The V-type recovery of Investment Banking

It really seems that the Investment Banking is picking up. Number of companies (like Morgan Stanley, Barclays Capitals, Nomura, Goldman Sachs and some small investment boutiques) are hiring actively. At the moment hiring is mostly in the space of seniors and middle-ranks. The reason for this is a huge number of experienced people, who stay our of employment - firms are willing to take advantage of the state of the market to hire experience people at low cost. I expect that this hiring fever will soon spill to the junior job market as well - I believe that this year will give excellent opportunities to find a job in lucrative sector at the junior level. I don't believe that the financial industry could be hit again anytime soon.

My advice at the moment is: Don't be afraid of working in companies that performed badly during the crisis (like RBS, UBS, Citibank etc.). It's very likely that especially these companies will provide extremely interesting opportunities for all juniors. This organizations cut big part of their businesses and hence now they need to rebuild rapidly to remain competitive and profitable.

Yet another proof of the improvement of the business conditions in the investment banking is the fact that I got a job recently! I am soon finishing my PhD and I will be starting in Barclays Capital in their Investment Banking Division.

Banking in the dark...

Banking industry is still under the water and it seems that near future will not be better. While reading the Financial Report of UBS from Q2 2008, I came across an apparently gloomy forecast of the chairman and CEO of the company:

Outlook: In the second half of the year we do not expect any improvement in current adverse economic and financial market trends. We will continue our program to reduce personnel levels, costs and risk concentrations.

12 August 2008
UBS
Chairman Peter Kurer
Chief Executive Officer Marcel Rohner

It seems that new lay-offs are on the way (a number of my friends in this bank was laid off already... :( ).
It is really very bad time to be on the job market. If you are able to embark on any academic programme in order not to have blank period in your CV its very good time to do it.

In coming months, quarters and years many people will have to adjust their aspirations and ambitions to survive on the job market.

Let the power be with you!

Is the era of Quant Finance over?

After recent losses suffered by Quantitative Hedge funds (like: Goldman Sachs Global Alpha and many others) some people wonder, if the era of quantitative finance is over. The quantitative funds are not considered to be money making perpetuum mobile any more. Number of people finally realized that it is impossible to make 20% profit every year without bearing any significant risk. This will now directly translate into the money inflow into quantitative funds in the years to come. This inflow will of course be much lower than what was observed before the credit crunch, so there would be definitely much less career opportunities in the quantitative finance field. I expect that demand for quants will be very low for at least 2 or 3 years. However, at the same time the supply of quants is very strong. In recent years almost every university started its financial maths or financial engineering program. The number of people, who will be graduating from quantitative programs goes now into tens of thousands every year, so you can imagine that it will be very hard to find a decent jobs in QF (and of course salaries will go down as well).

So, what can you do to improve your chances for employment if you are studying at a one of numerous MFE programs? First, work on your soft skills. In the current job market, not only you need to be able to solve Black-Scholes model, but you need to know what is happening in the macroeconomics for example. Second, work on your programming skills. In current market, IT skills is the asset that can find you a job. There are much more places in the banks for Quantitative Developers than just for Quants. Third, be open to other opportunities. Your quantitative skills will be useful not only in the investment banking. You can find that the work for the startups or other smaller companies may be very interesting (and even more rewarding that the work for investment banks).

As usual if you have comments or you would like to express your opinion, I invite you to the "Careers in Business Forum at forum.examhub.org".

When the situation improves?

I think that's the question a number of people is asking right now. The mood in Investment Banking is very poor, and that translates directly into lack of employment opportunities... The sad truth is: the banks are not hiring.

In the worst situations are people, who quite recently invested in their education, and now are not able to find a job (example from Investment Banking Forum - please gives your thoughts on the forum). In many cases with debts and some other obligations, these people may be forced to look for employment in sectors other than finance. (An interesting article from Journal of Finance about the impact of the crisis on the lifes of MBA students - really worth reading at least the introduction)

The most important question right now is how long will the bad mood last. I asked this question to a head-hunter who is a friend of mine (cheers Craig!) and who forecasted the downturn at a time, when everyone else was certain that the markets would always grow. Now, he thinks that by the end of the summer the banks will finish writing-off the credit mess. He thinks that by the end of the year (Dec 2008) there will be some capacity in the banks to create new teams. He claims that the general revival will come in the first half of 2009.
I think that he may be right - he is really a great mind and knows the industry inside-out.

Now the question is "what to do during the slowdown"? I wrote about it before in my previous post: "slowdown a good time for education". I still think that each of us should spend the time most productively to polish and improve his or her CV. Doing a financial certificate seems to be a perfect idea. However, if you are forced to get a source of income changing an industry may be inevitable.

PhD in Economics or PhD in Finance?

If you are interested in finance and economics and you want to do a PhD you need to decide whether you want to have EconPhD or PhD in Finance. Many universities have both degrees in their offer. In this post I will write why, in my opinion, going for an EconPhD seems to be a wiser route then pursuing FinPhD, even if you want to work in finance after completing your PhD program.
First, while doing a PhD in Economics you can write you thesis on financial topics. Economics Department are usually so large that you can find many finance oriented professors in them. To give an example in Department of Economics at Harvard University you have Andrei Shleifer, Efraim Benmelech, John Y. Campbell, Jeremy C. Stein, who are very much finance oriented. There are many other examples of top finance profs in top economics departments, so even if you are doing your PhD in Economics Department, you can write PhD thesis which are finance oriented. On the other hand, finance departments are usually quite small and don't give that kind of flexibility. It will be hard for example to diverge with your topic from pure finance to microeconomics during your PhD in Finance. Second, EconPhD gives clear signals. In all private and public organizations people know exactly what EconPhD is. They know what they should expect from EconPhDs. Finance PhD programs are less established and usually have shorter histories. Also curricula of different FinPhD programs differ considerably. Its not like EconPhD where you always have Micro, Macro, Econometrics plus some options. Every Finance PhD program is different. The only plus for Finance PhD, in my opinion, is that usually continuous time statistics (stochastic differential equations) is often a part of the basic curriculum. If you want to do research in finance during you EconPhD you have to learn it by your own.
Generally, EconPhD is a safer option. It is considered to be more general (and it is) , so in the future you can use it to find a job even if it is not finance oriented.