The prey David A. Morris stalks has good analytical skills, math aptitude, and can "read a prospectus like a suspense novel."

Is Morris on a nerd hunt? No, he maintains, this crowd is well turned out. And, armed with just a bachellor's degree and at least five years experience, some of his quarry will make close to. $116,000, which, if they were nerds, would make for some fairly sweet revenge.

Morris hunts municipal analysts, among other senior finance executives, for the New York-based executive search firm of Russell Reynolds Associates Inc.

What are firms looking for in a municipal analyst? Win demand for these creatures wax, wane, or stay the same?

James Kochan, head of fixed inconme asset management at Robert W. Baird & Co. Inc., thinks the municipal bond industry is in for some consolidation as the rollicking refinancing ride, which smashed records both this year and last, runs out of steam.

"That doesn't bode well for the growth of analysts [jobs]," Kochan said. However, mutual fund assets are growing, and some jobs could be created there, he said.

"Net, you're probably looking at a pretty stable market," Kochan said.

What do firms look for in a municipal analyst?

Experience, Kochan said.

"I don't know of very many Wall Street firms that are interested in training people," he said.

Typically Kochan likes analysts with four to five years of experience.

Firms often turn to the training grounds of Standard & Poor's Corp. and Moody's Investors Service when hiring analysts, he said.

But, along with analytical ability, a good pick would also have "a sense of the marketplace," Kochan said. "It's the second part that usually takes more time."

If industry consolidates, fewer analysts will be needed, and the trend will probably favor generalists over specialists, Kochan said.

One area where analysts are likely to be more in demand is health care, Kochan said. The Clinton healthcare plan will mean changes in the industry and consolidation is likely - translating into more questions regarding healthcare bonds, he said.

Robert W. Chamberlin, senior vice president and supervisory municipal analyst at Dean Witter Reynolds Inc., said good writing skills are important in a municipal analyst.

"Writing is very important to us," Chamberlin said. "Anybody who writes well probably understands what he or she is doing."

When Chamberlin started in the early 1960s, if a firm was interested in hiring an analyst already employed at another firm, they notified the candidate's boss first.

It was a matter of "professional courtesy," Chamberlin said.

Now, "there is no courtesy," he said. If you see somebody at a firm that you like, you go after them without notifying their boss first.

Another thing that has changed since the early 1960s is the candidate's educational level.

Chamberlin began his career in 1963, right after obtaining a master's degree in public administration and public finance from Cornell University.

"People scratched their heads and said, what are you doing this for," he said. People told him to stop being foolish and go straight to trading bonds, Chamberlin said.

Back then, he said, people just joined a firm and gravitated toward areas where they had aptitude.

"I think it's gotten more formalized," Chamberlin said. In the sixties, there were no specialists, he said.

"It's gotten a good deal more complex today," Chamberlin said.

But while specialists have evolved to cover such areas as public power cogeneration facilities, the move is now toward generalists and away from specialists, as many areas shrink.

Asked if layoffs are ahead for the industry, Chamberlin said: "Absolutely, and I think they will be fairly substantial." With fewer bankers there will be fewer analysts, he said.

While firms target education and experience as two important factors in choosing municipal analyst, they also seek some qualities that are just plain human nature.

"Curiosity is number one," said Thomas A. Dorsey, senior vice president at AMBAC Indemnity Corp. "The one thing I look for is a very strong sense of curiosity."

Whether sniffing out more on environmental or legal issues or urban economics, Dorsey finds curiosity an essential attribute for a "crack" analyst.

AMBAC looks for people with a master's degree in public administration or business administration and three to five years experience.

Preferably they come with some specialization, such as special experience with utilities. Dorsey said he also values experience with swaps or derivatives.

"We're looking for people who bring a little bit more to the table," he said.

Like Chamberlin, Dorsey also cited good writing ability. Analysts also need good interpersonal and negotiating skills, he said. Though he hasn't hired anyone like this lately, Dorsey would expect that a candidate with a master's degree and some limited experience could expect a starting salary of roughly $45,000 to $50,000 a year.

Dorsey also knows who he doesn't want.

"We're not hiring people directly out of graduate school," he said. And candidates with 15 to 20 years experience can forget it, Dorsey said.

"This is a high-volume, high pressure business that has a lot of turnaround to it," he said. AMBAC already has professionals on board with that much experience.

"We don't need to replace that level of expertise," Dorsey said.

A top analyst can make a six-figure salary, Dorsey said. "But the question is, are they still an analyst," he said. As people progress in the business and assume more and more managerial roles, whether they can still be considered an analyst is open to some debate, he said.

Asked about the move toward generalists, Dorsey emphasized that specialization is still necessary. His firm has started to restructure to bring diverse specialists together to help them broaden their areas of exposure.

Analysts specializing in transportation are introduced to issues facing colleges and universities. That way, while analysts maintain expertise in one area, the exposure gained in another will also help save a career if the specialist's area falls off.

"They are cross-training," Dorsey said.

Still, Dorsey emphasized, specialization is essential. An analyst assessing a Denver airport deal must understand how an airport operates inside and out, he said.

As for whether the industry will see consolidation in 1994, Dorsey said, "Nobody in the industry can agree about what's going to happen in 1994. I think it will depend entirely on what the market does."

While Dorsey is not forecasting a decline, he said that should the industry fall off, the decline will occur gradually and arrive sometime between mid to late 1994. While the market has been growing for the past four to five years, AMBAC's staff has remained relatively constant. Consequently, if a slowdown occurs, Dorsey doesn't see a need to cut staff. His group will remain relatively stable through next year, he said.

But Morris of Russell Reynolds earlier this year conducted a survey of members of the National Federation of Municipal Analysts which showed that more than 54% of respondents felt they were understaffed, while 46% said they were staffed appropriately.

"The intriguing part is that no one said they were overstaffed," Morris said in May in a speech to the National Federation of Municipal Analysts Conference.

Unlike the corporate bond market where analysts can rely on standardized Securities and Exchange Commission disclosure requirements to help them assess credits, municipal analysts must cope with different disclosure requirements and accounting rules that vary from state to state.

"Some states require different information to be included; some don't," Morris said. "Each has a different way of portraying the numbers." Also, housing authority financing differs from airport financing and bridge financing, he said.

A good municipal analyst must be comfortable with numbers, Morris said. The candidates must also have good intuitive ability to sense whether the numbers are heading left or right.

What Morris's survey also found was that 84% of analysts felt their college education left them ill-equipped for the job, while 16% felt sufficiently prepared. Quality of education and school location count more than the level of education.

As far as compensation goes - meaning both base salary and bonuses - it ranges from an average of $38,500 for an analyst with zero to three years experience to an average of $164,200 for a director of research, though that position entails more managerial responsibilities than the average analyst's job. For a top analyst, the average is about $115,400 annually.

Salaries increase relative to the degree of risk the analyst is willing to assume, Morris said. For instance, an analyst who takes on a low level of risk, such as a rating agency employee, would not be compensated as well as one who works for a portfolio manager and helps make day-to-day decisions on which bonds to buy, Morris said.

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