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The head of U.S. rates trading just left Credit Suisse

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Remember when Credit Suisse gutted its London macro trading business? It still has a macro team in New York City, but headhunters say people are leaving it voluntarily.

We understand there have been two senior exits from the Swiss bank’s U.S. rates business in the past week. They are: Kunal Maini, head of linear rates trading and Sean Sullivan a director on the rates team.

Maini is understood to be joining Morgan Stanley, where he’ll run the treasury business. Sullivan is understood to be joining Citadel.

Credit Suisse didn’t immediately confirm either man’s departure but neither was available when we called.

The exits come after Deutsche Bank said Credit Suisse’s U.S. business is both unprofitable and far too capital intensive. Rates trading is a notoriously capital intensive business.

Credit Suisse’s bonuses were thought to have been generally acceptable for 2016. However, the bank cut average pay per head in its markets business by 9% compared to 2015 and headhunters say there was disappointment with bonuses in NYC. “There are a lot of Credit Suisse people who aren’t happy,” says one. “The movement there is only just starting.”


Contact: sbutcher@efinancialcareers.com


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Morning Coffee: Prepare for a flood of banking jobs in New York. The biggest problem with 20-something traders

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UBS has already blinked and said it can’t hang around to move 1,500 staff out of the UK before the Brexit negotiations are concluded, now Goldman Sachs has said that it intends to start shifting “hundreds” of UK jobs across to Frankfurt even before Theresa May serves Article 50 next week.

Goldman’s move is merely confirmation investment banks aren’t bluffing and jobs really are heading out of the City. Expect more announcements next week. Morgan Stanley president Colm Kelleher also said yesterday that the bank would “certainly” be moving jobs out of London before the two-year Brexit negotiation period is up, according to the FT.

“Our business model involves all employees who need to live in different places and have children and so on,” he said. “You can’t just order them around like units on the board.”

Cue collective hand rubbing across the large cities of Europe, particularly Frankfurt, which is even shipping in craft beer to please a new breed of British bankers flooding across. Except, maybe it won’t be Frankfurt, or Paris or Dublin that emerges as the big winner. Maybe it’ll be New York.

The less conservative estimates put job relocations within the large investment banks at around 20% of headcount, and reports in the Handelsblatt in January suggested that 3,000 of Goldman’s 6,000 UK staff could go. Goldman’s new assertion that only a few hundred jobs will move to Frankfurt (or be recruited locally) may be an indication that Brexit really isn’t that bad. Or these might merely be the jobs that have to be in Europe and proceed further job moves elsewhere. Decentralising London as Europe’s key financial center might simply mean U.S. investment banks move people back to their home markets.

“You may see some business gravitating back to New York,” said Kelleher. “It’s not a disaster, it’s not going to be a blow-up. It’s not going to be the end of London, but clearly, we will have to adjust.”

Richie Boucher, chief executive of Bank of Ireland, also told the FT: “As far as investment banking is concerned, the presumption that it is a competition between London and another European centre has a degree of naivety. It’ll be between London and New York.”

Separately, there’s a problem with juniorisation on the trading floor, particularly in FX – young people who haven’t seen a crisis tend to panic when something big happens. Job cuts and a tendency to keep cheap analysts, associates and VPs and fire expensive directors and MDs has ensured a lack of “old hands” on the trading floor, and this is a worry. This comes from the latest Bank of International Settlements report on the FX market, reported by Bloomberg, that 20-something traders may be to blame, at least partially, for the flash crashes in the currency markets over the past two years.

“If there’s a shortage of senior people, there’s a shortage of knowledge,” said Keith Underwood , who runs his own foreign-exchange consulting firm and former FX trader who was previously hesitant to hand over his positions to juniors in other regions overnight. “I’ve certainly adjusted my orders, and I’ve also adjusted my sleep.”

If this is a genuine problem, it’s not going to get better any time soon – recruiters suggest that 75% of vacancies for currency traders now are for people with two to five years’ experience.

Meanwhile: 

A bank by bank guide to Brexit (Bloomberg)

Banks need to show the true cost of Brexit (Gadfly)

Why Morgan Stanley made massive cuts in FICC: “Clearly we were all running outsized fixed income businesses — far too much capital, far too much leverage, far too much liquidity trapped in, very sloppy way of dealing with derivatives — all that stuff.” (Business Insider)

Colm Kelleher says fixed income trading is doing well this year (Reuters)

The day after it said it was building its investment bank in Northern Europe, BNP Paribas says it’s actually firing people in the UK, Luxembourg and France (Reuters)

Meet the great man manager who would replace Steve Scharzman at Blackstone (Institutional Investor)

Deutsche Bank is opening its third innovation center. This time in New York (Finextra)

How to confuse compliance monitoring tools – speak in a language other than English (Financial News)

Travel tips from the CIA: “Flying Lufthansa: Booze is free so enjoy (within reason)!” (Economist)

Contact: pclarke@efinancialcareers.com

Photo: Getty Images

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The only investment banks you should want to work for now

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If you work for J.P. Morgan now, you should be basking in the glow of your investment banking pre-eminence. The U.S. bank is now top of the league tables in pretty much every sector out there, according to a new ranking. For Deutsche Bank, it’s been a year to forget.

U.S. investment banks are, of course, top of the tree in the new 2016 league table released today by research firm Coalition. But J.P. Morgan’s grip on the top has got even tighter. Much of J.P. Morgan’s supremacy can be pinned on a new-found dominance in Europe, and also the fact that it’s moved up the ranks in equities globally. J.P. Morgan is now first in Europe across fixed income, currencies and commodities, the investment banking division and equities. This time last year, it was only tied at the top in FICC with Deutsche Bank and ranked second for everything else.

J.P. Morgan has knocked Deutsche Bank off the number one spot in European FICC, and is tied with Goldman Sachs for the number one slot in IBD. Deutsche Bank has retained the second place overall in European investment banking, but has had to share it with Goldman. It’s also the only European bank to make it into the top five on their home turf. Barclays did, however, move into sixth thanks to an increase in its FICC revenues, but this – according to Coalition’s definition – makes it a tier two bank.

Deutsche Bank has made way for Morgan Stanley in the top five globally, moving into sixth. In the U.S., where Deutsche Bank has continued to make some senior hires, it’s lost ground to Barclays and is now ranked seventh overall. However, it’s also lost its top spot in APAC – again, J.P. Morgan is top in the region alone with Citi – and moved to joint third alongside Nomura, Morgan Stanley and Goldman Sachs. Still, Coalition does not include local Asian banks in it’s ranking and international firms now only account for 19% of the Asian investment banking wallet.

