Jefferies & Co. made news last week when it hired 10 senior executives for its mortgage-backed securities trading group, in an effort to expand its fixed-income business.
The ABS market was also buzzing with word that JPMorgan Chase used a $27 million lure to keep Jeffrey Mayer, co-head of fixed income at Bear Stearns.
News of ABS professionals landing plush jobs at hedge funds, brokerages and other financial services inspires great curiosity and, in times like these, perhaps envy.
But what about the former MBS trader at Goldman Sachs who left to launch a burial service that also preserves marine life, the portfolio manager at Mellon Financial Markets who left his job to open a chain of hair salons, or the MBS analyst who reportedly left UBS to join The World Bank?
They are not legion, and their motivations vary, but ABS professionals are leaving the industry and, in doing so, are underscoring a basic new reality.
Almost 39,000 structured-finance professionals lost their jobs between January 2007 and mid-April, according to ASR news stories. Most of the layoffs hit brokerages and the fixed-income groups at commercial banks, but law firms, monoline insurers and rating agencies are among the companies that have shed hundreds of ABS-related jobs.
When the ABS market does recover as expected, few think that the industry will return to the days of 2006, when it hit its production peak at $3 trillion.
The previously mentioned trader and analysts have chosen not to play the game of musical chairs for the dwindling number of ABS positions at competing banks, hedge funds or other financial services firms.
For Jason Rew, the decision was personal. In January 2007, he left the MBS trading desk at Goldman Sachs to launch a company called the Great Burial Reef. The service encases people's cremated remains inside artificial concrete reefs off the coast of Sarasota, Fla.
Located 30 feet underwater and weighing 4,000 lbs., each reef memorial can accommodate the remains of up to two people. All of the reefs have been installed underwater and await remains to be encased. Future reef sites are planned near Fort Meyers, St. Petersburg and Naples. Long-range plans include sites off the east coast of Florida and the California coast.
Rew has always been interested in running small businesses. When he came up with the idea for the Great Burial Reef in 1999, he worked closely with his father, Timothy, to refine the company's logistics.
In early 2003, Rew joined the asset management team within the securitization group at Goldman Sachs, and soon after that he went into MBS trading. Rew says he enjoyed working at Goldman, partly because the investment bank fosters a culture that applies creative and critical thinking. Nonetheless, he felt personally unfulfilled with his full-time job.
"I didn't feel like I was building anything or giving anything back to the environment or the community in any way," he said.
Plans to launch the Great Burial Reef became intensely urgent after May 2006, the month that Timothy died in a car accident. Great Burial Reef was incorporated in June 2007, and Timothy's remains were the first to be encased inside one of the memorials on March 30.
"This gives me the opportunity to build and construct something and to work with a lot of different types of people, whether they are marine biologists or funeral directors or construction workers," said Rew. "It is a very complex business that requires you to interact with different people, which I like."
Jeff Salmon took a less direct route on his exit from the ABS business. He left his job as an ABS portfolio manager at Bank of New York Mellon to open a chain of hair salons in suburban central New Jersey. Before that, Salmon was an ABS analyst for Barclays Capital. He had joined Mellon just 18 months before he left.
Salmon could not be reached to comment for this article, but industry sources familiar with him said he had become frustrated with his situation, and perhaps the industry.
"He didn't like it because the job was in Pittsburgh and he was commuting back and forth every weekend," said a source familiar with the situation. "Then Mellon had the merger with Bank of New York and he became irritated. He said to hell with it.'"
Reaching the height of frustration is another common prompt for financial sector executives to make a drastic career move, says Joe Robinson, a work/life balance coach and author of Work to Live. Usually, those professionals are in a burnout state. Their health has started to deteriorate, but that situation is typically ignored because Americans are conditioned to take a licking and not let on that they are under stress, said Robinson.
"Americans don't listen to their bodies," said Robinson. "We're told we have to take it, or else we're wimps."
When professionals finally relent and decide to make a huge career shift, the first step is to take stock of their strengths. What strategies might not be working for their careers? Robinson also tells his clients to keep a rotating list of the top five things that they want to do after they move on. That's what the three founders of the former Compaq computer company did before they left Texas Instruments.
"At one point, they wanted to start a Mexican restaurant," Robinson said.
Such soul searching might seem overly touchy-feely for the average hard-charging ABS professional. Tell that to the trader who spent an entire year out of work from the ABS sector. He eventually found another job, said an industry source who was familiar with him, but only after he suffered bouts of depression and alcoholism.
Culling the Herd
"Over the past several years, there has been a boom in the employment of financial engineers on Wall Street ... the computer geeks who could put together these high-powered models that were essential for creating pools of CDOs and CLOs," said Edward Yardeni, president of Yardeni Research.
Ironically, those Wall Street professionals who engineered the boom of the industry got snookered by their own alchemy, said Yardeni, because their firms kept the senior tranches of the securities, which were presumed to be the safest.
But now, the ranks of those financial engineers - including the quants, if you like - are thinning, and the culling of the herd is happening almost as quickly as the unraveling of the securities they engineered.
Those ABS professionals looking to find another position in the industry are already finding that the going is tough, mainly because there is very little job duplication anymore, said one industry source.
"Right now banks are more into calculating risk than basically making money," he said. Because most Wall Street firms know that they are not going to generate lots of volume from structured products enterprises, they are not willing to invest a lot of capital in extensive subprime and derivative desks.
Younger ABS professionals have acepted this reality and are more flexible with their career plans. They are willing to change specialties and target jobs involving mergers and acquisitions, endowments and wealth management.
ABS professionals who have been in the business for more than 20 years, however, have to withstand the volatility because they became accustomed to making great salaries for many years, that source said.
"They don't know anything else," he said. "It's not like you can take a structured product guy and say: OK, now you're an M&A guy.'"
Robinson said that although he has not personally coached a lot of former ABS executives through life-changing career moves, he expects the recent stream of exits to continue. It is estimated that someone entering the workforce today will go through about nine career changes in one lifetime.
"We are in a state of constant reinvention, so people have to be resourceful," said Robinson. "People have to be open, receptive and they always have to be looking at Plan B."
No matter what their situation, Robinson said, people who are frustrated with their job or the financial sector should not sweep aside whatever devastation or depression they are feeling.
"It will be over with, and they'll be moving on to something else, and it will be the beginning of a new opportunity," Robinson said.
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