From the poor relation to one of the market's most wanted: the lot of the credit analyst has vastly improved as European institutions focus on fixed income research. But what exactly is a credit analyst? And if you want one, where do you find one?
Not long ago, in the words of one senior analyst, "credit
research was thought of as where a bank puts its geeks to do some
Gone are the days where credit analysis was just a back office function. As Marc Pinto, vice president of European fixed income research at Merrill Lynch points out: "Now, the people who are in research are increasingly in front of investors."
Being personable is not the only requirement for the new breed of credit analysts, though. Although some banks would have you believe it, credit analysis is, as Pinto points out, "not rocket science, but it does require a certain mindset, a certain sophistication".
Corporate credit research looks into the fundamentals of an organisation, but fixed income research delves deeper, looking at whether bonds are trading cheap or rich, and making a call.
Pinto asserts that credit research requires someone with sensitivity to credit, economics, the socio-political backdrop and the mentality of the market. On top of that comes an analysis of senior versus subordinated debt, and how much it is worth to the bondholder. "A lot of it has to do with being in the market for a number of years," he says.
Rocket science it is not, but the majority of credit analysts are commanding much higher salaries than Russian cosmonauts.
The figures for wages may be apocryphal, as they often are from wishful thinkers wanting to bid up the market, but there may be truth behind one analyst's assertion: "One of my colleagues left to go to a job in high yield research for $750,000, and wasn't the most senior researcher there."
One City headhunter says he is currently looking to fill slots for credit analysts ranging in salary from £50,000 to £500,000.
Simple supply and demand dictates that as the European corporate credit market develops, investment banks, fund managers and, to a lesser extent, issuers will all be looking to recruit top notch credit analysts. While there are many analysts who can cope with pure credit research, the element of context and the market background is a rarer commodity.
While the salaries may have inflated, the image takes some shaking off. One city head hunter bemoans the analysts' dismal lot. "It's amazing how many credit analysts are hired to be on their own, either stuck in their own office or at the corner of a dealing room with no-one to talk to. It's pretty soul destroying and desperately boring for them and quite a few leave after only a short while."
That image may now be out of date. Gary Jenkins, head of European credit research at Barclays Capital, is surprised by the idea that investment banks could be hiring lone souls.
"Most are trying to hire teams," he says. "I don't know what you'd call a collection of credit analysts, you can fill in that yourself, but Barclays Capital have got a good close knit team with a great atmosphere."
To prove the point he quips that one of the analysts cooked a great spaghetti at home in mid-May which was eagerly devoured by the rest of the team.
Getting a decent, and relatively cheap, credit analyst is becoming ever more difficult. "If I spoke to a good junior ratings analyst at a rating agency I could almost guarantee not to speak to them again a month later," says one bank analyst ruefully.
Rating agencies have long been seen as providing good pickings for magpie investment banks - especially among fledgling analysts, a fact the agencies themselves are eager to downplay.
But agencies have been gearing up staffing levels themselves. Chester Murray, managing director at Moody's in Europe, points to his agency's growth: "We've had a compound annual growth of 30% in our staff in the London office alone since 1994," he says.
"Moody's has had very little turnover in Europe in our analyst base. We have no problem attracting people who want an interesting, independent place to work, whose careers aren't tied to the outcome of a transaction."
Many posts are being filled within investment banks through what the same headhunter calls a "huge network of internal chattering" between analysts.
The best fit tends to be from the equity side rather than from the traditional government bond analysts or currency analysts. The cross-over between credit and equity market analysts is possible, and increasingly prevalent.
"Credit and equity analysts walk down the same path quite a way before diverging," says Pinto.
"Equity tends to be more short term, and fixed income analysis more long term, but it was thought in the past that credit analysts did not need to react as quickly as equity analysts.
"That's changed, and fixed income analysts need to understand what is happening on a daily basis."
That said, persuading equity analysts to cross the path to credit is not always easy. In the words of one credit analyst anxiously seeking to recruit: "Not many equity analysts want to swap to debt. It's often seen as the poor relation, and bond analysts are pulled in so many more directions. The best bet for us is to pull in people from our corporate lending activities, but it is expensive."