Deutsche’s traditional strength in FICC has started to ebb away last year. Deutsche lost its tier one position in rates in 2016 as other investment banks rates desks rebounded after the Brexit vote and Donald Trump’s election as president, suggest the figures

Coalition bases the rankings on a combination of public announcements and its own research. Globally, there has been little movement year on year. Citi is now ranked number two overall, up from third in 2015. Bank of America Merrill Lynch is now also a tier two bank, having shifted down from second to fourth.

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Contact: pclarke@efinancialcareers.com

Photo: Getty Images

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“My new job pays 50% less. Pay deflation in finance is real”

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Suffer the equities salespeople. With 55% of equities flow trading now conducted electronically and small banks ceding market share to larger ones, there’s less need for them than there used to be. Some salesmen and women are getting out of the industry altogether. Others are hovering around on the margins trying to get back in, and accepting big pay cuts to do so.

We spoke to Clive Roberts (a pseudonym), an equities salesman who spent 15 years working for European banks in the U.S.. Roberts lost his job early last year and has only recently found a new one at a greatly reduced salary. He says regulation and changes to market structure have killed equities sales roles on both sides of the Atlantic.

Below is a description of the superannuation of a generation of equities salespeople in Roberts’ own words.

“It’s a wasteland out there. There are almost no jobs for someone like me. This is the reality.

I’ve held senior equity sales positions at two major banks but there’s very little interest now in someone with my profile. The Fiduciary Rule has seriously damaged the profitability of a lot of equities franchises in America. By mandating the full disclosure of commission rates it’s encouraged a rush to the lowest cost providers possible and a huge deflation in commissions.

You see this deflation most clearly in the retail sector, where there’s a price war between Charles Schwab and Fidelity but it’s gone all the way up through the value chain. The institutional sector is affected too. My clients are funds. They’ve lowered their turnover rate and are now much more active in looking for the best execution deal and the lowest levels of commission. It’s similar in Europe under MiFID.

The problem is being compounded by electronic trading. All the big liquid trades are now placed electronically. There’s still some human interaction in the middle but it’s disappearing quickly. Anything halfway liquid will be executed electronically soon.

I’m lucky. I found a new job a few weeks ago, but it’s at a small firm and I’ve had to accept a big pay cut. There’s a tremendous dislocation of talent in the market, huge numbers of people like me are looking for work and this is putting big pressure on pay.

My new role pays half as much as my old one and from what I’m hearing this is standard. Total compensation has gone down a lot just in the past few years.  When you’re out of the market you’re bid less than 50% what you earned before. This seems to be particularly the case for more senior people like me – you read about bonus pools at big banks being down 15%, but what that generally means is that juniors are being paid flat or slightly up and directors and managing directors are down by 50%+.

Of course, these new lower rates of pay have repercussions. It’s become impossible to build any wealth when you’re working in equities and much harder to build wealth across finance in general. You’re going to see this float up the whole value chain. People are going to be less willing to pay for expensive education like MBAs now that finance pay has been rebased. A finance job today will pay for you to live in a major city, but it’s not going to let you save anything for the future.

Most people my age are just sitting where they are, watching their pay fall. They know that if they’re out of the market they’re going to have to take an even bigger pay cut to get back in.

Would I like to get out and do something different? Sure, but this is a very difficult skill-set to transfer. I’m an institutional equities salesman. I sell equities to investment clients. I know about a bunch of different industries, but only really in the context of equities prices. I’m not an operations person and there’s so much talent around in each industry vertical that finding an opening there is impossible. The only answer is acceptance, and less pay.”

Bleak.


Contact: sbutcher@efinancialcareers.com


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Photo credit: sorbetto/Getty

Senior Credit Suisse cost-cutter has left the bank

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A managing director at Credit Suisse, who worked for nearly two years on the bank’s $1.2bn cost-cutting drive in its global markets business, which resulted in 2,000 lay offs, has now left the bank.

Edmund F. Taylor, a managing director who worked at Credit Suisse for over 20 years, departed earlier this month. Taylor’s latest role at the bank was head of global markets efficiency office, meaning that he was in one of several senior roles responsible for ensuring Credit Suisse’s trading floor shrinkage.

Taylor’s exit looks a little premature given that Credit Suisse has indicated that it wants to cut another CHF800m of costs from its global markets business by 2018.  However, during the 18 months in which he worked on the Swiss bank’s restructuring programme, 4,000 people were laid off and around 30% of London employees departed.

An American, Taylor spent 20 years in operational and cost-cutting roles at Credit Suisse. He was previously global head of the fixed income wind-down within Credit Suisse’s ‘bad bank’, responsible for the disposition of $50bn in legacy positions including sub-prime mortgages, CDOs and around $37bn in real estate. Before this, he spent a year as chief operating officer of Credit Suisse’s securities business between 2008 and 2009.

Credit Suisse’s CEO Tidjane Thiam said in January that the bulk of job cuts in Credit Suisse’s trading functions were over. The bank’s global markets business performed particularly badly last year and was excluded from the recent rebound in macro trading after cutting its rates business last May. Costs still consumed 99.2% of revenues last year.

There’s one sense in which Credit Suisse’s market business is super-efficient, though– its revenues per dollar of risk-weighted assets now come in at $0.13, compared to $0.06 at Deutsche Bank and $0.04 at Bank of America.

Credit Suisse may currently be regretting its decision to cut back so drastically in its rates business after the recent recovery, but don’t expect a general rebound in hiring activity in the FICC space.

Speaking at a conference yesterday, Morgan Stanley president Colm Kelleher lauded its decision to cut 25% of its FICC headcount. “Clearly we were all running outsized fixed income businesses — far too much capital, far too much leverage, far too much liquidity trapped in, very sloppy way of dealing with derivatives — all that stuff,” he said.

Contact: pclarke@efinancialcareers.com

Photo: Getty Images

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The ideal graduate recruit for Deutsche Bank now

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Deutsche Bank has outlined what makes an ideal graduate recruit now – female, with a technology degree.

Technology recruits are now a bigger proportion of the total graduate intake at Deutsche Bank than ever before. 23% of the 2016 graduate intake at Deutsche Bank went into technology roles and – surprisingly in a sector short on female talent – 40% were women, according to its new human resources report.

Deutsche has made a renewed push to hire more graduates this year despite the cost-cutting elsewhere in the bank. It took on 813 new analyst hires last year, up from 766 in 2015 and 577 the year before.

