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• QUESTION: The word on the street is that the structured credit market is dead. The traders on the other hand are pointing out that there is opportunity out there to pick up distressed debt. As a structured credit ops person, should I leap to another area and if so which, or hang in there?

  Confused 03 Dec 2008

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• Confused: Couldn't give a direct answer to this as I do not cover the operations sector. From a product persepctive Distressed Debt will be an interesting space in 2009 whereas Structured Credit will remain a difficult environment.

  Alex Tracey, Clifden Partners 03 Dec 2008

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• Confused: You are right in saying there is opportunity , however banks have a herd mentality and until one bank gets in to this business the rest will not follow

  Jason Kennedy, Kennedy Associates 03 Dec 2008

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• Confused: The macro conditions that investors currently care about most are in dichotomy with most payoffs engineered by the banks, systematically reducing business generation this year. Investors are reluctant to invest in products with risks they do not fully comprehend. Sales have therefore reduced in the traditional structured credit product spaces and activity is likely to be subdued in 2009. You are right in identifying activity further down the credit curve – distressed debt and illiquid asset desks are seeking out value in the market and if they get it right could stand to make a lot of money. My advice is if you have not been cut yet then stick in there – they obvious value you or are redirecting resources into such areas. However, you may consider if there are specialist teams being set up to cover the settlement and evaluation of risk exposure to certain institutional. counterparties. This will be an ongoing concern in 2009. Certainly, flow credit operations and other asset classes will give you less sleepless nights going forward.

  Russell Clarke, Mantis Partners 03 Dec 2008

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• QUESTION: I was working as a quant for a BB, and then was hired to trade structured credit for another BB, only to be fired a couple months later with Lehman's bankruptcy. Since then I have an offer from a startup hedge fund to work on and trade stat arb/high freq strategies. The only problem is the HF is outside NY/London.

  Ex-trader Joe 03 Dec 2008

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• Ex-trader Joe: A bird in hand my friend … take the offer and continue looking for the ideal job.

  Jason Kennedy, Kennedy Associates 03 Dec 2008

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• Ex-trader Joe: Hedge Funds are themselves in the middle of the market turmoil and it is clear that no more than 50% of them will survive. If you feel strongly that your HF will be a survivor then I would suggest taking this opportunity.

  Alex Tracey, Clifden Partners 03 Dec 2008

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• Ex-trader Joe: Two very different experiences. It depends upon the longer term commitment by the HF and if you bring a model to the table. It could be a little while before your model trades well and indeed over the longer period the hedge fund could be more rewarding for you. A start up HF focusing on automated quant strats is more secure than some structured Credit HFs at present. Without knowing the underlings it is hard to take a view on the value of High Frequency strategy but it sounds like you have a lot of variables to consider, most of all the location. If the temperature is a balmy 30 degrees I would say go for it, get a tan and let the model do the work. However, the sell side market will come back and at present you may possibly have the right blend of trading savvy and quant skills that is in demand. Most structure credit activity is focused on the risk management of the books. It may seem less sexy than market making, but if you join a sell side structured trading desk as a technical trader, reduce risk and determine what parts of a book can be unwound and what the business has to manage over the longer term you could become a vital component for the business as the market plays out.

  Russell Clarke, Mantis Partners 03 Dec 2008

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• QUESTION: With structured finance models having proved to be less than fit at providing proper risk pricing and valuations, what is the future for those who have worked on the quant and risk management side?

  KD 03 Dec 2008

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• KD: You need to evolve to a new business that is in vogue, like equity quant or high frequency quant

  Jason Kennedy, Kennedy Associates 03 Dec 2008

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