The devastating number of layoffs in the structured finance industry - and on Wall Street in general - has industry participants tossing around terms like "bloodbath" or "pinstripe massacre" to depict the jarring consequences of the current economic outlook.
While mass layoffs are nothing new - high-yield bankers faced similar circumstances when their market was derailed in the late 1980s and Internet analysts saw layoffs at the turn of the millennium when the dot-com bubble burst - structured finance industry participants won't have an easier recovery this time around, especially the senior players whose experience resides in a moribund market.
"These people were in a product that has become pretty much extinct, and when it comes back it will come back in a much different form than it is today," said Richard Lipstein, managing director at Boyden Global Executive Search.
The stagnant condition of the credit markets has rendered many previously lucrative business relationships null and void. The lack of new deal flow has been especially detrimental for the senior employees whose responsibility it was to maintain sufficient new issuance volume. Without these contacts, prospective employment may be limited.
"The very fact that the relationships [these senior employees] have are not producing revenue or less revenue than acceptable is causing them to get laid off," Lipstein said. "They cannot go to a second- or third-tier firm because what do they bring to the table? They don't bring relationships." He noted that these firms would prefer to hire an associate over a managing director or a principal.
Indeed, the associate and vice president levels may have an easier time finding jobs because there is always that desire on the part of the smaller firms to hire more qualified and better trained midlevel professionals, sources said.
Current opportunities are few and far between but they do exist, said market pundits. Smaller middle-market companies are still able to get deals done and are currently hiring, sources said. Among those said to be adding staff are Churchill Financial Group, which confirmed the rumor but did not give specific details.
Interestingly, there are also new opportunities arising in the mortgage industry after months of market scorn for anything sector-related. "In general, the market is still challenged, but we are starting to see a distinct uptick in mortgage hiring, especially at hedge funds that are looking for whole loans, pass-thrus and derivatives candidates. Sell-side participants are looking to upgrade positions opportunistically," said Brad Young, director at Options Group, a global executive search and consulting firm based in New York. These firms are talking to people at all levels, he confirmed.
Just last week, Guggenheim Capital Markets brought on an entire whole loan group run by managing directors Mary Glass-Schannault and Gretchen Verdugo. The group researches, sources and prices residential loan products that range from first- and second-lien products to performing, reperforming, subperforming and nonperforming loans to fixed- and adjustable-rate loans, agency loans and other residential mortgage asset classes.
Glass-Schannault was most recently at Opteum Financial. She was also the principal executive officer and founder of Impac Mortgage Holdings and Impac Commercial Holdings.
Previously, Verdugo was the executive vice president and chief financial officer at Impac Cos. She has also served as a senior manager at KPMG in the mortgage and structured finance group and as the CFO of Bay Federal Credit Union.
Earlier this year, Mission Capital Partners, a residential, commercial and consumer loan sale advisor, tapped Jim Barnard as director involved with structuring loan sales transactions. Before joining Mission, Barnard was an associate director in Bear Stearns' real estate capital markets unit.
National Asset Direct, a purchaser of distressed residential assets and loans, recently hired Ray Schalk for its whole loan trading team, where he will be responsible for all aspects of loan acquisitions.
The Right Fit
Another challenge facing structured finance professionals is finding the right fit in another industry. Vulture funds and hedge funds are getting increasingly involved in buying distressed loans as the market for these assets expands, but while some people have gotten hired, it is a totally different industry, Lipstein said.
Though moving from the sell side to a hedge fund environment is relatively easy, the skills of structuring a deal and getting it out the door are much different than knowing how to value an asset when there is no market for it, he said.
However, even these firms are not making significant additions to their staffs at the moment, said a market source. Many hedge funds are sitting on the sidelines with a lot of capital, and the lack of activity does not bode well for new hires. "Right now, everyone is very cautious about pulling the trigger on anything," he said.
However, when the feeding frenzy does come back, so will the job market, sources said.
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