- Inflation trading has gone from a backwater to a $4 billion business as consumer prices careen.
- It’s led to a rush of hiring by banks and hedge funds eager to tap top talent.
- Insider breaks down the biggest departures, promotions, and hires in inflation trading.
It’s a familiar story on Wall Street: A once niche trading product rises from obscurity and piques the intrigue of some marquee investors who make a killing. The rest of the Street takes notice and scrambles to catch up, resulting in an intense carousel of hiring.
Inflation trading isn’t new, but up until the last two years, it was a bit of a backwater. Serious surges in consumer prices were a relic of a bygone era when Jimmy Carter was president, and cars were lined up around the block to fuel up at nearby gas stations.
The post-pandemic economic recovery and rise in interest rates have made inflation perhaps the hottest political and economic topic. It’s also making investment banks and hedge funds a lot of money via esoteric financial instruments, like inflation-linked bonds and swaps.
At the largest banks, revenues from inflation trading are on pace to hit $3.5 billion to $4 billion this year, according to financial data firm Vali Analytics. The trade produced just $700 million in 2018 and 2019, before growing each of the last three years and hitting $3.9 billion in 2022.
Traders specializing in making money off swings in consumer prices have become a hot commodity among hedge funds and bank trading desks alike. Citadel made one of the most recent splashy hires, pulling Joaquin de Soto from Goldman Sachs.
“Inflation uncertainty is at its highest levels in decades and has led to a large increase in inflation product volatility. Dealers and hedge funds are eager to capture P&L in this arena,” said Jordan Lange, a partner at recruiting firm Carrington Fox, which works in this space.
Barclays in May hired Igor Cashyn from JPMorgan and Guy Winkworth from Deutsche Bank after its former head Sukhjeet Atwal left in October for academia. It’s Winkworth’s second move since the renaissance in inflation trading — he joined Deutsche from Morgan Stanley in 2021.
Representatives for the banks declined to comment for this story.
Here’s a list of other hires, promotions, and departures at the big banks, which we’ll continue to update: