Hi everyone, I'll be interning in S&T as a BB and specifically, I'll be rotating within Emerging markets (LATAM). I'm happy about this placement, the people seem nice and I really enjoy macro. My goal is to eventually go to a macro fund so I wanted to get some advice on which desks I should target within emerging markets. here are some desks I'll be able to spend some time with:
Within EM credit:
-
corporate credit traders; there seem to be some specialized in HY/distressed/
-
sovereign credit traders, I think they also trade CDS
-
macro credit within EM, these people traded CDS indices, options, TRS and credit ETFs
EM macro:
- they seem to be cross asset and trade both rates & fx
Any insight into the career prospect of these desks would be much appreciated! In terms of exit opps, future proof from regulations/automation and ability to take risk, which should I target?
If you are dead set on macro exits:
1.) EM macro
little gap
2.) EM sov
decent gap
3.) Macro credit
huge gap
4.) corp credit
But if you are open to EM funds:
1.) EM sov
tiny gap
2.) EM macro
decent gap
3.) Corp credit
decent gap
4,) macro credit
will leave it to others to talk about careers on specific desks on the sellside but think sov and em macro give you best options for buyside (corp credit does too but a different track as not macro focused). my caveat is i dont have as great a feel for macro credit potential on buyside but it feels like a very sellside centric type role
Thanks for the advice! That’s surprising to hear about macro credit; my thought process was that since I would get to trade both linear and non-linear/vol it’ll give me a more well rounded skillset and gives more flexibility on how to take risk. I also wanted to clarify, what makes up the cdx index in EM are sovereigns CDSs so I’m assuming they would probably trade sovereign CDS on a hedging/pre-hedging basis. Would those assumption be accurate?
Yeah correct that cdx components are sovs. In terms of organization have seen more cases that one person trades all regional cds + cdx vs. someone trading cash and cds for the same names but no hard and fast rules.
As mentioned I have lowest conviction on where macro credit should sit and certainly not bc of the risk taking experience as you rightly point out.
Macro funds are more active in fx/rates bc most liquid FICC product in EM. On the other hand EM dedicated funds tend to be grounded in credit bc lowest beta FICC EM product/historical benchmarking reasons for the embig (hard currency sov credit index). So those paths are pretty seamless. Not saying macro credit couldn’t do it but at a macro fund you may have to pitch you could do all EM or all macro credit including non EM. For an EM you might have to pitch yourself as an execution focused generalist. Particularly ironic as arguably could prepare you best of all for a PM seat even if lower offs of getting there through it. But again others may have better views.
Products in descending order of liquidity:
- local rates / fx (including options)
- sovereign credit derivatives like CDX.EM, TRS, ETF, single name sovereign CDS in your region; from here on down there isn't usually enough liquidity in the underlying to support options (different from DM where you may find iTraxx options)
- sovereign cash bonds; the people who quote these may not necessarily quote the corresponding country CDS
- quasi sovereign CDS and cash bonds (Petrobras, Pemex)
- IG corporate cash bonds; from here on down there isn't usually enough liquidity to support CDS (different from DM IG where you do find more single name corporate CDS)
- HY and distressed corporate cash bonds
If you want to trade vol I think you should aim for the local rates / fx desk as the credit side generally won't have enough liquidity to support options.
In terms of exits to macro, I think local rates / fx is best, followed by sovereign credit derivatives and indexes. The reason I like sovereign credit derivatives (what you call "macro credit") over "EM sov" for macro exits is that you look across all the countries in the CDX.EM and trade their CDS (granted, just on a hedging basis for sovereign CDS outside your region). Would imagine that gives you a better big picture view than being the guy who trades just Bra/Mex cash bonds (or worse, CAC).
On that note, you can do sovereign cash bonds and go to "buyside" but it's more likely you'll be in an execution trader role there. Same goes for corporate bonds. If that's what you want then great. I would lean towards the research route (instead of trading) if you want to stay on the credit side (instead of macro).
Also leaning towards local rates / fx for ability to take risk. Your bank will have higher capital charges for the credit desks (think of what you are underwriting / exposing the bank to by offering a CDS) and you won't be able to swing as big compared to local rates / fx.
Funny enough, you can try to over-optimize with all this knowledge but I think a lot of it may be out of your control as an intern (who on which desk likes you, has a spot to give out, etc.). Make sure you underwrite this career path as something you can see yourself doing long term (i.e. if you can never move to the buyside).
This makes sense re: macro credit/sov credit derivatives. To caveat my above advice I was strictly speaking in terms of buy side exits, but this poster is right regarding the quality of buy side exits (i.e. PM vs. execution trader.) High quality post overall, bravo.
Thanks for clarifying - Would you say exiting into a pure execution role is a step back from flow trading though? I can't imagine why a BB trader would want to move to a pure execution role?
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