What sort of career paths do Traders at banks have?
I've heard a lot about traders not staying as a trader for their entire career due to the low job security, stress etc but what sort of career paths do traders have? Do they start their own prop shop or hedge fund when they have built a good reputation in their industry or just become traders at hedge funds and prop shops instead? I've heard that some of them become portfolio managers as well. Can anyone verify that?
It really depends on the desk, firm (buy side or sell side), and the individual person. I don't think it is a question that has a simple answer to it. I'll speak only to what I have observed. Typically at BB, traders will try to climb the ranks of analyst, associate, VP, ED, MD like you would see in other departments at the bank. If there is trouble progressing, they may leave for something different. If the MBA between associate and vp or vp and ed yields a better job offer, they may leave for something different. If they would rather do something different, they may leave or switch to something else, totally depends on the person. Not all asset classes give BB traders the skill set to be a PM at a hedge fund or in Asset Management.
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I think the more sought after talents would be people in rates groups, high yield or distressed groups, some structured products groups and it helps to cover some emerging markets region. I think funding desks (repo, general collateral) would be the least transferrable along with equities simply because equity market making is really not what it used to be. I think it's important to understand that trading at a sell side bank is really limiting how much risk you can take and is mostly a market making/ principle business, so it's not like you can do a few years and leave and jump right into managing a portfolio's strategies. A popular landing spot I've been seeing is F500 treasury departments, doing something like helping a multi-national hedge FX/rate risk.
What do you think about the skill-set developed in equity derivatives trading? Is is transferable?
Yea I'd think so. The more exotic/less vanilla the product, the better I think.
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