Fundamental-Driven Trading Desks

Hey guys,

Going to be interning at a top BB in S&T this summer, and want some advice on what trading desks to try out or rotate through.

I want to look into products/desks that have a component of fundamental analysis to them. Now, I know trading at a BB is more about market making and fast-paced dealing, but I've heard there are some that involve more deep analysis than others do. So far I'm aware of:

HY Credit
Long-term distressed prop desks (i.e. SSG)
Equity Derivs (maybe?)

I'd like to have the skillset to join a long/short equity HF or something similar. Any comments appreciated

 
Best Response

Can't comment on 'long-term distressed prop desks' as never personally experienced one.

As for equity derivs, like Revsly said, you're really not going to be getting involved in fundamental analysis.

On the other hand, HY credit is probably one of the more fundamental-orientated desks you can experience. If you trade HY credit you'll often be dealing with companies that are on the verge of bankruptcy. In such scenarios, expect to spend a fair bit of your day chatting to your firm's go-to lawyer for these things (b/c you don't want to/know how to properly interpret a several hundred page prospectus with all sorts of liens and god knows what that will in turn have a huge impact on the value of the credit in question), also your firm's research analyst for the company in question (assuming there is one), not to mention a lot of chat amongst the traders themselves.

Personally, this would be one of my favourite areas to trade. A lot of money to be lost in such scenarios (no one's going to be happy if you're long a chunk of CDS on an entity about to default), but also a lot of money to be made (both through correct positioning and big bid-offer spreads), and requires really getting to know the companies you're dealing with.

Other desks that spring to mind if you're interested in fundamental stuff is merger arb-orientated desks, assuming the firm has such a desk.

 
XIII:
Personally, this would be one of my favourite areas to trade. A lot of money to be lost in such scenarios (no one's going to be happy if you're long a chunk of CDS on an entity about to default), but also a lot of money to be made (both through correct positioning and big bid-offer spreads), and requires really getting to know the companies you're dealing with.Other desks that spring to mind if you're interested in fundamental stuff is merger arb-orientated desks, assuming the firm has such a desk.

1) market makers in hy dont get all get access to firm lawyers, but rsrch since most are on the desk. If ur in distrs then u may have in house counsel but generally have outside counsel on retainer 2) no one says "long a bunch of cds" ppl say short credit if u bot protection or long credit if u sold protection

 

essentially the fundamental ones are those with large balance sheet - likely the prop groups to join a L/S equity hf, you dont need to be in a BB, in fact people will appreciate if you are from a mutual fund/ AM firm better. historically, fund guys have looked at S&T guys in a very different light

HY/value is indeed boring. but one covenant is all you need to differentiate yourself from the rest with a very large gap - just look at the sub prime RMBS and you will figure. Its all a matter of are you weird enough to wait out for an insanely long period of time and batting all your worth into one superb idea while everyone is against it?

 

re: long-term distressed prop

My understanding is that this is not something that people do straight away out of school. A lot of guys taking positions in distressed debt over the long haul likely have a lot of exposure to restructuring (and as a result, often come from an IB role, then into a PE firm that takes positions in distressed debt).

Revsly is right, if you do equity derivatives, you will likely be trading vol and not focusing on financial statements.

And it is true that you will probably get more of a fundamental analysis approach from something that seems plain vanilla like a asset manager/mutual fund/etc.

 
matthewlesko:
re: long-term distressed prop

My understanding is that this is not something that people do straight away out of school. A lot of guys taking positions in distressed debt over the long haul likely have a lot of exposure to restructuring (and as a result, often come from an IB role, then into a PE firm that takes positions in distressed debt).

This is correct, for example the GS SSG and PS hired IB analysts quite frequently

 

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