Raising the Bar on the Buy-Side Skill Set

The qualifications for becoming a buy-side trader are changing. With brokers pushing more electronic execution tools, the buy side is being forced to raise the bar on its skill set.

"The buy side is becoming much more sophisticated, much more savvy. They're putting the resources to [hiring] better traders on their desks," said Peter Driscoll, vice president and senior equity trader at Northern Trust Company, speaking at the TradeTech institutional equity trading conference in April. "You don't go out and get your trader on the switchboard or the reception desk anymore," he added.

Traditionally, having a good feel for how the overall market works has been an important qualification for traders. But now, being able to handle the technology well is also an important prerequisite, according to Adam Stewart, head of equity trading at Trusco in Atlanta.

With all the algorithmic trading strategies being thrown their way, do buy-side firms need to hire Ph.D.s in physics to understand the latest bells and whistles? "You shouldn't be afraid of computers and algorithms, and you should be willing to experiment and be open to new things," says Floyd Coleman, cohead trader at Axa Rosenberg, a global institutional money manager in Orinda, Calif. Still, the buy-side trader does not have to be a rocket scientist to understand algorithmic tools, he adds. The sell side should be able to provide an "elevator pitch" that explains the tool, Coleman relates, but the buy-side trader has to be able to understand it.

Richard Tsai, head of electronic trading at San Francisco-based Barclays Global Investors, says his firm has focused more recently on hiring quantitative traders. As BGI expands into new asset classes, such as commodities and derivatives, it's going to need more specialist traders, he adds.

One portfolio manager at a quantitative buy-side firm says his firm is hiring people who know how to code. "We think you can teach them the finance; coding is harder," he asserts. -I.S.