These hires are not investment banking specific and include the German retail bank and other Deutsche units. The big growth is down to an increase in technology recruits, who accounted for 27% of this year’s graduate intake – or 219 people. The bank is even changing the way it finds these new hires – now choosing to reach out to them directly on social media to uncover students who might not of thought of working for a bank.

Deutsche Bank still has a global recruitment freeze in place, but technology is an area of the bank that’s excepted from this. Technology can, of course, provide a competitive advantage for banks, but it’s also a cost-cutting exercise. Last year, deutsche announced plans to streamline its technology systems under its head of operations Kim Hammonds.

Deutsche is also hiring in a big way within its innovation labs. It has one in Berlin, London and Silicon Valley, but has just launched another in New York which will explore artificial intelligence, cloud computing and cyber-security. It hired Elly Hardwick as head of innovation late last year to work with fintech companies and the bank’s own divisions on new technology.

Technology talent is highly-contested and banks have sought to gain an edge over large tech firms like Google and Facebook by hiring in more people at the graduate level. Goldman Sachs said that 37% of the new graduate hires this year were studying STEM subjects and that it was specifically focused on bringing “science and engineering skills into the firm” as it hires ever-more people into tech roles.

Contact: pclarke@efinancialcareers.com

Photo: Getty Images

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Goldman bankers watch as $120m wiped off the bonus pool

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It’s been a bad week if you’re a banker with a significant amount of stock in your employer. As the Trump effect wears thin and bank stocks fall, so too does the value of 2016’s deferred stock bonuses.

Goldman Sachs stock has fallen 6% over the past week. Bank of America stock fell nearly 6% yesterday alone. J.P. Morgan fell nearly 3%. UBS stock is down nearly 4.5% in the past seven days and Barclays is down 2%.

At Goldman Sachs around $2bn of stock bonuses were issued this year in payment for 2017. The first tranche vests in early 2018, leaving Goldman bankers powerless to cash-out as the combined value of their newly issued stock fell by $120m.

At UBS, CHF700m ($700k) of the 2016 bonus pool was deferred, resulting in a CHF31.5m reduction in their value over the past week. At Barclays 2016 deferrals totalled £593k ($797k), resulting in a loss of £34m. Unvested stock bonuses from previous years have also been affected.

The pain is made all the worse because share bonuses for 2016 were denominated in stock issued when the market was peaking in January and February. Goldman Sachs, for example, issued 8.4m of restricted units to its staff this year compared to 15m one year earlier when its share prices was 36% lower. This didn’t matter while Goldman stock was high, but it will be painful if bank stocks keep falling.

Deutsche’s most prized bankers will be watching this week’s decline particularly feverishly. The German bank issued €1.1bn of retention bonuses to its most prized staff after cutting its bonus pool by 80%. However, these bonuses are worth nothing unless the bank’s stock is trading at €23 in the first three weeks of 2021. Right now, Deutsche stock is trading at €15.8, down from around €19 when the retention scheme was conceived.


Contact: sbutcher@efinancialcareers.com


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Good and not-so-good excuses to get out of work for a job interview

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It’s one of the only situations in life where the correct thing to do may be to tell a white lie. Unless the hiring company is willing to meet with you off the clock, you’ll likely need to spin a tale to sneak away from work for a job interview.

In some situations, it’s not overly difficult. You tell your boss you have an appointment and you’ll be back in a few hours. In others, you may feel compelled to offer more details, especially if you’re actively looking for a new job and need multiple stays away from the office.

“A key focus should be keeping your schedule clear since you don’t know when interviews might happen,” said Caroline Ceniza-Levine, career expert with SixFigureStart.

She advises approaching the issue with cunning. Don’t wait until you start interviewing to book time off. You need to get your boss inured to the notion that you might be out of the office well in advance.

“Start blocking off your calendar and getting people used to you having and keeping your own timetable for doing things before you even start interviewing,” she said. “This will make slotting in interviews easier and less obvious.”

Here’s a general framework of excuses you should never employ, as well as a few of the safer, smarter options.

Bad Excuses

One that insinuates irresponsibility. Here’s a common pitfall. You are so worried about providing a believable excuse, you choose one that makes you look bad. In some situations, the impression you leave can be worse than if your boss found out you had an interview.

One recruiter said he had a candidate tell him that, in an effort to get away with missing work, they called their current boss after the interview and said they went out the night before and slept through the alarm. Not a good choice. Never choose an excuse that makes you look like a bad employee. Always notify your boss before you are supposed to be in the office, not afterward.

Bad news involving a family member. If you feel compelled to provide a specific excuse, it’s rather dangerous to involve someone else who is close to you, especially if it is of a “serious” nature. What happens at the company Christmas party or a work outing that involves spouses or kids? Not only are you involving a second person, but you’ve stretched an excuse into an emotionally manipulative lie.

People can understand if it comes to light that a “dentist’s appointment” was, in actuality, an interview, but an excuse like “My son was in a car accident” is tough to look past. Even if you get the job, you risk burning bridges. It’s best to avoid the serious excuse, especially one related to sickness, injury or death.

Aside from being an absolutely awful thing to do in general, people will ask questions if you say that there was a death in the family, so you will actually have to determine who the fictional deceased is.

“If additional questions are asked, likely when colleagues want to be supportive because of your loss, your lie will be forced to grow and that is never a good thing – ever,” said Alyssa Gelbard, the president of Resume Strategists.

Many others seconded that notion.

“Most people don’t like to say it’s a family emergency, lest they jinx themselves,” Ceniza-Levine said.

Calling in sick. Whether it’s to come in late or not come in at all, if your statement that you’re feeling ill is out of the blue and you felt fine the day before, then it won’t be so believable, Gelbard said.

“Plus, when you do come into the office, if you immediately act like your regular, healthy self, you can create suspicion … unless you convince everyone that you made a miraculous recovery,” she said.

Anything your boss can help you with. You say that something small and inconvenient came up, like a flat tire or your nanny didn’t show, and you’ll be a few hours late. Well what if someone from the office can help in that situation? Banks and other larger financial firms have back-up daycare to guard against their employees missing work due to issues with their children. Some firms even offer concierge services to help settle small annoyances. Know these policies and prepare for such a possibility accordingly.

One that doesn’t give you enough time. If an interview is going well, often a one-hour chat can quickly become a three-hour interview with multiple people. The last thing you want to do while trying to make a good impression is telling someone you need to walk away. Give yourself plenty of berth when it comes to timing.

Doing It Right

The easiest, most professional way to get out of work for an interview is to not have to do it at all. Inquire if a hiring company can meet you before or after typical work hours. Even if they say no, they won’t be taken aback by the request. If anything, it will make you look like a responsible employee.

