Sebastien Rosset: From market making to the funding team at the EIB
After three decades – and a few financial crises – on the trading floors of four of the largest investment banks, most traders would probably be contemplating leaving to either set up their own hedge fund or take their well-deserved retirement from the industry. Fewer still might be considering, and actually going through with, making a move into public sector employment.
Yet, for Sebastien Rosset, former managing director and head of European government bond and sovereign, supranational and agency trading at Barclays in London, this is precisely the switch he has made, having joined the European Investment Bank earlier this year as a senior funding officer, reporting into Sandeep Dhawan, head of benchmark funding at the supranational.
The move is notable for a number of reasons, not least that it’s one of the most high-profile and rare examples of a trading desk head joining a public sector borrower on the funding side. For some in the market, it is also a fine example of the British expression poacher turned gamekeeper.
Indeed, having traded SSA bonds, including the EIB’s, as well high-grade financial institution and government bonds for nearly 30 years at Barclays, UBS, Lehman Brothers, and HSBC, Rosset’s experience will be invaluable to the EIB’s funding team, providing a new, advantageous perspective on its operations. Just as important is Rosset’s trading and markets knowledge and expertise, and his relationships with investment banks and institutional investors – crucial counterparties to the EIB.
In an interview, Rosset explains what drove his decision to join to the EIB and what it is like to work for one of the world’s largest, most important, and innovative public sector borrowers. He also highlights some of the trading skills and experiences most applicable in his new role and shares some thoughts on the current state of the SSA market.
GC: It’s been a few months now since you joined the EIB. Thinking back, what provoked you to make the switch? The EIB obviously presents an attractive opportunity, but what else was a factor in you deciding to pursue it?
Rosset: As you suggest, there are a few factors that informed my decision. The first is that I'm a proud and passionate European citizen, having benefitted from the best that Europe has to offer such as studying abroad via the Erasmus programme, travelling freely across the continent, and settling down abroad with my multicultural family. I’m also pretty passionate about global finance in general and particularly the SSA market, which I’ve been actively involved in since joining HSBC as a graduate trainee in 1993.
I wanted to work for more than just myself and felt like I needed to take my career in a totally different direction, to work for an institution, a public sector institution, with a different mission to that of the firms I had been working for.
Over the years, I’ve been lucky enough to work at the some of the leading global investment banks, being a trader myself and managing market making teams. So, joining an institution like the EIB was always going to be attractive as it enabled me to engage in two of my passions in life; Europe and the financial markets.
Also, I've built-up a lot of experience which I wanted to put to use, but in a different way to what I had known working in the private sector for 25 years. I wanted to work for more than just myself and felt like I needed to take my career in a totally different direction, to work for an institution, a public sector institution, with a different mission to that of the firms I had been working for. The EIB was a logical choice because of the type of public sector institution it is and with the mission it has.
Importantly, in hiring for this role, the EIB showed that they had the bandwidth and a genuine interest in considering a candidate with a different background, which is quite rare among public sector institutions. So, they had the foresight to know how to leverage the experience of someone like me. That the funding team was willing to take the risk of making an atypical hire, convinced me that it was the right call. It is a decision I've not looked back on.
GC: You’re obviously having to adjust and absorb new information and ways of doing things. What has struck you most so far?
Rosset: What has impressed me the most so far is the extreme level professionalism from the capital markets department in general and the benchmark funding team in particular. Having interacted with the latter on numerous occasions during the course of my career, my perception from the outside was they were a team of consummate professionals. Once I passed the turnstile and sat at my desk, I realized this was not just an impression but the reality and that the standard of excellence expected is at least as high, if not higher, then everything I had experienced in the past. The team prides itself in keeping its finger on the pulse of the market. I witness this on a daily basis, so have to ensure I integrate this drive to ensure I meet the standards set by the rest of the team and thrive in the organisation.
I was also impressed by the attitude. Having successfully navigated through various crises, different market cycles, and built unrivaled expertise in funding, some issuers may be satisfied with that. Yet, there's none of that here. I've found in the team a group of individuals who are keen to share their knowledge, to constantly question themselves and to look for ways to do things better. This intellectual curiosity drives the team, is very refreshing and guarantees the role will remain interesting.
Finally, I think the people, culture and corporate spirit of the institution is exceptional. It may sound like a cliché, but you really get a sense that we are here all working to achieve the same goal. There's a genuine interest in the common good and that to me is very reassuring. Culturally, it is fantastic, too, because it’s so multinational and multilingual. You can obviously find that in a city such as London, but it’s perhaps more extreme here, where, coming from almost all corners of the continent, almost everyone seems to speak at least three languages. So being exposed to so many different highly skilled, competent people and cultures is fascinating and exciting to be a part of. In many ways it is exactly what I needed.
