Difference Between Strategy Desks and Trading Desks in Fixed Income

I have previously been to a BB's fixed-income trading floor and was able to have a very quick glimpse into the majority of desks. One that really interested me was a strategy desk that seemed to have a smaller team than most of the other desks. Since I didn't have long to speak to everyone there I was wondering what some of the major differences are between a strategy desk and other trading desks such as bonds and MBS.

What does the general work entail?
What kind of salary can be expected from analyst to a more senior position?
What sort of exit opportunities are there?
What sort of backgrounds are hired into these positions?

Any other information or input would be great as well.

Comments (12)

Most Helpful
Oct 2, 2018 - 11:10am
faceslappingcompilation, what's your opinion? Comment below:

Strategy (also called research) spends their time writing the "story of the market" and putting out relative value trade ideas. The primary audience for their free work product are bank clients (mostly hedge funds, pension funds, other asset managers, etc..) however they also provide their ideas to their firms internal trading desks. Strategy and research desks generally don't have a P&L...but if clients like the ideas and put on the trades, they generally use that firms trading desks to do so..and that is how they justify their existence (the trading desks theoretically earn the bid/offer spread from customer flow...so any additional flow is accretive).

Common exit for research/strategy is to the customers who they previously were writing for as a portfolio manager (RV hedge funds, pension funds, university endowments, etc...). I've seen research guys become PMs at DE Shaw, Tutor, Brevan, the Harvard Endowment, Citadel, and many other similar types of asset managers

just google it...you're welcome
  • 3
Oct 2, 2018 - 11:20am
kanda85, what's your opinion? Comment below:

What you described sounds like the dedicated research desks that I also visited. The strategy desk that I am referring to seemed to be dealing with creating the actual trading strategy for the traders. Are they also just in essence research? My understanding was that the chain of information went somewhat like Research -> Strategy -> Traders

Oct 2, 2018 - 11:27am
faceslappingcompilation, what's your opinion? Comment below:

Maybe things have changed since i worked at an ibank, but in my experience, FICC traders didn't have anybody telling them "how to trade"...and the research and strategy groups work product was always taken "with a grain of salt". This might be specific to the firm you were at...the 3-4 ibanks i worked at never had such a thing as you describe.

Was the strategy desk writing code/execution algos?

just google it...you're welcome
Oct 10, 2018 - 2:40pm
kanda85, what's your opinion? Comment below:

How significant of a difference in earning potentials would you say there is?

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Oct 19, 2018 - 3:44pm
bobl eonia, what's your opinion? Comment below:

Obviously differs from bank to bank. That said however, in general terms where the research guy is meant to conduct independent market research and report whatever he/she truly believes (regardless of desk positioning and client interest), the strategist is directly involved with sales/trading and tries to promote ideas that suit both internal desks and clients.

Simply put, the strategist works in trading desks' interest and the researcher works (supposedly anyway) independently. Strategist research is much more pinpointed and mainly involves specific trade ideas rather than a general macro picture.

Exit ops obviously reflect that and as mentioned already, moving to the buyside to trade is fairly common.

Backgrounds are similar to trading, but perhaps a touch more quanty on average. Salary on par with sales/trading.

For good order this is not to be confused with 'strat' teams at GS/MS which are pure quant positions.

Nov 15, 2018 - 3:16am
2128701630, what's your opinion? Comment below:

Also, from a regulations perspective research is more tightly controlled since it can include investment recommendations, whereas strategy is considered "market commentary."

I guess the real question is: if you wanna move over to a fixed income hedge fund, should you try be a trader or strategist? Traders have PnL and can put on trades, but have to make markets and manage unwanted risk. Strategists have client exposure and time to come up with ideas, but no book to put them in. A real conundrum. faceslappingcompilation @bobl eonia"

May 4, 2022 - 1:22am
marklazow, what's your opinion? Comment below:

The fixed income trading desk is a broad category that can be subdivided into narrower categories of specialised trading desks. It allows investment firms to separate the different kinds of assets and markets that can deal with ultra-safe to high-risk treasuries, low-grade bonds to high-grade bonds, etc.

Strategy (also called research) desks usually have a macro perspective on the general markets including fixed income research and equity research. They publish relative-value trade ideas after considering the entire market story. The primary clients are hedge funds, pension funds and asset managers. The strategists are directly involved with sales/trading and promote ideas independently. 

Exit opportunities of moving to the buy side to trade are fairly common. A common exit for the strategist is writing as a portfolio manager. The backgrounds of the strategy desk are similar to trading, but there may be a more qualitative touch. The research desk is filled with high-level quants and a good grasp of economics.

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May 5, 2022 - 12:11am

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