If the interview must happen during work, you may want to consider taking a vacation day. Then there is no excuse needed and you won’t have to worry about timing or what to do with your interview clothes (another significant problem we’ll address later). Just give more than one day’s notice.

“A last-minute excuse is not appreciated, and you don’t want to be worrying about annoying a supervisor and having that distraction when you are going on an interview,” Gelbard said. “A vacation day also gives you the luxury of not having to worry about rushing back to the office.”

If that is not an option, ask for a really early or really late interview time. Your absence won’t be noticed as much and you won’t need to concern yourself with the “before” and the “after” fallout at your current office.

As for excuses, it’s best to be as vague as possible. “I need to take care of some personal business” or, even better, “I have an appointment” works 90% of the time. Often there is no need to go into more detail and, quite literally, you aren’t fibbing. You can also try “I’m taking a couple of hours’ personal time” or “I’m picking a friend up from the airport.” If you feel you need to provide more information, stick with the standard appointment with a doctor, dentist, accountant, tax professional or contractors who need to work on your house or apartment. Try to work from home that day if at all possible.

“Regarding finance pros who need to ditch work for an interview, old standbys include a doctor or dentist appointment, or a maintenance issue in the home – for example, a water leak seems to be coming out of my apartment’s sink,” Ceniza-Levine said.

“If it’s a lunch-time interview, you can mention an old friend is in town so you’re taking a longer lunch,” she said.

If you’re going to employ the commonly used doctor’s appointment excuse, it’s better to say your appointment is first thing in the morning or late in the day, but not in the middle of the afternoon – that can look suspicious, especially if you normally schedule your appointments early or late. Also, avoid using this excuse when you find out about an interview at the very last minute.

“A sudden morning doctor’s appointment can raise some eyebrows, especially if you haven’t been out sick,” Gelbard said. “Plus, if you need to arrange for coverage, doing it last-minute is never appreciated by anyone – colleague or boss.”

When expecting a series of interviews, either with one company or with different firms, dental problems may be a good excuse. Typically, people need to go back several times. Just don’t make this mistake.

The Dry Cleaner Trick

What do you do if you work in the city and take public transportation? If the interview is at the end of the day, where do you store your suit while at the office? The old industry trick is to drop it off at the dry cleaner days before the interview. You then go to work in your normal clothes, put in a good day of work and head to the dry cleaner to pick up your suit. Find a bathroom to change into and tuck your business-casual clothes into your bag. If the interview is first thing in the morning, drop your suit off at the dry cleaner afterward. Just don’t forget a change of clothes.

Photo credit: LuminaStock/iStock/Thinkstock
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Morning Coffee: Bank finds 50% of staff are a hindrance. Art of Goldman politics

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Remember when Hank Paulson, then CEO of Goldman Sachs said 15-20% of the firm’s staff added 80% of the value? The year was 2003 and Goldman was cutting costs, but Paulson was quickly forced to apologize for being “glib and insensitive.”

The year is now 2017 and another bank CEO has said something similar, but worse. And there’s no sign of a retraction.

Slawomir Krupa, the head of Societe Generale Americas, told Business Insider that SocGen has spent the past few years learning how to do more with less. In the process, it discovered that a large proportion of its staff were pointless.

SocGen took teams of 10, 15, or 20 people and cut them in half, said Krupa. Following these incisions it found that, “all of a sudden business flourishes.” In some cases, teams with half the people doubled their revenues.

SocGen is committed to cutting €220m ($237m) in costs from its investment bank, around half of which are yet to come. The implication is that many bankers – in SocGen’s American office at least – are fillers. In their absence, the doers can thrive.

How does SocGen spot the causers of the congestion? Krupa says it takes both diligence and patience. Senior bankers need to listen carefully and devote the time required to understanding what’s really going on.  It’s all about answering the questions: “Who exactly is creating value?” Who is the one who is very good at managing? Who is the one who actually sees clients? And who is the one who understands the flows in the market? And who can work properly with the sales force?”

Bankers at other firms need to hope this doesn’t catch on.

Separately, Gary Cohn at the White House is doing a good job of demonstrating the political arts we supposed he picked up after 26 years at Goldman Sachs.

Following reports that Cohn had formed a “faction” and successfully sidelined Peter Navarro, an economist averse to free trade, the New York Times reports that the ex-Goldman COO has also been demonstrating how to stand your ground against Trump.

In a recent Oval office meeting, Trump reportedly interrupted Cohn, who instructed the President, “Let me finish.” Unusually Trump did just that. It won’t be long before Gary Cohn will be putting his leg up on the Oval office desk.

Meanwhile:

J.P. Morgan has been growing its prime services revenues because it’s interested in the “halo revenues” in equities and electronic trading that come with the prime business. (Financial Times)

Senior Barclays banker who cleaned McDonalds toilets is resigning to fight for civil liberties under Trump. (Bloomberg) 

LIBOR trader Tom Hayes avoided videoconferencing software because he disliked eye contact. This met he conducted most of his work over instant message, creating a damning trove of evidence. (Bloomberg) 

UK bankers and accountants could be banned from working in the EU after Brexit. (Independent) 

Dublin and Amsterdam would be better options than Frankfurt post-Brexit. (Bloomberg) 

Why has women’s share of ‘computer occupations’ declined? (Department of Labor) 

Cost of living index that considers cocktails, Michelin-starred restaurants and Burberry shops says London’s become cheaper. (Bloomberg)  

Inspirational quotes from the Credit Suisse gym. (Business Insider)

Senior bankers given permission to read novels. (Conde Naste Traveler) 


Contact: sbutcher@efinancialcareers.com

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Photo credit:  mediaphotos/Getty

UBS hiring from Goldman Sachs as it rebuilds in FICC

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It’s four years since UBS made thousands of people in its fixed income sale and trading business redundant. What looked like a great idea back then has seemed like less of a good idea as fixed income sales and trading revenues rebound.  Despite the protestations from UBS investment bank CEO Andrea Orcel that the Swiss bank is more interested in returns than revenues, it’s hard to stand on the sidelines and see your fixed income top line fall while U.S. banks in particular experience double digit growth.

It seems UBS has decided to do something about it. It’s been bolstering its fixed income trading team with people from Goldman Sachs.

In London, UBS hired Ali Sanai, a former executive director in rates sales at Goldman. In New York, headhunters say it’s hired Aliza Raffel, a Goldman Sachs vice president in cross FX sales.

UBS didn’t confirm the arrivals. Both are though to be on gardening leave.

