In the wake of investment banking industry consolidation, Wall Street has never been so rich with unemployed structured-finance talent, industry professionals said.
However, other forces, particularly an expanding globalization effort, combined with a growing acceptance of securitization worldwide, will continue to boost demand for seasoned structured finance professionals.
"A lot of the strongest, prime candidates are entertaining multiple offers, so they have their choices," said Eric Stampfl, principal and head of the asset-backed practice at Morgan Stampfl, a Manhattan-based recruiting firm with 15 years experience in the fixed-income/ABS market. "Consolidation is changing the landscape, but there is tremendous opportunity right now."
As a trend, expect an increase in foreign banks picking off prime ABS talent, as the banks will use their balance sheets and capital to compete in the niche core businesses. Principle finance and merchant banking represent great opportunities, since issuers and finance companies are always in need of funding, Stampfl said.
In essence, consolidation is making room for the foreign banks to compete.
In addition to foreign banks looking to compete in the U.S., there's growing demand in the international markets, such as Europe, Asia and Latin America for ABS professionals.
According to Moody's Investors Service, volume of CDOs in the European market doubled last year, and the agency sees increased growth going forward. Moody's expects issuance of ABS in Europe, the Middle East and Africa to reach $24 billion this year, up from $18.4 billion in 2000.
"Countries outside the U.S. don't really have the volume of structured finance professionals that the U.S. has to choose from," Stampfl added. "As for the European market, as well as in Asia, we've seen tremendous growth in demand for professionals."
Consulting firms and the slowing economy
The battleground for ABS talent, here and abroad, has extended into every structured finance-related industry. Transaction-advisory companies, consultants and accounting firms, for example, have adjusted their recruiting agenda in tandem with the ebbs and flows of the asset-backed market at large.
Arthur Andersen, for instance, is currently in the process of beefing up its structured finance team, seeking out more associates to help run transactions. Especially as issuance increases and different product types emerge, it becomes more imperative to find highly qualified individuals with advanced skill sets. The firm hopes to tap the robust pool of highly qualified candidates that were left in the marketplace as a result of last year's consolidations.
"There are more quality candidates in the market now, compared to a year ago," said George Curth, the head of Arthur Andersen's structured finance team. "The Street firms laid off a bunch of different people last year. Some of those people came from a consulting company or accounting background, and didn't like the new environment of a Street firm.
"Consulting firms offer them something different; we tend to be more stable, and we create an environment that is different than banks. You usually don't hear about lots of layoffs. So many of them choose to come to a company like ours instead of going to another bank.
"With the cost-cutting efforts at Street firms and consolidation, consulting firms can take advantage of the quality people out there. And a lot of these people want to try something different."
Of course, the flow of human resources goes in both directions: many consulting and accounting workers emigrate to banks, often for higher salaries and bonuses.
This turnover effect is not negligible, but Curth says that turnover is not as high as it was in the past.
"A year ago, people in our group were saying, Wow, look at all this opportunity out there in the ABS market.' They had the expectations that things are great and always will be great. But for our type of business, things have kind of gone sideways recently," Curth said.
Slowing economy: good for business?
For the on-call accounting and tax consultation industry, a status-quo market is just not good for business. When the market is very hot and people are doing deals, business tends to be good, and when the market is very bad, workout people need to get involved, leading to increased opportunities for consulting. But if things are stagnant and just chugging along, as it was at the end of 2000, business tends to follow suit.
"Our type of business is hedged on both sides. If things are great, then the group can grow with deals, and if there are big problems, people need to get them solved," Curth said. "But if the market is kind of unsure, then things are more stagnant."
And with a slowing economy approaching, things might just pick up for ABS consulting firms. Certain seasoned deals may be affected, and nervous investors are going to need consulting help, Curth says.
"If a company goes bankrupt or if there are problems, an investor is not going to call the bank or the issuer, they will seek independent assessment," Curth says.
Curth, who heads a team which covers CDOs, commercial mortgage-backeds and asset-backeds, says that the influx of qualified players into the market caused by the mergers is particular to ABS.
"Most of the CMBS players have already found homes. The ABS area is still mixing it up a bit."
Morgan Stampfl is currently looking for structured finance professionals at all levels, especially associates. Contact the recruiter directly at firstname.lastname@example.org.