• Christian Armbruester

(Asset) Class Wars


Why some people work in equities and others in fixed income.

The first time I entered the building of one of the big investment banks in Canary Wharf, it was awe inspiring. The sheer scale of the huge entrance hall immediately made me feel very small. Not that I was not already intimated enough, as I was about to meet the masters of the universe. My brother had arranged for me to meet one of the traders, to help me understand more about the industry, before I graduate and hopefully become one of them.

I was taken up the elevators by two very important people in perfectly tailored clothing. As the doors opened on the second floor, I was told this is Equities. As the doors to the third floor opened, I was told this is Fixed Income. I inquired why these two departments were operating on two different floors as both seemed to be engaging in the same things, trading et al? Suddenly the elevator fell silent, and I noticed the smirks and grimaces of all the people which had overheard what must have been the dumbest question in the world. “Don’t worry, you will understand”, the friendly administrative assistant whispered in my ear, as I was led out onto the fourth floor, more confused than ever.

Over the years, I tried to understand what was so different about trading bonds or trading stocks. After all, both are financial securities, which we can buy and sell in public markets, with the same rules for trading, and subject to identical regulations. Maybe it was the culture? I have to admit in all my years of working on the equities floor we never socialised with the people dealing with credit. There was certainly no reason to ever walk onto each other’s floor. Of course, we could run into one another in the smoking lounge or the cafeteria, but it might as well have been people from two different worlds and there was simply no interaction at all.

Things got so bad that top management decided to bring the two groups together. I was invited alongside three other traders to meet our contemporaries from the fixed income side to talk about what we do and to see if we can learn from each other or potentially find ways to work together. What transpired next is a classic tale from the City. Clearly, any trader that has survived at one of the big banks for many years, must have been successful. Otherwise, they would get fired. This in of itself explains the culture of any trading floor you will ever walk onto.

Everyone thinks they are god’s gift to the world. The only question we had to decide by meeting fellow traders was, who is the biggest swinging (you know what) of them all. So, after discussing the intricacies of trading dividends versus coupons, and the difference between duration and beta, we quickly came to the only thing that mattered: how much did you get paid last year? Turns out, the fixed income guys made a lot more money than we did. We took that up with management, and it was swiftly decided to end the cultural exchange between two evidently very different departments. We never really got over that and have avoided mixing with any people from fixed income ever since.

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