Mulsanne Opinion – Q4, 2013 January 2014

Mulsanne Market Overview

Our Q4 market overview indicates an increased interest in hiring, relative to recent years, in the majority of areas. With banks appearing to express a greater confidence in investing, the market looks generally optimistic for the next quarter.

Comparative to recent years, 2013 has seen a higher volume of hiring throughout the year, which continued into Q4. With guarantees harder to come by, there has been an increase in people moving for lower-than-market-value compensation. Due to a lack of liquidity, movement in the Flow Credit space has been minimal, with the majority of businesses staying more or less stable. In Structured Credit, however, there was a growing interest in hiring, especially in the securitisation space, including ABS and CLO sales and trading, Asset Finance, and CRE.

Foreign Exchange hiring has slowed considerably in Q4. The few hires which did take place were largely opportunistic in the G10 FX space, with slightly more focus on Emerging Markets. As the end of the year approached, the expectation was that businesses would start to narrow down hiring plans for 2014, and these would continue to be sales driven with subdued hiring on the trading side.

Interest Rates:
Hiring in the EGB space continued late into Q4, with banks focusing on positioning for 2014. Hiring reduced across the rest of the Rates markets. Trading revenues across Rates, particularly Flow Rates, has remained sharply down on the previous year. There was little difference in the environment on the Structured side, where very few hires took place. In reviewing headcount and hiring plans, banks will likely wait to see how the market shapes up in early 2014.

Investment Banking:
Q4 saw further increases in hiring activity, building on the steady growth in IBD that took place throughout Q3. Growing demand from clients has led the already stretched teams to review their 2014 resourcing needs. Hiring has been concentrated in two distinct areas; Senior Associate/VP and Senior MD. The steady outflow of bankers from this sector seems to have abated as optimism gradually returns; all eyes are on the bonus rounds as many believe this will strongly influence retention levels of the strained junior ranks.

Private Banking & Wealth Management:
After a turbulent Q3, with layoffs within Wealth and Investment Management at several global and domestic private banking institutions, the pendulum has swung away from cost cutting and back towards specific hiring. Notoriously slow for hires, Q4 saw a lot of hiring between houses at C-level, with CIO’s, CEO’s, and unit heads moving and finding new opportunities. Strong client inflows and net revenues, precipitated by increasingly strong equity and real estate markets, saw most Private Banks and Chief Investment Offices release bullish forecasts for the year ahead.

Emerging Markets:
Across the Emerging Markets, Q4 hiring has on the whole increased on the same period in 2012. The main growth areas were in FICC and DCM. In banking, the forecast for 2014 is quite optimistic, with bankers expecting M&A to grow and consequently their team sizes will need to increase. In Markets, Q1 will be focused on bonus announcements rather than new strategy development, but debt will be a key growth area going forward as houses seek to finance their activities, whilst the equity market remains quite slow.