Respondents to Structured Credit Investor's 2007 compensation survey paint a bleak picture. Nearly all of the more than 30 headhunters polled declined to put figures to expectations for the forthcoming bonus round, on the basis that averages are unrealistic given the range of anticipated pay-outs for structured credit professionals this year.
All survey respondents agreed, however, that good news would be rare. Of those headhunters offering numbers, even the most optimistic forecast average bonus declines against last year's survey. Across both structured and flow disciplines, drops of 15% for the best traders and 90% for the hardest-hit salespeople are suggested.
The actual amounts individuals receive will depend on their institution. Each firm appears to be dealing with staff compensation in a different way, based on how they strategically view their CDO and broader structured credit businesses going forward.
With both clients and candidates still at a loss as to when investor demand and liquidity will return to structured credit markets, it is even fair to say that some banks will not be paying bonuses at all and that the primary concern of individuals at the moment is keeping their job. It is certainly extremely difficult to arrive at figures that are representative of average compensation packets.
Headhunters say that remuneration will be both politically and economically motivated, and will likely be used as a tool to rationalise staff even further - particularly as cuts in Europe have not been as heavy as many feel the outlook for 2008 now requires. Where desk heads have been retained, their cash packages will likely be much reduced in line with their business revenues - with potential upside through shorter deferred stock options being used by some banks, should they turn things around in 2008 and 2009.
Judging from the calibre of people let go so far, it appears that some institutions have decided that the opportunity cost of not being in the structured credit business is lower than originally thought. Remuneration levels for 2007 are therefore expected to reflect this realisation.