Moving to the Front Office from Risk

[seamusfinnegan]

Four middle office jobs which may allow you to become a trader

www.efinancialcareers.co.uk

Some banks are more partial to market risk professionals becoming traders than others, says Butter. However, he declined to mention which ones.

Which ones are they?

"Market risk isn't really seen as a middle office function any more," says David Butter of risk recruitment firm GRS. "Market risk professionals are now largely involved in making trading decisions, which means it's a natural succession for them to start managing their own money."

What involvement do they have in making trading decisions?

 

[lolalin]

No idea if this is what you are looking for, but this is what BAM's new CRO has to say about risk:

“When I joined and looked at things holistically — risk management was viewed as a loss mitigation technique, as opposed to being a backbone to an alpha-generation process,” he says.

His first order of business was to integrate risk management into the portfolio management process. That led to the introduction of a volatility target model, which enabled the firm to use risk management as an alpha-generation tool, rather than just as a defensive measure, he claims.

Schroeder gives a simple example of how the model works: A biotechnology stock and a financial stock might have the same return potential, but the financial stock might have three times the volatility. With a volatility limit on each trade, it is still possible to invest in the financial stock, but you need to neutralize the volatility factor, perhaps by having a competing short position. “It’s the opposite of what you have in a gross-exposure-management strategy,” Schroeder says.

Source: The Curious Case of Dmitry Balyasny

So maybe firms who view risk as an offensive tool might be more likely to give a risk manager a trading job?

 

[MLV]

Not on the trading side, but it is my understanding that Market Risk to Trading is a relatively common route for people. Ever since Market Risk started sitting on the floors right beside their respective trading desks, I'd assume relationships are built that lead to the transition for anyone that proves to have the smarts / motivations.

From experience, Credit Risk to Front Office is also pretty possible when you have the relationships. Or Credit Risk to any other area for that matter.

 

[seamusfinnegan]

@MLV where is going to be hard to move from in middle office to a front office role?

 

[Liam]

Yes people are right here - some firms will have strategies that value Market Risk, others won't.

Main point I'd have is to start with looking at your relationships to see where you stand. Build on real working relationships you have in the current role to see where you stand + let people know you are interested. Main thing I found personally was that movement between MO and FO usually wasn't too hard, as long as you are in a position to show you are getting good at understanding investment (as opposed to just being someone their for regulatory purposes)

Or if you look at other firms as MR manager try and guage it from the interview or at least make sure any reports of any firms valueing market risk managers as potential traders are fairly current reports from someone working there that is switched on.

 

[seamusfinnegan]

@Liam "some firms will have strategies that value Market Risk, others won't." why is this? Also for people dont have any internal contacts, how can you tell these things in the interview?

Also is it getting to make the move with many job losses from the front office in recent years + automation?

 

[Liam]

@Liam "some firms will have strategies that value Market Risk, others won't." why is this? Also for people dont have any internal contacts, how can you tell these things in the interview?

Also is it getting to make the move with many job losses from the front office in recent years + automation

Different firms take different views. Some will view risk as just popping numbers in a model to shove a trade through i.e. not really caring, other firms it's not even about the model but listening to market risk analysts.

Guaging it can simply be from the attitude in interview - all I can say is use the gumption. The marketing spiel to sell you the role will be similar in all firms, but a firm on the ball when it comes to risk will ask about areas of risk not in textbooks while others won't. Also a firm not on the ball are more prone to bullshit questions for the sake of it eg worst interview I ever did was as a graduate where the line manager regurgitated the job spec. I took a mental note and after getting a job elsewhere found from a college contact my gumption was correct - the market risk team in that case had a poor reputation and didn't do much (and voila they went bust in the credit crunch very fast).

There comes a point though where you to stop asking questions and just use your gumption, otherwise you will end up not wanting to go for any role.