Credit Risk Pathways

In the last edition of the Edge, we discussed some of the factors behind increasing churn rates in IB Credit risk teams. If you missed this, catch it here.

This week, we’ll be exploring exactly where Credit risk talent is going.

Private Credit Funds

We find ourselves in what has been dubbed the ‘golden era of private credit’. With high yields yet lower loss ratios than other high-yield fixed income instruments, private credit broke through the $2 trillion barrier last year and is forecasted to reach $2.8 trillion by the end of 2028, in line with wide-scale loan maturation and subsequent refinancing. Increasingly, we are seeing the private credit landscape attract credit risk talent on the bases of high compensation and earning potential, less industry regulation, and more sociable working hours.

The funds are welcoming credit risk talent with open arms, particularly valuing creativity within deal structuring and experience across several asset classes. We see that talent with experience on both the trading and banking books is particularly sought-after at funds that are themselves levered or are engaged in derivatives trading, like Blackstone, though these funds are notably in the minority.

Origination & Trading

On the banking book side, the allure of getting closer to clients is becoming harder to ignore for credit risk talent who boast sound technical ability and suitable elan. Individuals who have specialised within a business area and are able to develop and leverage their network well tend to transition smoothly into the front office, especially given the duplication of efforts between the first and second lines of defence. The feedback we glean from individuals moving closer to the front commonly describes the direct gratification of deal-making and more than healthy increases to their compensation.

Moving onto the trading book side, we see Credit talent that has shown a proclivity for trading instruments — commodities hedging, FX derivatives, swaps, options, etc. — gravitate towards market risk as an intentional driver into trading or market optimisation itself. This journey is navigated best by talent that harbours an appreciation for the macroeconomic elements in consideration on the trading side — an appreciation that can also lead to opportunities in prime brokerage and funds more generally.

In many cases, burgeoning churn rates within CRM teams are not indicative of any bank-wide exodus of talent. Internal mobility is still very much encouraged by the banks, which look to retain and upskill their strongest talent. This can, in effect, create a positive brain drain – Credit risk teams may suffer, but banks ultimately gain.

Further Buy Side Opportunities

Opportunities on the buy-side within IB are few and far between but are among the most highly regarded within Credit risk networks. The increased dynamism and financial incentives of working on credit research within an investment bank’s Asset Management division or Principal Trading group are big pull factors for talent. Also impactful is the opportunity to make a tangible impact on investment performance over a long-term investment horizon, while the connections with stakeholders and management inherent within buy-side roles can lead to strong career progression down the line.

Fintech

Historically less considered but increasingly relevant are FinTechs, who have entered the market for Credit risk talent in force. These firms represent a pivot away from the towering hierarchies of the banking sphere in favour of flatter structures and a more entrepreneurial culture. The largest appetites for credit risk talent in fintech are on the retail credit side — firms playing in the trade solutions or derivatives clearing space, to name two examples. It is, however, worth mentioning that we see a high return rate back into banking from the FinTech space — perhaps more of a summer romance after all.

Eversearch provides executive search and modern talent solutions exclusively to the risk and finance sectors.

We are true sector specialists and partner with a select group of core financial services clients that demand best-in-class talent. Many of our clients have partnered with us over several years. We are an extension of their in-house talent strategy and are trusted advisors. We know their operations well and have great instincts on how to navigate challenging talent pools to deliver consistent results.

Risk has emerged as one of the most important business functions across complex financial services institutions. While many of our competitors now cover the sector, our differentiators are our depth of experience, thorough insights, and proven ability to deliver on otherwise hard-to-find talent.