What are some exit options for S&T Associates in FI/Rates?
Are S&T Associates (credit/rates/fixed income) pigeon-holed into their desk/field on sell-side or can they also exit to buy-side?
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if you are good...then you can goto the buyside and trade rates...that's where most all of the best rates traders end up going. Citadel, Brevan, Tudor, Millenium, Element, BlueCrest, Exodus, etc...tons of rates trading funds and they all hire the star traders from the BB rates desks.
The first task, is to become a star rates trader....and that meand putting up big P&L...making 20-40mm+ for multiple years will get you that shot to make 15% of your P&L at a hedge fund....but first you have to put up that P&L...and this typically takes at least 4-5 years of trading...sometimes more like 10 years.
However, if you are making 40mm of P&L at a BB at year 4, you will be paid decently...maybe 500-700k (vs at a hedge fund, you'll get paid 6mm for that 40mm of P&L)
you think one can do well trading rates in this environment?
Also, you say 20-40mm of profit per book. What book size are we talking about here?
This was from my experience trading on a BB rates desk...where carrying more than 100k-200k of outright directional DV01 risk was generally frowned upon for the junior traders (of course, some client flows put you to much higher position sizes, but the traders are expected to hedge those flows when it was reasonable to do so).
So, on a treasury desk, it was generally acceptable for anybody, to be long or short 100mm-200mm 10yr notes (or the DV01 equivalent anywhere on the curve) whenever you wanted...and spread risk could be of course be larger....but the avg trader without a large P&L cushion is expected to not have losses greater than 500k on any given day. If you are up 10mm, then sure, you can be up/down 1mm on any given day, and nobody will care....but if you are flat for the rear, then losing 500k will not look good, but was not a fireable offense...but more than a few of those days in a row and you will get your wings clipped. Obviously, the senior traders are expected to take more risk and their P&L swings more...what i saw was 1-2mm avg P&L swing for the senior traders....where 5-10mm swing or larger was an outlier and not an "avg day". This means different things for different traders, because different parts of the curve will have very different activity (the 2yr trader and the 30yr bond trader client base are often active on different days, and in different ways).
The standard recommendation is to try to make 100k-200k per day for a couple months as a junior trader, and then start swinging for larger (500k-1mm) per day after you have 10mm of P&L cushion. While there is an argument to swing large when the opportunity presents itself...and that might be on day one.....without a decent P&L cushion, this is not recommended.
If you are doing vanilla products, making 200k a day is not so easy. Spread is tight so you have to quote and trade a lot. No way you can compete with robots.
If you trade exotic product, then your pnl volatility is much higher, and you are more likely to suffer from some big losses.
You can however build position ahead and take a view, but most of banks don’t even allow you hold a big position for more than a month.
In summary, consistently even making 100k a day is Very hard nowadays
What are your similar thoughts on the IG Credit Side?
Thoughts on salespeople?
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From what I have seen at least in non-rates FI products is that you start getting better looks at buyside opportunities once you make VP. Which makes a ton of sense as you are most likely not getting your own trading book/client list of any real size until you make associate and then you have to prove yourself and build relationships with the buy-side accounts that you want to work for. Trading tends to get better looks than sales but a lot of the buy-side traders job is information filtering and pitching ideas to the PM so you see sales people become buyside traders.
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I am in touch with this guy at a multistrat HF in vanilla US rates. He has his own pod at 30-31. Was briefly a bank trader and before that an execution trader at a hf. He said that the bank was generally chill with prop trading. Not saying that path is easy but it's definitely possible and he said that there were some really adaptable traders at the bank he was at.
Also, in terms of other exit ops for rates roles, there seems to be some very interesting roles in balance sheet management at financial institutions. I'm going to get in touch with people who can hopefully give more info.
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