Structured Credit & Structured Rates - Riddle Me This
Hi all, I'm in the structured credit arena, and have a question on why you chose securitized credit trading, over banking (UW/securitization). If it wasn't much of a choice you had that's fine, but tell me if you'd still rather or recommend going the structured credit trading over structured credit banking route to eventually go buy-side.
How does your comp look vs friends you have in banking? If anyone is in structured rates trading as well, I'd like to know how you're doing comp wise.
Please include which asset class you primarily work with CLO/ABS/CMBS/RMBS (Agency/N-A), your title (An/Assoc/VP), if you're at a BB or MM, how well respected your bank is in the space, and what kind of hours you work.
Lots of questions, I will do my best to break it down.
I'm a director in sales at a BB (I think we are in the top 5 in the league tables in all of the products you mentioned), and I cover accounts for all of those products. I work around 50 hours a week in the office and pre-covid was going out with clients a night or 2 a week and might spend a couple of days a month traveling to visit clients not in NYC. So while you are not sitting in an office you are still "working" and while it seems exciting to a young kid it can get old real fast. In S&T your personal and work life can blur a bit, my kids played T-ball with one of my clients kids so while its not a formal client event us going out for pizza after a game can sometimes feel like work. Comp wise its about even to what our bankers make, our traders are paid a little better.
I agree with you that a structured products banking group is the best way to learn the business/develop a network and offers the widest variety of exits (trading, sales, buyside, issuer. Line between buyside and issuer is blurring these days) however there are a couple of things to think about.
1. Being a junior banker sucks, and it is not for everybody. Takes a certain personality to put up with the BS, and if you don't think its for you then I would tell you to skip it, sucking it up for 2 years for an exit that you are going to have to really hustle for is not worth it.
2. Unlike traditional IB, there is not this 2yrs and out path with people constantly recruiting you for buyside roles. The number of buyside seats that really appreciate your junior banker structured products skill set is not as large as you think. There are only so many accounts that focus down in credit enough to really need to "get in the weeds on deals" if you are an account that is mostly AA/AAA focused how much "credit work, understanding structure" do you really need to do and by extension do you really need or want to pay for someone with that banking skill set. There are plenty of other people who can do what you need cheaper. If you truly want to "be on the buyside" and you are smart enough to get a structured products banking seat you can find you way to a buyside gig without being in banking, and once you are on the buyside its easier to move up in market once you have the experience. If Blackrock is looking for a CMBS analyst they are going to look first at people with buyside experience, then sell-side research, and then for bankers.
For me personally I started on the buyside pre-crisis, just was not a fit for me personally (too slow of a pace and did not like the people I worked with) and I was able to exit after a year or so to a sell side trading seat in non-agency MBS. Back then the banks did more of the issuance off the secondary desk so the line between what a banker did and what a trader did was a bit more blurred. In Non-agency the dealer side would buy loans from originators and create deals off the desk and syndicate them out, still happens now but nearly what it used to be. There was less warehouse financed 3rd party money out originating and holding loans for securitization so the whole banking coverage style model you see today was not as big for us. Also the banks themselves had more sheet so they would do loans and just hold them on sheet. Sadly I was only there for a couple of years and then the crisis happened and I got let go. I have bounced around sales seats since then, some have been very lucrative and some not so much but feel like I am in a decent place now and will see how long I can stick it out.
OP here. Appreciate the analysis! And you’ve done well for yourself making Director. To bigger and better things. Small world, I’m in your space on the banking side, at a top 5 on the league table. I eventually do want to go buyside down the road in a PM capacity. I’m not set on 2 or 3 years, but would like to jump by latest senior associate through 1st year vp. And I’m thinking would it be better by that point for me to be just a banker those years or pick up sell-side trading or join a bank’s principle finance group. Assuming those could all be possible in a couple years, what would be ideal if you could weight your skillset marketability solely in order (50%banker/50% trader, 50%banker/50% prin fin, 50%trader/50%prin fin, 100% banker, 100% trader, 100% prin fin)
And how would you say your comp stacks up compared to the rest of FICC desks in S&T
What exactly is the role of a Bank's Principal Finance group? From what I've seen on Linkedin, it seems like they provide structured financing to external counterparties?
If you have already spent time in banking you are better off being a trader if you want to be a PM on the buyside you already get the fundamentals of the deals but you have never really been truly markets focused day to day and I think it takes time to understand that. Either way you are not going to be given a PM seat from day 1 coming from the banking world or off a trading desk so just be prepared for that. Couple of thoughts on why I think trading would be better.
1. Networking: As a junior banker you don't have all that much interaction with the buyside accounts, sure you may get the basic questions but you are not going to be getting a speaking role on calls with accounts about deals. At least when I have calls with clients its always the senior guys doing all the talking. As a trader you will be in all the chats and will be talking to clients pretty much from day 1. Also you will going out a lot more so will be able to build relationships that way instead of just at conferences.
2. Pace: The pace on the buyside/any markets role is much faster than banking and on some level you are in comp vs all the other buyside accounts to see and react quickly to the best ideas in your area of focus you are going to get a better feel for how that works after trading for a couple of years.
3. P&L/risk management- Something you think about all the time on the buyside, but never as a banker. While you think about it differently on the sell-side you get reps at thinking like this. Also as a banker you really don't have any revenue generating responsibilities until you make director as a trader you have them pretty much right away, especially if you start as a trader after 5+ years in banking. Can you live with that?
4. As a banker you really never think about relative value which you would learn how to do not just within your space as a trader but across asset classes very helping for being on the buyside at some point.
The other thing you really have to think about is what sort of buyside do you want to be on. Do you want to be at a larger asset manager where you have all sorts of strategies that you are running within a space or do you want to work at more of a hedge fund type vehicle where your return hurdles are higher so your box of what you can look at is much smaller on the CUSIP side but maybe wider on the loan/derivative side? Those are very different jobs and I don't think you would really learn until you sit in a trading seat and interact with both of them on a day to day basis.
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