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Jobs in high finance: Big money seeks big brains

City institutions are crying out for number-crunching PhDs. And paying them well, too, says Nick Jackson

Thursday 15 November 2007 01:00 GMT

After grappling with the big questions of how the world works, quantitative PhDs – PhD graduates in the sciences, engineering, maths, and computing – can emerge blinking into the sunlight to face an even bigger question: what next?

Few people do a PhD for the money. And while an undergraduate degree on average boosts your income throughout your life by some 45 per cent, the hard slog of a doctorate earns an average student a less than 1 per cent income increase over their lifetime.

With only around one in 10 PhD graduates going into academia, many are left with a qualification that makes some employers wary of them, fearful that those impressive initials mean that PhDs will be unwilling to start at the bottom and work their way up. One place where that is not true, and that many PhDs overlook, is the City.

Quantitative PhDs are much in demand in the financial sector. Banking has become increasingly fast, furious, and complex in the 21 years since the City's Big Bang. And skills honed understanding the complexities of the universe are highly sought after to help to make sense of the subtleties of the market.

The money beats academia at any rate. Quantitative PhD graduates without any commercial experience can expect to earn along the same pay scales as MBA graduates. Most start on up to £50,000, while those with commercial experience or relevant doctoral research can command a starting salary of £100,000. According to financial recruiters this rises exponentially and PhDs who go into trading could be taking home hundreds of thousands or even millions each year after a few years.

Which may explain why banking is an increasingly popular option for PhD graduates. This year University College London organised a conference to show PhDs what is on offer. Thirty PhDs were expected. Three hundred turned up. "It was a bit of a surprise. To be honest, it was a minor nightmare," says Philip Treleaven, pro-provost and professor of computing at UCL, who organised the conference, which will run again next June.

It is easy to understand the enthusiasm. "PhDs have traditionally been looked on as the new generation of academics," says Professor Treleaven. "But it's become devilishly difficult for PhDs to get research jobs these days." The City is a highly remunerative alternative to the bitter competition for research posts.

Professor Treleaven imagines that in the near future relevant PhDs will be funded by the financial sector. Already some academics in particularly plum subjects such as computational physics are touting their subjects for financial potential. "A lot of supervisors now see it as a carrot," says Professor Treleaven.

The banks are just as keen. Goldman Sachs takes on several hundred PhDs internationally each year. "We cannot find enough of them," says Paul Young, managing director and partner at Goldman Sachs.

Dr Young stresses that no financial background is necessary. "There is a consistent view that an economics background is necessary or that we're only looking for a few," he says. "That is wrong. If your PhD is quantitative your CV will get a good hard look."

Many of the skills needed in quantitative PhDs are directly transferable to banking. In trading, share volatility and their correlation with other shares is worked out using matrix maths. And with the shouting men in silly blazers long ago replaced by computers, the market is now run through programs built with the C++ programming language that many PhD students will have used in their research.

Many PhDs now making a fortune in the City never planned to be there. "PhDs mistakenly think that they need to go into academia," says Dr Young. "But there's a very, very wide variety of things PhDs might do in the City." Dr Young himself entered finance as the result of what seemed at first to be a career disaster.

Dr Young started his PhD in applied physics at Harvard in 1987. Like many physicists at the time he expected to work for the military. By the time he graduated in 1992, the Cold War was over and Dr Young was out of a job. Only then did he consider banking. "I discovered that there was a huge career path and one that pays extremely well," he says.

Many banks now run graduate fairs for PhDs. And there are even PhD graduate training schemes specifically designed for quantitatively canny but commercially clueless doctoral graduates.

Merrill Lynch runs a structured programme for around 20 quantitative PhD graduates each year for its London office. After a week's induction, trainees are given financial tuition for a further year and access to a learning lounge to work on projects online.

"It's building on their academic skills to give them greater commercial awareness and soft skills," says Mary Middleton, Europe, Middle East and Africa head of talent resourcing at Merrill Lynch. Lecturers are brought in from London colleges to bring trainees up to scratch technically while bankers give necessary commercial tuition.

The training is desk-specific. Graduates are recruited to particular roles and then trained up to do them. Merrill Lynch recruits PhDs to global markets, including quantitative analytics and exotics or derivatives trading, and research, equity and commodities research.

A particular PhD programme does not necessarily decide which area you will work in. "During the selection process it usually becomes clear," says Middleton. Quantitative analysts, who develop mathematical models for traders, need a good knowledge of programming languages like C++. Equity derivatives research, researching stocks and their issuers, requires good client-facing skills.

And even if you are not a quantitative graduate, the banks want to hear from you. Brutally competitive, the big banks survive on hiring the best, whatever their background. "We look at a wide variety of backgrounds," says Mary Avery, head of European recruitment, securities division at Goldman Sachs. "After all our CEO is a juris doctor."

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