The moves follow other recruits to UBS’s U.S. fixed income team last year. Star fixed income salesman Josh Miller joined from Deutsche Bank last April, for example. Miller’s arrival followed the addition of fellow ex-Deutsche banker Daniel Swasbrook as head of U.S. fixed income distribution at UBS in 2015. Headhunters say Swasbrook has been slowly hiring Deutsche people and that Deutsche is particularly susceptible to his overtones following this year’s awful bonuses.  All the more so because UBS is actually paying: recent hires are said by headhunters to have received a big uptick in their compensation, with generous guaranteed bonuses pinned to achievable targets.

“The payout relative to production at UBS is lower,” says one U.S.-focused headhunter. “You don’t have to produce as much there to get paid.”

While people might want to work for UBS for this reason, a London headhunter cautions against expecting a wave of hiring. “It’s ones and twos. They’re so light everywhere that as markets come back it makes sense to add a couple of people.”


Contact: sbutcher@efinancialcareers.com


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Ex-Bank of America MD quits trading platform after less than a year

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Electronic trading platforms are supposed to be the future. Last week’s big report from Oliver Wyman and Morgan Stanley forecast that an increasing proportion of flow trading will be pushed through these platforms as banks pull out due to low commissions and margins. But trading platforms employ hardly any people. And what if the jobs there are not all that?

The career perambulations of Robert Grillo, Bank of America’s former global head of rates sales and FICC e-sales, suggest this might be the case.

Grillo left Bank of America in April last year. Two months later, he turned up as president at OpenDoor trading, a treasuries trading platform set up by Susan Estes, a former senior mortgage-backed securities trader at Countrywide and Deutsche Bank. Grillo told Bloomberg his task there was to “expand the growing pool of primary dealers, central banks, asset-management firms and other institutional investors supporting the pending launch”.

OpenDoor is launching soon. Grillo, however, isn’t sticking around. Although he’s still cited a member of the team on OpenDoor’s website, he’s updated his LinkedIn profile to say that he’s quit and is off to become CEO of a new venture, RMG LLC’. What does RMG do exactly? We don’t know, but Grillo says it’ll be engaged in RVC, which could conceivably stand for retail venture capital. Watch this space.


Contact: sbutcher@efinancialcareers.com

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Photo credit: 090919-40232-LX3 by hopeless128 is licensed under CC BY 2.0.

“Traders today are best off in long-only asset management”

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If you want to move to the buy-side, you’re probably thinking of joining a hedge fund. Venkatesh “Venk” Reddy has gone the other way. He left the alts world to launch a traditional mutual fund.

Reddy’s resume include stints on the sell-side (he was an equity derivatives trader at Banc of America Securities) and in hedge funds. He founded Laurel Ridge Asset Management, a multi-strategy market neutral fund. He also worked a stint at Pine River Capital Management, another hedge fund. Now he’s managing partner and chief investment officer of Zeo Capital Advisors, which manages a long-only fixed income mutual fund and is planning to grow its investment product offerings.

Here’s why Reddy decided to leave the sell-side and later hedge funds to embrace long-only asset management.

Success in hedge funds is increasingly about getting lucky

“The hedge fund space is very crowded, and managers are rarely rewarded for being cautious; investors typically require equity-like returns from their hedge fund portfolios. To do that well, you have to get lucky with timing, because the types of strategies that hedge fund investors want go in and out of favor quickly.

For someone like me whose approach to investing is more about long-term stability, I was drawn to the less-crowded opportunity to build a business to address our investors’ under-served needs by solving complicated risk problems using straightforward strategies that are easy to understand but not easy to execute.

We started with an investment strategy designed to provide low-volatility absolute returns regardless of what happens in the markets. This kind of strategy is most appropriate in the form of a mutual fund, which provides our investors ease of access, lower fees, an independent board of directors, external regulatory oversight and simplicity of year-end reporting.”

Success in long-only asset management is all about delivering low volatility returns

It is a misconception that long-only investors do less work or perform different types of analysis than hedge fund managers. Rather, the effort is strategy-specific.

Ultimately, the task is always the same: to identify risks, assess the consequences of those risks and combine different risks to meet the mandate of the investors. Great managers can apply this skillset to any strategy within their asset-class expertise, regardless of whether it is long-only or more complicated.

As for Zeo, on the investment side, we value an audit background – specifically the transaction-services teams evaluating potential M&A deals. Given our fundamental approach in providing a low-volatility product, it is important to understand what could go wrong in an industry, how a company could fail and the implications of investing in different parts of the capital structure. The audit mindset helps us to identify good companies in an overlooked market segment in order to deliver the low-volatility returns our investors expect.”

Success in a bank is all about negating downside risk

“I will start off by saying that I wouldn’t be where I am today if I hadn’t had the sell-side experience. There is a valuable education in seeing the capital markets from the bank perspective. However, the buy side of the business has a very different risk mindset.

First, the typical trader on the sell-side is mostly trying not to lose money because his primary goal is to retain commission revenue paid by customers or to earn the equivalent bonus.

On top of that, the sell-side trader is trading with customers that probably know more about a particular situation than he does but still expect him to take risk to facilitate their orders. It’s rather unfair, which is why the incentives of the sell-side trader can vary from firm to firm – some banks want risk-takers while some want risk-reducers.”

Trading in a hedge fund can blow up your career

“On the other hand, the buy-side trader starts every day with a mandate to make money, so the need to take risk is even more important. But too much risk-taking can bring about an unexpected and early demise to both a fund and a career.”

A fund facilitated by quantitative tools is better than a quant fund

“I am a firm believer that technology is best used to facilitate rather than replace human decision-making when it comes to investing.

There is an old saying that a quant strategy works until it doesn’t. That is, paradigmatic shifts are generally difficult for true quant strategies to handle because models are not typically designed to question the validity of their own inputs.

Humans, on the other hand, are much better at thinking outside the algorithm, so to speak. Fundamental strategies tend to be less complicated even as they require deep-dive analysis.

If technology can help free us of the commoditized work that takes up 80% of our time – for example, by helping to screen out subpar investments earlier in the investment process – then the analyst can be five times more efficient, which I believe would lead to a better fundamental portfolio.”

Photo courtesy of Zeo Capital Advisors
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10 exceptional 19 year-olds about to arrive at banks in London

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Research out today suggests banks in London are bereft of the kinds of top graduates from the European Union who used to queue up to work in the City. There were 50,000 fewer EU graduates in the UK in the fourth quarter, with EU graduates going into finance falling particularly heavily.

This may be so, but London banks’ intake of first year university students for their spring weeks suggests City jobs are still an appealing option for graduates of all nationalities. If anything, banks’ spring week intakes are particularly multinational and multicultural. “Spring weeks are part of banks’ attempts to recruit people from a diverse range of backgrounds,” says John Craven, a former structurer at Merrill Lynch who now helps non-middle class students into banking jobs. 

