Macro Desks
Which specific macro sales and trading desks are best for career prospects as well as exit opportunities?
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Hey Trader27, I'm the WSO Monkey Bot and I'm here since nobody responded to your topic! Bummer...could just be unlucky but one of these topics will help shed some light:
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I recommend rotating across rates, fx, and derivatives if possible. Even better would be to get on a cross-asset team.
Thanks that’s really useful, which specific desks under rates and fx are best. Also which are the macro desks that generally allow you to trade cross products I’ve heard FX/STIR normally does.
I'd venture to say EM rates, but UST or whatever sovereign that's local is also a great starting point. Typically there are specialist teams that run cross asset trading in their book (lots of s&t desks are not as super-structured on the sale side -- trading is very silo'd though). Cross asset teaches you a lot about a lot of things.
Could you explain why it would be even better to get on cross-asset team?
I'm expected to do SA for cross-asset team in one of BBs, but really don't have any idea what kind of merits does this desk have, especially for the aspect of exit opportunities.
Cross asset teams are usually sales or structuring desks. There are 2 "types" of cross asset teams: those who deal with institutional clients (banks, InsCos, pension funds, ...) and the ones who cover structured products distribution (broker, private banks, AM with the final client being a HNWI). In both casse, it's a great opportunity because you have exposure to a lot of different products and asset classes, you speak to many trading desks, you get familiar with rates, equities, fx, credit, financing, ... Institutional coverage gives a broader exposure because they can trade more complex structures, with accounting/capital/etc considerations.
Thanks for your help.
I have an opportunity to interview with a cross asset team. But it would be in a sales role. Does your advice also apply to salespeople? In terms of exit opps, etc.
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govt rates trading is the #1 route
Liquid government bonds are the best route into a macro HF?
Wouldn’t rate derivs be better than vanilla rates?
There is no one way- Macro strategies can be employed in any one or a number of asset classes on the buyside so there are plenty of sell side desks that could ostensibly train a talented individual. To reiterate and consolidate from above- currencies, commodities, rates, corp credit, sovereign credit, derivatives and even equities and their derivatives (not what people tend to think about with macro but Julian Robertson dabbled in the 90s). Not surprisingly, "Cross Asset" gets exposure to multiple of these asset classes and therefore could be considered a good starting point. Macro PMs tend to be an eclectic group -I'd venture much more so than the average PE or IB senior professional but what do i know?- most are well read outside of just the finance realm, consider themselves cultured and well traveled(whether true or not), and have several quirky hobbies as well as passion projects in charitable causes.
My background was in distressed credit and later moved into more liquid stressed/performing strategies whereas I trade all of these opportunistically now.
When do you see most people move from these S&T desks towards a HF at analyst/associate or VP and above?
I think one of the more interesting things I've learned is that being a PM at say Millennium/BlueCrest etc trading rates doesn't necessarily mean your strategy is actually global macro. There are a lot of people in "macro" products whose strategy is really based on linear RV, vol, etc which is rather different.
Everyone I've spoken to whether they are a hedge fund PM or sell side trader said that you want to be exposed across FICC when you are in an internship/analyst program rather than immediately focus on the product they're in. A lot of people seem to have gripes/worries for whatever product they're in haha no matter what product it is. Most in sell side rates/FX whether G10 or EM said that you are taking prop risk regularly. Some people I've talked to in sell-side do trade interesting combinations like G10 STIR plus EM FX or even linear/vol combos but this seems uncommon.
Personally, I think the STIR/FX area is cool because it involves a lot of different products like xccy (someone told me those are super interesting) and even though not all of it is useful for becoming a hedge fund PM, it's a good skill set for being in like treasury balance sheet management/funding etc.
Thank you, that's extremely insightful and interesting to hear. Do you think certain macro S&T give a better skillset and are more sought after by hedge funds? For example do you think FX/STIR is more desirable that a long maturity IRS desk? Would love to hear your thoughts on the specific desks, as this information is very hard to find online. You've sort of mentioned it in your response, hedge funds are looking for a skill set to trade with a macro view, not necessarily for the ability to trade a specific product as what products you trade at a HF may change from your speciality in S&T?
