What it’s all about
Sector strategists work with traders and sales people. Their primary responsibility is to support the trading desk by preparing trade commentaries, trade ideas and other useful materials. They analyse materials produced both the bank’s research department, and other publicly available information.
I work as a credit sector strategist, and my role involves the analysis of companies to determine their creditworthiness or riskiness. Using this analysis, we form a view on whether a credit security looks cheap (that is, should be bought) or expensive (that is, should be sold) and advise clients on what action they should take. It’s worth noting that when we talk about a credit security we’re typically referring to either a bond, loan or credit derivative. Typically we would publish a note detailing this trade idea that would be sent to clients, but we also provide our views in meetings and presentations. Although separate functions, sales, trading and sector strategy are all, in part, reliant on each other.
I’m the credit sector strategist responsible for the European automotive, retail and consumer sectors at Credit Suisse, so I’m constantly looking at new information that comes through, determining how it’s going to impact security prices and giving my view to our sales and trading teams on how they and our clients should be reacting.
How it brings in revenue
Typically, the credit strategist will come up with a trade idea, which they will suggest to the client. If they like the idea and want to transact they will contact their salesperson to request a price from the trader. If the trader and client agree on a price then they will transact. So by originating lots of smart and executable trade ideas that help clients to make money, the credit strategist generates revenue for the bank. The credit strategist can also suggest to the traders that they put this position on their own trading book. In addition, and subject to compliance approval, sector strategy can also work with other areas of the bank such as pre-deal reports on new bonds that the bank brings to market for a company.
How it works
The day generally starts at 7am, which is when trading typically starts. We need to be sure we’re in to process any overnight market-moving news and make sure traders, sales and clients are aware of it. Furthermore, most companies, bearing in mind we trade European credits, report their results about that time.
The news flow never stops, and we must be very prompt in analysing it and getting it out. Typically you don’t have a set lunch break, unless you’re going to see clients. The day normally ends around 6pm, but things do vary depending on workloads and what’s happening in the market. Because it’s so important to be on top of information, you tend to stay close to your desk, where you might be constantly updating financial models with new data, and looking at investment opportunities which you think the market has mispriced or putting out notes, which might be about trade ideas on a specific credit or more sector-specific pieces.
A key part of the job is being able to filter the relevant information from the noise. You need to be able to see which credit spreads are moving at the moment and why, and understand what pieces of news will have implications on a longer-term basis. You also need to monitor other markets (for example, equity and foreign exchange) as they are all interconnected and have implications for your own credits. There are countless information sources and we need to be on top of these, because a key piece of information can have a material impact on the market. I primarily use Bloomberg, which provides a continuous stream of real time news, data and prices. In addition, corporate websites are also an essential source of information, as are conference calls, road shows and presentations from company management. We live in a global world and by that token, you need to be gathering data from every region.
Having the confidence to stand up in a roomful of people is important. For example, we have a sales meeting every Tuesday evening where we go through our key ideas in detail. We also have regular client presentations, which can range from one on one meetings, to presentations to several hundred people. Whatever the size of the audience, you need to present a confident, well thought out and valid opinion that can stand up to rigorous questioning.
It’s very important to enjoy your job, and I’m fortunate to cover the consumer product sectors that I find most interesting. Being in this job gives you fantastic opportunities to work with incredibly intelligent people from across the globe. There are also a lot of travel opportunities, whether it’s going to meet with clients based in different countries, or meeting with company management. For instance, I recently attended the Frankfurt Auto Show’s investor conference; in addition to visiting the actual show (where I got to admire some gorgeous new car models) we met with the auto sector’s senior management, who gave their views on a wide range of topical subjects from the impact on autos from the European sovereign debt crisis to how environmental legislation will influence future car development. The job of the credit strategist is to take all this information, sort it in order of relevance, determine whether the current environment is indicative of what may happen in the future, and conclude whether it is reflected in prices.
Even though I cover only specific sectors, currently the main market drivers are coming from the macroeconomic situation. Things are becoming increasingly difficult to predict as company specific fundamentals are outweighed by the economic environment, and that’s a huge challenge in my role.