Below, we’ve picked out 10 of the most impressive first year university students (whom we assume to be around 19 years old) who’ll be turning up at banks’ offices in London in the next few weeks. There are some EU students on the list, but there are also several who speak African, Arabic or Asian languages. If European language speakers pull out, it seems the City will have others to choose from. Please note, the list is not in ranked order.

1. Ayman Ahmed

Studying:  Economics at UCL

2017 Spring internships with: Deutsche Bank and BNP Paribas

Previous internships: Insight week Deloitte, summer internship Deutsche, summer internship Oliver Wyman.

Speaks: English, Arabic.

Special because: Ayman began his finance internships before he even began studying at UCL. This is called ‘starting early’.

2. Ifeoluwa Adeyemi

Studying: Economics with Japanese at Birmingham University. Achieved first class standard in first year.

2017 Spring internships with: Barclays, J.P. Morgan, Lazard, BNP Paribas

Other things of note: Adeyemi’s been nominated for a positive role model award from National Diversity Awards.

Speaks: English, Japanese, Portuguese

Special because: Ifeoluwa’s list of spring internships is among the most impressive we’ve seen. He’s also got some valuable extracurricular experience, including working at the Rio Olympics and in a home for the mentally disabled in Brazil.

3. Lorcan Delaney 

Studying: Electronic and electrical engineering at UCL with a year abroad at ETH in Zurich. On track for a first class degree.

2017 Spring internships with: Goldman Sachs, Morgan Stanley, Deloitte (strategy consulting).

Other things of note: Delaney graduated from his high school with some of the highest marks in his year, and his school was one of the top in Italy.

Speaks: Italian and English (at least).

Special because: Lorcan’s academic record is exceptional. He’s already landed top internships and co-founded the UCL Centre for Blockchain technologies.

4. Eniola Ojumu

Studying: Sociology at the University of Warwick.

2017 Spring internships with: J.P. Morgan

Previous experience with: Chevron in Nigeria and various companies in the UAE, including Boston Consulting. Mentored by PwC and Deloitte in London.

Speaks: English, German and Yoruba

Special because: Eniola has a huge amount of international experience. She’s also worked across different sectors before coming to J.P. Morgan.

5. Abi Adeyemi

Studying: Economics at the LSE

2017 Spring internships with: Goldman Sachs.

Previous experience with: Deutsche, EY and UBS.

Special because: Abi only started at the LSE last year, but he already has plenty of internships under his belt. He got three As at A-level and two As at AS-level.

6. Pawel Kaluzny

Studying: Business and management with a European language at Cardiff University.

2017 spring internships with: J.P. Morgan, Goldman Sachs, Barclays.

Speaks: English, German, Polish

Previous experience with: PwC, KPMG, Teach First

Special because: Pawel not only has excellent experience but he’s a former president of Young Poles. This will be interesting to banks like Goldman Sachs, which are in the process of bolstering its operations in Warsaw.

7. Nicole Wilcox

Studying: Computing and management at Loughborough University.

2017 spring internships with: Goldman Sachs (tech)

Previously: Completed the J.P. Morgan Code for Good Hackathon.

Special because: Nicole is on track for a first class degree after scoring 78.1% in her first year. A brilliant Afro Caribbean woman in tech, she’s the kind of person banks need to appeal to more strongly in future.

8. Kushagra Bosamia

Studying: Chemical engineering at Imperial College London as part of an exchange programme from the University of Queensland in Australia.

2017 spring internships with: Citi (capital markets origination)

Speaks: English, Gujarati, Hindi.

Special because: Kushagra is an exceptional chemist (he achieved full marks in the first year of his degree in Queensland) with a valuable international perspective. His is the kind of profile London banks are likely to hire more of in future.

9. Sukhmani Singh

Studying: Government and economics at the LSE

2017 spring internships with: Citi and EY

Previous experience with: UBS, Credit Suisse, HSBC, Bank of America.

Special because: Sukhmani graduated with top marks from her high school in India and has dedicated her time at the LSE to making serious inroads into the banking sector. She’s also found time to play tennis on the first team and is part of the LSE Indian women’s subcommittee.

10. Patrick Pflughaupt

Studying: Chemistry at UCL

2017 spring internships with: McKinsey Co. & Blackrock

Speaks: English, German (and a bit of Thai and Latin).

Special because: Patrick is on track for a first class degree. He has an international perspective, having spent a year at McGill University in Canada. He’s also captain of the UCL rowing team,


Contact: sbutcher@efinancialcareers.com

You should’ve studied data science

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Financial services firms, including hedge funds, proprietary trading shops and even mutual funds, are falling all over themselves to hire talented artificial intelligence (AI) and machine learning experts, data scientists, programmers/developers/coders and quantitative traders. There is plenty of competition for such talent. Top candidates are in control.

Adam Zoia, the founder and CEO of Glocap, a recruitment firm, said that the big new trends he’s seen are artificial intelligence and data science coming into serious demand on Wall Street.

“AI and data science are being used more across the financial services industry in the context of making better business decisions and which stocks to go long on or short,” Zoia said.

For many of the positions firms are looking to fill, data analysis is a better description than quant. At the non-quantitative fundamental hedge funds, data analytics specialists are informing investment decisions for the traditional portfolio managers.

“There’s a lot of hiring going on there,” Zoia said.

“We see a big uptake in interest in data science and the machine learning space,” agrees Victor Tang, a senior associate of quantitative analytics and risk in the financial services practice at The Execu|Search Group, a recruitment firm.

He says most firms prefer candidates with a Ph.D. in statistics, mathematics or computer science. “A lot of successful candidates have heavy programming skills – most Ph.D.s have experience working in C++ and the Python environment. It used to be Matlab, but now most firms are using Python.”

Hedge funds will also hire candidates right after graduation. Tang said Two Sigma recently hired a candidate with a Ph.D. from Princeton and internships at Google and Apple at a hefty starting salary.

The pay in data science is huge

“If a candidate’s got a Ph.D. in the right subject from Stanford or Yale and internships at Apple and Google or another Silicon Valley giant, they’ll get an offer in the $350k range right off the bat,” Tang said. “Most of these go back to the type of research that they’ve done, which machine learning especially in demand.

“Some do statistical analysis, data processing or imaging, but with the right type of research, hedge funds will generally make a standard offer between $300k and $400k all in for recent Ph.D. graduates,” he added

It’s not just hedge funds

Nor is it just hedge funds that want data people: long only funds and venture capital funds are chasing them too.