GC: Turning to your role. The EIB is one of the largest and most prolific public sector borrowers. Are there any specific areas of its annual funding programme that you are especially interested in?
Rosset: The EIB is one of the most innovative public sector borrowers. Unlike our peers, we fund in 19 different currencies, issue plain vanilla bonds and structured notes as well as green and, most recently, blockchain bonds. So, there is a lot of innovation happening in the EIB’s funding programme, which is important and exciting.
Yet for me, given my experience and background, one of the things that excites me most is understanding what happens before a transaction is launched. There is a lot of work that goes into this, and this work – finding the point where the bank’s interests are best aligned with investor's – is fascinating because it is somewhat new to me. I spent most of my career focussing on what happens after the bond is launched whilst now, it is the other way round. To some extent, some might say I have now come full circle.
Getting this pre-launch part right is absolutely critical for a successful transaction. Ultimately, an issue which struggles from the start is likely to trade poorly up until it matures, which is why the work we do beforehand is so important. After six months, I'm still impressed on a daily basis by the benchmark team’s attention to detail, minutiae and willingness to leave no stone unturned in the preparation of its transactions. I have heard “fail to prepare or prepare to fail” said many times over the years but can hardly remember a group of people implementing this strategy with such dedication and discipline. This enables us to not only preserve our reputation in the market, but also, and more importantly, to ensure investors keep coming back to us. Returning investors are obviously one of the cornerstones of a successful funding strategy.
GC: There’s surely many skills and experiences gained in your previous role on the trading side that are directly applicable on the funding side. What are some of those overlaps or areas?
Rosset: Interestingly, there are more similarities between the roles than one might think. As an example, given that we are a market-based funder, we constantly try to adapt to the market and listen to what it is telling us it wants. To do that, and do it well as a borrower, which is what the team has been able to do over the years, you need to have strong connections with all stakeholders, but more specifically to investors in order to better understand what they want to buy from you. Market makers are in fact seeking to do something similar, in the sense that they are just trying to find bonds they expect investors will want. It’s the same principle on the funding side – you need to know your investors, listen to what they need, and provide it as best you can.
The EIB is one of the most innovative public sector borrowers. Unlike our peers, we fund in 19 different currencies, issue plain vanilla bonds and structured notes as well as green and, most recently, blockchain bonds. So, there is a lot of innovation happening in the EIB’s funding programme, which is important and exciting.
Previously, as a head of desk, I was constantly interacting with DCM and syndicate. As an example, I regularly contributed to the pitching process, the year-end dealer group reviews and participated in the regular team effort to maintaining the relationship, so I know exactly how investment banks approached these interactions. And that type of experience of how the other side operates will be of value to the EIB.
GC: Interesting to hear. Given your experience and relationships, should the EIB’s group of underwriters expect anything to change with you in the role?
Rosset: The institution has successfully been funding in the markets since 1958 so, no, I wouldn’t say so. Over the years, the team has developed an operating model which has stood the test of time and successfully navigated through major crises so one has to remain very humble to any impact I may have. For instance, the mandating process is based on a number of key indicators and metrics that are evolving but have been in place for some time.
What is interesting, and where I can provide some insight, is on the strength of the bank’s secondary markets trading business. A bank might have a strong primary markets franchise, but its secondary franchise might not be so strong, and vice versa. Strength in primary and secondary is obviously important to us, and so my experience and knowledge here will be useful.
I can also bring increased connectivity to the trading and market making community which will be of value to the EIB.
GC: What are some of your broader views on the SSA market – it's current state, how its changed, and how you think it may change in the future?
Rosset: The market is in good shape as demonstrated by the strong reception our recent deals were met with, which is what you want to see. More broadly, the arrival of EU to the bond markets has been interesting and potentially a game changer. It has certainly contributed to renewed investors focus on the asset-class and entice more of them to invest in the product, which is a massive plus for the market. Yes, there were concern
s in the market about “crowding out” of optimal issuance windows and valuations being under pressure. Yet, so far, none of them have materialised, the reality being that investors’ response to the new entrant has been extremely supportive with no meaningful negative impact on valuations being observed.
Further down the line, one of the main questions is around QE and obviously what impact a less accommodative central bank policy will have on the market. What we have done is run some historical analysis on our funding levels pre-QE and compared then with what we can currently observe. What we have found is that on many metrics they are not that fundamentally different. QE has removed most of the credit differentiation within the asset-class and across various asset-classes. So, the day QE stops, some credit differentiation will return to the bond markets, which would be beneficial to an institution with EIB’s pedigree. At the end of the day, the EIB has been issuing bonds for more than 60 years and successfully navigated through all cycles and crises. We fully expect to successfully navigate through the end of QE as well.