It’s no shadow of a doubt that the cash equities trading space witnessed record earnings in 2021. Continuing to buck the same trend this year, the boom in equities trading at the Global investment banks has directly spilled into a high demand for equities trading specialists.
Alasdair Moody, Head of Global Capital Markets at Selby Jennings (Hong Kong), reveals that some firms are offering, “a 30%+ uptick in compensation to those switching companies” to facilitate this demand and incentivise talent to join. Discover Alasdair’s insights on the evolving equity trader landscape and his advice on talent management strategies.
Q: Why have we seen such strong performance in equities markets, and what does this mean for the banks?
A: Taking the S&P 500 as a barometer, equities are up circa 100% since the low in March 2020. This growth was driven by a combination of sustained low interest rates, Covid-related/Government stimulus, geo-politics, and increased savings to name but a few, all of which fed speculation across global equity markets, driving volatility and prices ever higher - although it’s fair to assume a correction maybe imminent.
These factors forced the big players (asset managers/hedge funds) to allocate a greater portion of their portfolio towards equities, and away from fixed income and cash - both of which, once adjusted for inflation, have yielded negative returns - in order to meet the returns required to satisfy their obligations to investors.
On the surface, this has been great for the banks’ equity sales & trading desks. As a market maker, revenue is derived from transaction size and volume, and the volatility induced by the aforementioned factors has helped to fuel both. As a result, we have experienced back-to-back revenue records for equity desks across the globe and, subsequently, the cherry on top for those operating those desks, who helped generate/facilitate said revenue, is a nice fat bonus cheque - figures of which have not been seen since the glory days pre-2008.
Q: How has this performance impacted the recruitment landscape for your business in Hong Kong?
A: In recent years, investment banks have never been more challenged to meet the growing demands of their clients; greater volume requires smarter/faster traders, algorithms and salespeople, and greater volatility requires more complex products as well as risk management and due diligence - all of which demands specialist talent. This challenge is exacerbated in parallel with rise in capital under management by institutional investors, who also desire the best specialist talent, and typically have more money and fewer stakeholders to satisfy when it comes to paying their staff.
But, to answer the question, since the outbreak of the global pandemic and subsequent market performance, Hong Kong’s equity sales and trading desks have witnessed, as one of my industry-leading clients summarised, “the biggest display of musical chairs in over a decade.”
Following a record year, the banks’ stakeholders expect and/or need that performance to continue. With performance comes opportunity, which transpires in the form or promotions, upgrades, expansions as well as replacing those who naturally move on in their career for greener pastures. Now, that’s not a huge problem, you promote internally, relocate staff from other regions, source talent from competitors, people repatriate etc., but during the past two years this has become more difficult with travel restrictions and the natural repatriation of talent due to the world health crisis. Whilst the markets’ performance primarily isn’t the only force, buyside talent demand, the growth of Chinese banks offshore, Government restrictions, crypto etc. all have their part to play, it is the underlying catalyst which has meant the demand for talent specialists like ourselves has grown over the period – my team has grown 60% in the past 6 months and revenues are up more than 2x YTD.
Q: Other than market performance, what other factors have you noticed impact the recruitment landscape?
A: The swell in demand for equity sales/traders to support the investment banks is in discrepancy to supply. The lack of new young talent entering the region, coupled with a talent exodus to the buyside, the global pandemic, crypto, among others, has resulted in many banks struggling to get equity sales/trading professionals onboard. Whilst the talent challenges are apparent, my team and I have observed many Chinese banks building out their offshore equity teams faster than their European counterparts. This could be in part a reflection of their shorter interview processes, often condensed to as little 3 rounds, and a more lucrative package to offer candidates. What’s more, although the demand is strong for native Mandarin and Cantonese speaking talent in Hong Kong, Chinese banks are well-positioned to secure that talent with their market access onshore.
Q: Given this, what are you seeing clients use to incentivise talent to join them?
A: When we speak to candidates and clients, it’s our job to identify what we describe as the push/pull factors, which include; compensation, team/culture, responsibility, growth prospects/upward mobility, company reputation, to name a few. However, it is very rare for someone to make a move when there isn’t a financial incentive to do so.
In my team’s experience, we have seen firms offer a 20-40% uptick in the base salaries of equity sales/traders, alongside many guaranteeing bonuses and promotions in the next cycle. Whilst it’s been a record-breaking period for equities trading, a trend that shows no sign of slowing down, it’s important for businesses to get incentives, whether that’s looking for business-critical talent across the waters, and paying talent fairly and competitively to facilitate for future global expansion.
Alasdair Moody leads the Global Capital Markets business for Selby Jennings, running a team of specialist consultants to help clients solve the number on business challenge: talent, across Global Markets and Investment Banking in North Asia.
For a confidential discussion with the specialist team at Selby Jennings to help with your job search or talent solutions, contact us.