel it can’t hurt to start marketing yourself if you are actually looking to make a move.
Just make sure these HH are not spraying your resume to a bunch of places they didn’t clear you for. Otherwise be open minded.
Happy to hear any rebuttals on this to anyone following along
Lol all your example desks (vol products) require quantitative thinking and backgrounds
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