With Dan Nicholls, Head of Trading, International Business of Federated Hermes
Briefly describe Federated Hermes and its trading profile.
My team is the trading team for the International business of Federated Hermes, whose majority owner is Federated Hermes, Inc.
Our capabilities are active expertise across the investment spectrum. We offer specialised investment capabilities in public and private market, and pioneering stewardship services spanning:
- Active equities: global and regional
- Fixed-income: across regions, sectors and the yield curve
- Liquidity: solutions driven by four decades of experience
- Private markets: infrastructure, private equity and debt
- Stewardship: corporate engagement, proxy voting, policy advocacy representing USD1.28 trillion assets under advice
We are guided by the conviction that responsible investing is the best way to create long-term wealth. Through our stewardship services, we engage companies on strategic and sustainability concerns to promote investors’ long-term performance and fiduciary interests.
Our goals are to help individuals invest and retire better, to help clients achieve better risk-adjusted returns, and to contribute to positive outcomes in the wider world.
What is the size of your team and what positions do they hold (e.g. trader, technologist, strategist, researcher etc.)?
There are five multi-asset traders in London who trade Equity, Fixed Income, Credit, Fx, MM, Derivatives, Commodity & Treasury. The team is supported by four front office trading technology support staff. We have a dedicated Trade Cost Analysis department providing the desk with trading research and analysis of our trading and behaviours as well as market structure expertise. We also have trading teams executing in live markets from New York, Pittsburgh and Hong Kong.
In London our traders have an average of 18 years’ experience. Although generalists, all the traders have a core product focus in which they are experts (The trading desk won ‘Mid-cap Trading Desk of the Year’ 2019 and ‘Trading Desk of the Year’ 2018 at the The Trade Industry awards).
How has recruitment on the trading desk evolved from when you started your career in the late 1990s, to present day?
The entry level standard of education has increased exponentially. When I started as a LIFFE trader in the 1990s I had a degree in Zoology from Newcastle University. Most traders weren’t graduates. The trading world was a very different environment with very different people back then. The only trading tools we had were (almost) unsmashable telephone handsets, a pen and paper, and a calculator if you were sophisticated.
Now the trading desk is surrounded by approximately 20 different trading technology application tools. Gone are the unsmashable telephone handsets, pens and paper and calculators.
During my career I have attended London Business School, studied algorithmic trading at Oxford University and machine learning at MIT. Our latest joiners on the trading desk have the CFA and a Masters in Finance.
However, being street smart (having common sense) is still just as important as being academically smart in trading. Some of the cleverest people I know are the worst traders.
In 2021 we are an industry that has demonstrated over the last year that we are able to work successfully from home. Shorter, more flexible hours combined with technology advances have helped reduce stress.
What are your main challenges in recruiting?
We tend to employ experienced hires on the trading desk, as we are a small team and the attrition rate of graduate traders across the industry is high. Team stability is vital.
A major challenge is finding diverse candidates who are suited for roles at this ‘experienced hire’ level. For example, we are seeing very few female candidates coming through the system, which is a real concern.
How do financial firms compete for top talent? Is it difficult to compete with a technology sector that has been riding high?
Competition for roles is greater than it has ever been. The level of available candidates at every level of experience is unprecedented. However, as noted above there is a real shortage of diverse talent.
Are women sufficiently represented on trading desks (at Federated Hermes and/or industry-wide)?
Women and minority groups are significantly underrepresented in trading when compared to the London demographic, and this is a challenge for us – as alluded to above.
As a firm we recognise the wider industry challenge. In the UK we have signed the Women in Finance Charter and its objective of attaining gender balance across all levels of financial services. Through our initiatives and constant consideration of the value gender diversity and all aspects of inclusive behaviour can bring to us as a business, our industry and society, we continue to make progress toward the achievement of our goals.
Discuss diversity and inclusion on the trading desk — how do you implement D&I initiatives and what needs to improve?
Given our size we tie into the wider company approach. We have an Inclusion Committee, along with a recently appointed Head of Inclusion, who reports into our Executive Committee. Our inclusion strategy, set by the committee, focuses on three key themes: leadership, practices, and people and the environment. These themes encompass all areas of our business, enabling greater diversity and inclusion integration throughout the firm. We have seen very positive progress in terms of gender diversity both in terms of actual numbers and the increase of senior positions being filled by women. Where we want to improve is in improving our ethnic diversity – particularly the number of Black people in the firm.
What current recruitment initiatives do you have underway?
Two notable initiatives we would highlight which is specifically targeted at ethnic diversity:
- We have set a goal to at least double the actual number of permanent Black employees in our workforce by the end of 2022, and with the most senior levels of management to be held accountable to deliver on these metrics.
- We are launching our own Investment Trainee Programme for school leavers in the UK, where we are headquartered, which will give places for up to 10 trainees each year from socially disadvantaged backgrounds, with a particular emphasis on encouraging applications from under-represented ethnic minority groups. They will, initially, spend a year with us with the aim of transitioning them onto a formal apprentice programme after that time. An initial pilot programme for up to four trainees is launching in January 2021.
What is the future of recruitment on the trading desk?
It does lie in building greater diversity — a challenge that needs to be addressed across the industry. It is clear that diverse talent is not coming through the ranks and this needs tackling. We need to understand why and work out how we can become an attractive industry to the wider population.