IAIP – Insights into making Career in Fixed Income Market, Mumbai

IAIP, Mumbai organized Career Day event on 04 June 2013, focused on relatively unexplored area of Fixed Income. The event was well attended by around 100 participants, which included candidates as well as member charter holders.

The event began with Kishor Bagri CFA, Director, IAIP, outlining the flow of events and introducing various speakers. This was followed by speech from  G. Subramaniam, Consultant, NSE, presentation from Reuben Mistry and Saket Jain, Managing Partners, Vito India Advisors  and finally Panel Discussion moderated by Amit Khurana CFA, Director, IAIP and panelist comprising of Brijen Puri, Executive Director JP Morgan,  Dwijendra Srivastava CFA, Head Fixed Income, Sundaram Mutual,  G. Subramaniam, Consultant, National Stock Exchange, and Karthik Srinivasan CFA, Senior Vice President, ICRA. The event concluded with Q&A session followed by vote of thanks.

In his speech G. Subramaniam, Consultant, NSE walked through the details of fixed income market. He explained about the various instruments traded, participants in the market & combining fixed income with other asset classes to create strategies. He further elaborated on the evolution of this space, which has been indeed slow. This is primarily attributed to the mute popularity of debt instruments. While deciding the asset allocation to various classes, debt instrument rank much lower in the pecking order. Equities, Gold, Foreign Exchange are still much preferred. Fixed Income market was a popular place in late 80’s & early 90’s. Corporate Bonds, REPO & CBLO were heavily traded but systematic failure due to Harshad Mehta Scam took its toll on the market leading to liquidity drying up.

Government is taking various steps to improve participation in the market. They have experimented by introducing IRFs (Interest Rate Futures) & various other measures by RBI. Collectively these measures have shown some results. However, Subramaniam explained that in his opinion, focused approach is required to improve  liquidity & creating encouraging regulatory system. He stressed on the fact that it is really important to decide the exit. Further he explained that that to improve liquidity, market needs to be integrated which can facilitate the efficient price discovery & removal of anomalies in the market. Recent introduction of trading of bonds in stock exchanges, FII participation will help in creating the much required liquidity in this segment & making this asset class popular.

Saket Jain, Vito India Advisors gave brief about Capital Markets hiring trend. Since Jan 2012, there is overall reduction in No of Capital markets professionals. People are moving out from their careers in Global banks & moving to domestic banks or changing their careers. For Instance 61 people have moved out from IB accompanied by reduction in average team side. In total 108 people were hired and about 320 moved out. He further mentioned that scenario looks sub optimal for next 2 quarters on hiring front.

Ruben Mistry, Vito India Advisors explained about the various career options available in Fixed Income Buy and Sell side, career mobility & salary levels. To highlight a few points the roles available at Buy side, typically representing Asset Management Company, are in Fixed Income Research, Credit Research, and Fund Management. After spending 3-8 years in fixed income research a person moves to Assistant Portfolio/Fund Manager followed by Portfolio/Fund manager to Chief Investment Officer in 12-15 yrs. Fixed Income fund manager role does not see much churn in talent. No of debt fund manager are 140 as against 336 in equities. On the sell side roles include Fixed Income/Credit research, Fixed Income Retail & Institutional Sales, Corporate sales, FICC (Fixed Income, Currency & Commodity), FX, Derivatives (IRD & Foreign exchange), Structuring & Trading, Quant & Prop including rates & credit, ALM team, Private Placement, Corporate Banking & Public. 2013-14, hiring scenario for AMC remain Flat, FICC can show marginal improvement. However, DCM from NBFC hired some people but experienced ones. Corporate Banking have some ray of   hope on account of issuance of banking License.

Excerpts of the Panel Discussion:

Brijen Puri Executive Director JP Morgan

Debt market is more of bull market. It is different from equity in that it is not zero sum game. Banks will require consolidation in 2-3 years & there will be emergence of FICC part of business. More products will be required  to manage risk & there should be consolidated approach to manage risk e.g.  consolidation of call money & FX desk. Consolidation of teams like Rates, ALM & Fx. Difference between balance sheet management & trading management is reducing. Going forward demand will be for professionals with diverse knowledge. Introduction of new products will bring traction in this space.

He specified that working in Fixed Income can open the doors for working internationally. On skill set front, international markets value the soft skills like relationship management, people skills & networking skills etc more than the domestic market.

Dwijendra Srivastava CFA, Head Fixed Income, Sundaram Mutual

Present scenario in terms of hiring demand is not so good. Two to three years down the line opportunities may arise. So focus should be on building skills now. Any one looking at the role of credit analyst, Fund Manager should understand the fundamentals properly. He stressed on the need to read a lot on global factors, local factors & other economic factors. Challenge for fund managers is to manage the inflows & outflows. One need to be alert in liquidity management. Soft skills here play a great role .One should be mentally agile.

Karthik Srinivasan CFA, Senior Vice President, ICRA

Remain clear about fundamentals. Rating agency require credit analyst to look at the financial statements. He stressed the need to understand the Cash Flow along with P&L.  He specified that ability to read the various disclosures, understanding impact will differentiate an exceptional analyst from average analyst. Rating agency analyst has access to management but this role is away from actual money management. People move from rating agency to foreign banks & fund houses.

G. Subramaniam, Consultant, NSE

Trading in NSE started with the WDM but however equity growth outpaced the debt growth. Exchange offer certification program to facilitate creation of able market professionals. Common platform is required for integrating the segmented markets of OTC, government debt market, bonds trades, retail debt, IRFs. Emergence of trading platform, settlement platform will attract more professionals thereby creating more opportunities. The good traders find opportunities in not so good market as well. This skill gets honed with experience.

Contribution by: Rajni Dhameja, IAIP Volunteer

Photographs by: Santosh Samal

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