Thanks! Well, i'm not sure about long dated IRS vs FX/STIR. From the little I know, people who trade the long end of the yield curve frequently have a background in the front end too (STIR) because they are interlinked. A challenge I would see with trading long dated IRS at a hedge fund is that they use a lot of balance sheet which HFs don't like. Even banks (HSBC and NatWest) are pulling out of long dated IRS market making because of this. Also the clients who use long dated IRS traditionally are corporates looking to hedge so it seems like one of those markets that HFs probably aren't as involved in. A lot of STIR products aren't common for hedge funds to get involved in too like xccy which is a product where your clients are mainly corporates and interbank.
Now if you're looking at a guy who's moving into a RV rates PM role at a HF, he's going to have a background in sell-side as an IRS trader or government bond trader because the strategy is to capture basis opportunities between IRS/cash bonds and futures etc. (IRS is linked to the eurodollars futures market, UST to UST futures). I am probably way oversimplifying this because this is getting beyond my depth. I am sure there are also pods taking more directional views on linear rates as well depending on the environment. When the monetary environment is quiet like pre covid, basis differences will be smaller but theoretically more reliable so a RV trader will increase leverage to take advantage of this. This is where STIR stuff comes in because all that leverage needs to be funded in the overnight market. The trouble can be when quiet changes to dangerous due to some shock like in March (some of those super leveraged RV UST positions exploded).
People seem to trade the same products at a hedge fund that they made markets in at sell side. People just tell me to be exposed to a lot as a jr because you don't know what you're going to like or what product will be strong at that point in time. A bank trader in say USTs can move to a hedge fund by being very involved with the clients (like hedge funds) and being good at managing the proprietary risk from that client flow. Theoretically, the more flow you have, the more opportunity to take views and the more information you'll have on the market. However it's a tough balancing act because hedge fund clients want prices that hurt your margins and increase your risk. That client interaction is crucial as a sell side trader from what i've heard and seems to be how people make their way to a HF (ie one of their clients).
Now in terms of specific products that can lead to being a PM besides the above, there is also the whole agency MBS side that's linked with rates too that I don't know much about but I know a lot of pods do. Then, you're going to have vol people who traded FX, rates or equity derivs vol in sell side. You're going to have various systematic strategies pods in different product areas (ie with a macro overlay or an index arb bent). Then there are people who trade IG and HY credit (some are more fundamental while others are trading macro credit/credit indices). There are equity index/synthetic strategies that I don't understand enough to say anything. The people who don't come from sell side s&t are typically in quant oriented stuff. There will also be people who traded IG credit or rates at some type of asset manager and made their way to a hedge fund somehow. You'll obviously also have the more corp finance oriented pods like merger arb and sector based long/short equities who can come from IB analyst stints. The crazy thing is that this is definitely missing a lot and just within the g10 rates/fx universe, I know so little which I find cool. I think some sort of rule of thumb is that a hedge fund doesn't want someone in fx/rates that can't make money without using a large amount of balance sheet. You're right that you can't find this info online really and that's why I've made a big effort to network and learn. I will say you can learn a fair bit about the backgrounds of HF PMs just by going on multistrat/macro fund's LinkedIn pages and looking at the PMs profiles. I have a superday in February so feel free to PM me if you want to collab or something.
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Thanks! Well, what rotation have you been placed on haha? Does it seem to be related to macro trading in any way? Is it a more general placement like fixed income or something specific within FICC or equities like rates or equity derivatives? I'd always first reach out and learn from the people on the desk you'll be sitting on.
Slightly off-track suggestion here, but I wanted to flag RBS' (now Natwest Market's) fixed income desk. For a shop with little clout elsewhere in the markets and, certainly since 2008, a shop that gets little admiration of the S&T side of things, they have an extremely strong franchise. In my honest opinion, one of the best fixed income desks on the street (in Europe).
What’s your opinion based on out of curiosity?
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