Russia is the new Klondike for City derivatives professionals. But the sheen could soon wear thin.
City banks are complaining of losing highly skilled derivatives professionals to Moscow where derivatives trading is the fastest growing sector of the financial market.
Top derivatives professionals can earn in excess of 550k in a 10-mile radius of Red Square, according to this year's Napier Scott salary survey, and many of the big Square Mile players have recently lost skilled derivatives traders and executives to Moscow.
Earlier this month, Moscow-based investment bank Renaissance Capital poached the joint head of Goldman's Moscow office, Gordon McCulloch.
City insiders say a number of the large European houses with interests in Russia, including UBS, Credit Suisse, BNP and Dresdner, are actively pursuing City derivatives traders and executives, adding to pressure on City banks to retain top-drawer staff.
One trader says, "The cash can be good and often they'll offer anything between 10% to 20% P&L, way above what is normally on offer in London."
Elvira Moratova at Napier Scott says, "They don't offer more money per se, but the tax regime in Russia is more generous, averaging around just 13% for nationals. Also, the major Russian players can offer more generous profit payouts than London, [payouts] that are more commensurate with hedge fund percentages than banking."
This isn't the first time banks have gone hell for leather in Russia, however. The 1998 crash may be nearly a decade ago, but it still looms large in the eyes of Moscow sceptics. Last week, for example, Hans-Joerg Rudloff, chairman of Barclays Capital, told the Financial Times that the Russian boom isn't sustainable and a correction is on its way.
So will Russia's gold diggers turn out to be fools? A senior emerging markets strategist at one European bank isn't so sure. "Companies are not nearly so highly leveraged and the government has sufficiently strong reserves to cover most eventualities," he tells us.