Traditional long-only asset managers such as mutual fund firms are targeting this same pool of fintech and quant talent. Traditional fundamental asset managers are particularly interested in hiring data scientists, said Reshma Ketkar, director and the head of the long-only investment professionals recruiting practice at Glocap.

“These data scientists are responsible for gleaning insights from big data and acting as another input into the investment process,” she said. They are not writing trading algos and they are not replacing human jobs.”

These traditional asset managers still invest based upon a fundamental view on the company, considering cash flows, valuations and the effectiveness of the management team, among other factors, but the data scientists are tasked with finding information that could be additive to the investment process, Ketkar said.

Fund firms such as AllianceBernstein, Fidelity and Goldman Sachs Asset Management have all hired data scientists as a supplement to their investment teams. An increasing number of fundamental hedge funds are also considering such a structure.

“The trend for data scientists crosses historically quant trading hedge funds and fundamental investment firms,” Ketkar said. “They all want data scientists, but on the fundamental investment firm side, they are an input rather than the main drivers of the investment process.”

There has also been plenty of recruitment action on the quant side of the asset management business – the programming languages that are in demand include Python, C++ and C#.

Photo credit: angusforbes/GettyImages
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Morning Coffee: Goldman partner at 27, finance failure at 49. Goldman women likely to get a raise

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Just because your finance career flies in your 20s, don’t assume it will maintain the same sort of elevation two decades later on.

Case in point: Eric Mindich, who will turn 50 this year, became the youngest ever partner at Goldman Sachs more than 20 years ago at age 27, earning him a reputation as a “Wall Street wunderkind.” As with all top traders of his generation, Mindich subsequently left Goldman Sachs and launched a hedge fund. New York-based hedge fund Eton Park Capital Management was born in 2004 with $3.5bn in capital. To start with it all went well. Eton Park expanded to manage $14bn in 2011, but those assets have been cut in half over the ensuing six years.

Now the jig is up. Eton Park is shutting down. It will begin returning its remaining $7bn-plus in capital to investors by the end of next month.

Mindich’s magic has faded. Eton Park lost 9.4% last year and the fund’s performance has been flat so far this year compared to a 5% gain for the S&P 500 during that time.

“A combination of industry headwinds, a difficult market environment and, importantly, our own disappointing 2016 results have challenged our ability to continue to maintain the scale and scope we believe necessary to pursue our investment program,” Mindich wrote in a letter to investors that was sent after he notified the firm’s 120 employees of the decision to close, according to The New York Times.

Admittedly, Mindich isn’t the only one struggling. Huge numbers of hedge funds closed last year, prompting claims that traders are better off working in long-only asset management. Nor is Mindich the first ex-Goldman partner to crash and burn. – Jon Corzine’s stint at MF Global was far more damaging. 

Separately, Goldman’s women could soon have something to celebrate. Pax World Management, an activist shareholder, has reportedly convinced Goldman to “take proactive steps” to address the disparities in men’s and women’s compensation. Goldman agreed to enhance pay equity disclosures in an upcoming report, according to Bloomberg. BNY Mellon has committed to doing the same.

Taking job title and responsibilities into consideration, men who work at financial services firms earn 6.4% more on average than women, compared to a 5.9% percent gender pay gap at technology companies.

Meanwhile:

Banks are laying off compliance professionals. (Bloomberg)

Citigroup’s global head of G-10 currency strategy Steven Englander has quit to join the hedge fund Rafiki Capital Management. (FINalternatives)

The former Credit Suisse global research head and an ex-AllianceBernstein equity portfolio manager are launching a new long-only emerging markets equities firm. (HFMWeek)

Big banks and Silicon Valley have been waging a war for talent for a while, but now they’re engaged in an escalating battle over your personal financial data. (New York Times)

U.S. fees are up 19% to $8.8bn in the first quarter, and Goldman Sachs is still at the top of the mergers and acquisitions league table, while JPMorgan ranks first for equity and debt capital markets. (Business Insider)

Jay Clayton, who President Trump chose to lead the Securities and Exchange Commission, told Congress that his past work as a Wall Street lawyer “is a strength” and called for scaling back regulations and expressed skepticism about the usefulness of large corporate penalties. (WSJ)

This guy quit his job at Coke to create his own trading website, became a millionaire by collecting fees for executing trades via the E*Trade knockoff, got busted by the FBI, turned informant and then went rogue. (Bloomberg)

Don’t count on equivalence to save your City banking job, warns Citi. (Reuters)

The Financial Conduct Authority is reexamining the £7.3bn fundraising that Barclays undertook in 2008. (FT)

Leveraged ETFs are such complicated financial instruments that even fund managers struggle to quantify the losses they incur from daily rebalancing. (Bloomberg)

Qatar, the world’s richest country per capita, is overhauling its $335bn sovereign wealth fund for the second time in three years. (Bloomberg)

There’s an argument for elite colleges and universities to move to a lottery system for admissions. (MarketWatch)

Mulling what to do with all of your spare time after retiring from your successful financial services career? Enroll in Stanford University’s Distinguished Careers Institute. (Bloomberg)

Even bankers can save the world and figure out the meaning of life, according to this banker. (Bilal Hafeez)

Photo credit: cineuno/GettyImages
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I was an MD at RBS, but I’ve quit investment banking for good to climb Everest

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Rory McHugh spent nearly 20 years in investment banking, travelling the world and dealing with senior executives in the boardrooms of corporations. Now, however, he’s decided that he is more comfortable at the top of a mountain.

McHugh left his job as a managing director at Royal Bank of Scotland late last year, and next week will be embarking on a expedition to climb Everest. Even after two decades of brutal investment banking hours, the training has proven tough.

“I’ve recently been training 19 days out of 20,” he says. “This can mean hitting the hills for a six to ten hour walk with a 30 kilo backpack, staying in the City and going running, or – more often than not – running up and down the stairs in my ten-story apartment block in Clapham with a weight vest on.”

McHugh was latterly head of alternative finance, specialist lenders and fintech solutions at RBS, but has now left banking for good. The plan, eventually, may be to start something in the alternative lender and fintech space, he says, but for now he’s focused on one thing – scaling Everest and leaving for Nepal next week.

“I started climbing mountains about ten years ago and I just knew that I wanted to be up a mountain more and more,” he says. “At some point a few years ago, I realised that I had the technical skill I needed to consider a challenge like this.”

