Insights

Credit & Risk Management

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q4 2019

• Article by BRUIN Financial

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q4 2019

INTRODUCTION

With the 31st October Brexit deadline being extended by 3 months, and the subsequent general election, one might have thought that this increased uncertainty would have a detrimental impact on job flow. However, the fourth quarter of 2019 saw a 15% year-on-year increase in job flow for the Credit, Risk and Quantitative Analytics desk at BRUIN; which shows that financial services firms are still keen to grow in spite of geopolitical uncertainty, and is also testament to the faith our clients have placed in us to deliver high-calibre professionals for them. It would be inaccurate however to suggest that these uncertainties have not had an impact on hiring processes.

Firms are now noticeably more cautious in making hiring decisions, with  a growing tendency to involve more and more senior stakeholders in the hiring process, which can cause lag due to diary availability. As a result, there has been somewhat of a holding pattern on hires towards the end of this year. This can lead to frustration on the candidate side, as some are left waiting for a protracted length of time before decisions on their candidacy are made. It is important to maintain communication with these individuals to avoid reputational damage.

Perhaps the most encouraging sign going into 2020 is that the larger investment banks have started to open up roles externally in a much greater volume than in the first three quarters of the year. With the advent of IR35 on the horizon, banks have in general been looking to convert their contractor base into permanent employees. However, a 100% conversion rate always looked to be a Sisyphean task given the size of the organisations, and as such these firms have had to look externally for new talent to replace contractors with permanent staff. This, combined with the fact we now have a majority government with a clear outlook on how to move Brexit forward, means that we are extremely positive about the outlook for the job market next year.

We are also delighted to announce some new additions to our team. Nick White has joined us from one of our competitors to focus on Risk and Compliance in Europe; and Stuart Fairbairn has moved internally from our Investments and Middle Office desk to focus on the Quant space. Should you wish to discuss these markets with them on a confidential basis, please feel free to reach out via the contact details listed.

 

MARKET RISK

With sell-side organisations tending to be reticent to create new roles in Q4, Market Risk proved to be relatively quiet overall in this period compared to last year. Where hiring did take place, it was concentrated at the junior end of the market, with banks, brokers and trading firms looking to bring in candidates with strong and concentrated asset class knowledge to face off to traders on the holistic incorporation of market risk into the trading process.

Market Risk professionals at all levels from advanced STEM backgrounds who are adept coders continue to be courted by leading systematic Hedge Funds. Given that the banks have shown signs towards the end of the quarter that they are open to hiring again, we anticipate that more opportunities will become available next year.

 

QUANTITATIVE ANALYTICS AND RESEARCH

In contrast with other areas on the sell side, demand for Quants has continued to be high in Q4 across a variety of role types and levels. Owing to growing regulatory commitments which need to be adhered to, there has been a spike in demand for candidates who have experience looking at Counterparty Risk and IMM models. Candidates with strong model documentation skills are also in high demand for similar reasons. Also, candidates with experience in machine learning, artificial intelligence and algorithmic trading were highly sought after, as banks look to increase their edges in an information and data-rich marketplace.

From a buy side perspective, the market was quieter this quarter year-on-year in terms of new roles coming to market, perhaps due to the fact that traditional asset classes struggled to yield the returns to precipitate bountiful growth. Where hiring was seen, it tended to be concentrated at the junior end, with candidates with Equities investments knowledge and strong object-oriented programming and data manipulation skills finding themselves in high demand from Quantamental Asset Managers and Systematic Hedge Funds. As is always the case on the buy side though, once variable compensation begins to be paid, the market across all levels is expected to pick up significantly due to attrition.

 

INVESTMENT RISK

Investment risk has been a busy area in the fourth quarter across seniority levels, however due to traditional asset class performances being poorer than anticipated, there has been a desire to look at alternatives, and candidates with multi asset/alternatives/private markets product knowledge have been highly sought after. This is a relatively niche space, with smaller risk teams, and so candidates from Hedge Funds, Private Equity firms and alternatives-focused Asset Managers have found themselves in high demand. We also observed that hiring appetite was strongly correlated with the geopolitical timeline in Q4; with spikes after the Brexit deadline postponement and post-election, following relatively fallow periods before both. Hopefully with clarity now achieved, to a large extent if not totally, on these issues, we will see a strong hiring appetite in Q1.

 

OPERATIONAL RISK

Hiring patterns in Operational Risk on the buy side in Q4 were relatively consistent with those in Investment Risk. Many Asset Management firms are continuing to commit to a three lines of defence model, and we have seen an increase in first line business manager/COO roles as part of this. Given some high profile cases of Asset Managers struggling with liquidity issues this year, we have also seen a buoyant contract market for enterprise and liquidity risk framework professionals in Q4.

On the sell side things have been relatively quiet in Q4, with the most noticeable trend being a desire for firms to replace vacant Director level roles with more junior VPs/senior managers as part of cost cutting. Whether this will continue into the New Year remains to be seen.

 

CREDIT

From a buy-side perspective, continuing on from Q3, Credit Research continued to be a buoyant area of hiring, with a number of asset managers seeking to grow teams with senior hires. Roles have been across the capital structure, with a European focused portfolio. Areas of significant growth included roles with significant private markets and real assets focus.

On the sell side, with a number of Credit Desks in London shrinking, there is a surplus of senior managers/ directors looking for roles. With the future growth of this market in London uncertain, firms are increasingly looking for broad skill sets to cover multiple counterparts and areas to make teams more flexible.

 

INFORMATION SECURITY

In Q4, we have seen an increased number of broad roles come to market, covering multiple areas, such as Ops Risk/ Resilience/ Controls Assurance, along with IT Risk and Information Security. As has been the trend over the past 6/9 months, there are a lot of contractors in this space looking to move to permanent roles, with IR35 as a significant contributory factor. We anticipate that this will continue into 2020.

 

EUROPE

There have been many Head of Risk (Conducting Officer) opportunities come to market in Q4, especially in Amsterdam and Luxembourg. Risk Managers with experience in AIFM and Real Estate will have seen opportunities in Luxembourg across Asset Management. Whilst strong technical skills are an asset, the most important skills hiring managers are looking for in Risk professionals in Europe are the experience and relationships with local regulators. The main pushback on candidates after interviewing has been the lack of leadership qualities and gravitas.

 

DIVERSITY

Over the course of 2019, we have noticed some interesting trends around gender diversity from a compensation and seniority perspective in the Risk and Quant markets. Firstly, overall we calculated that females and males moving jobs in these sectors achieved an average of 12% and 16% salary uplifts respectively, compared to roughly 17% each in 2018. Secondly, we observed that there was a significant trend towards firms hiring females at more senior levels than seen in 2018. We conclude that the reduction in average salary uplift for women is directly correlated with firms’ efforts to introduce more senior female talent to their organisations, as uplifts at the more senior level tend to plateau compared to junior hires, whose salary increases tend to accelerate faster when they move.

Overall from a diversity perspective we are encouraged by this trend. At the recent Riskminds International conference, 20% of the speaker panel of senior leaders were female, and it will be interesting to see if there is a year-on-year increase in this percentage in 2020. We will also look to measure variable compensation metrics from a diversity perspective in the New Year, and report on these in the Q1 2020 update.

Finally, it is noteworthy to mention that as a desk we placed professionals from 16 different countries into roles this year, across London and Continental Europe. It is a genuine honour to be able to liaise with professionals from backgrounds that span all corners of the globe, and to continue to contribute to the strengthening of teams and organisations through diversity. We wish you all a happy and prosperous New Year, and look forward to working with you in 2020.

***

For more information about the market or current opportunities please contact one of our Consultants.