Everest is the toughest mountain to climb in the Seven Summits Challenge, which also includes Denali in Alaska and Aconcagua in Argentina both of which he has climbed in preparation. McHugh is trying to raise £50k for Child Rescue Nepal in order to build up to four schools in the remote region of Makwanpur in Nepal, which was devastated in the 2015 earthquake and is also planning to blog throughout the trip on rorymchugh.com.

McHugh admits that mountain climbing is an expensive hobby, and is scaling Everest alongside an ex-equity analyst from BlackRock, a second mate on a US navy supply vessel and another climber who works in the oil industry.

“It’s fair to say that the kit is very specialised and expensive,” he says. “The kit alone for a trip like this easily costs £5-10k. You can spend £500-1,000 on specialist high altitude boots, and £800-1,000 on a down suit. Don’t even think of going up a mountain without these. You want to come back with your fingers and toes!.”

Despite investment bankers’ penchant for ultra-marathons and Ironman events, McHugh says he’s never encountered another mountaineer from the City to have successfully summited Everest. “It’s a classic trip of a life time. Nine weeks, pushing yourself to the limit – what’s not to like? Other people might consider this to be hell, though,” he says.

For the last two years of his investment banking career, McHugh added fintech companies to his list of clients. Considering the red-hot nature of the sector now, it seems like an odd time to hang up his boots.

“A few years ago, people had barely encountered fintech companies, and no on in investment banking really covered the space,” he says. “I put my hand up to add fintech coverage to my existing job, and the excitement around the sector has been infectious.”

The one advantage of working as an investment banker in the fintech sector, however, is that you learn what makes a successful start-up, which could prove useful for McHugh in the future.

“The key to success in fintech is having a combination of a strong management team who have a plan and who know how to execute and also have the right financial backers who support the firms growth trajectory,” he says. “It’s so competitive that you need to be clear on what your value proposition is and what niche you can better serve than anyone else.”

Contact: pclarke@efinancialcareers.com

Photo: Getty Images

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10 things you should know about that ‘big’ Credit Suisse bonus pool

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You’ve probably heard that the Credit Suisse bonus pool was up 6% for 2016. If you don’t work for Credit Suisse, you probably think that was pretty generous (given the Swiss bank made a CHF2.7bn loss last year). If you do work for Credit Suisse, you’re probably sceptical. The Credit Suisse bonus story is not that clear cut.

1. Credit Suisse bonuses were only increased for 2016 because they were down so much the previous year

Yes, Credit Suisse’s overall bonus pool was up 6% for 2016, but if you work in Credit Suisse’s investment bank you’ll remember that the bonus pool for 2015 was cut by more than 30%. Worse, in 2015 31% of employees in the investment bank had their bonuses cut by more than 50%.

Over the course of last year, this caused big problems. Dissatisfied people in the investment bank started leaving. The (minimal) increase in the latest bonus pool was simply an attempt to put things right.

2. Average bonuses awarded for work done in 2016 were up slightly. But the amount the average member of Credit Suisse staff actually received last year was down a lot

The real bonus story at Credit Suisse is reflected in the charts below.

Bonuses awarded to Credit Suisse employees on a per head basis were up around 6.4% for last year. However, these bonuses were only issued in the first quarter of 2017 and are not all immediately available – a large proportion are deferred over three years.

The second chart reflects the reality of the amount Credit Suisse spent on bonuses that were expensed and received for 2016. On a per head basis these were down nearly 30%. This reflects the huge reduction in the value of deferred bonuses issued in 2015 and vesting in 2016. Because of this, the average Credit Suisse employee will have felt significantly poorer.

3. Credit Suisse therefore had to issue its most valued employees with special retention bonuses (this happened in both 2015 and 2016, but last year way more people received them)

As Credit Suisse employees felt the pinch in pay last year, the bank had to keep them happy.

It was forced to issue 148 of its key risk taking staff with retention bonuses worth CHF1.5m ($1.5m) each.

Even larger retention bonuses were issued to material risk takers (MRTs) in 2015, but in 2015 only 50 people received them.

4. Excluding those retention payments, most material risk takers at Credit Suisse did NOT get paid more last year. – Most saw their pay fall 

Credit Suisse has 939 material risk takers in total. Excluding the 148 who received the retention bonuses, the average MRT experienced a 4% pay cut last year, as per the chart below.

5. Pay for material risk takers at Credit Suisse looks a lot higher than at Deutsche, but this is a definitional thing

With the average material risk taker at Credit Suisse earning CHF1.5m (€1.4m), Credit Suisse looks pretty generous compared to Deutsche Bank where the average MRT earned a mere €469k in global markets.

However, this is entirely down to the way the two banks define their MRTs. At Deutsche Bank anyone over VP is deemed a material risk taker, with the result that there are thousands of them. At Credit Suisse, material risk takers are defined much more narrowly as managing directors and people taking significant amounts of risk. By definition, this means that Credit Suisse’s material risk takers are only its highest earners.

6. UBS pays its material risk takers more than Credit Suisse does

UBS’s material risk takers earned an average of CHF1.7m last year, so Credit Suisse is less generous than its closest rival.

7. The stock bonuses Credit Suisse issued for 2016 are already down 4.5%

Credit Suisse issued its stock bonuses for 2016 on the basis of a share price of of CHF15.32 (the average of the 10 last trading days in February). The bank’s share price currently stands at CHF14.62.

8. The good news is that Credit Suisse doesn’t tie its stock bonuses into its (overly ambitious) returns targets

The good news is that Credit Suisse’s deferred stock bonuses aren’t contingent upon the bank meeting Tidjane Thiam’s strangely ambitious return on equity targets of 10%-15% in global markets and 15% to 20% in the investment bank. This is in contrast to Deutsche, where employees’ bonuses are reduced if John Cryan’s targets aren’t met, and UBS, where bonuses are reduced if the investment bank doesn’t generate returns of at least 10%. 

9. The other good news is that Credit Suisse pays an impressive proportion of its bonuses in cash – especially in the Americas 

Because Credit Suisse defines a comparatively small proportion of its staff as material risk takers, it’s less restricted by the regulations stipulating that bonuses for MRTs must be deferred.

Bonuses at Credit Suisse are paid entirely in cash until your total compensation (salary included) hits CHF250k. This is less generous than at UBS, where the cash threshold is CHF300k. Once you earn more than CHF250k, however, Credit Suisse’s deferrals look comparatively tame – especially in the Americas where they start at 17.5% and rise to 60%. Elsewhere they start at 17.5% and rise to 85%.

By comparison, the deferral rate at UBS starts at 48% of bonuses. And at Deutsche the deferral rate maxes out at 100% for employees with bonuses over €500k – no matter where in the world they work.

10. And there are people at Credit Suisse earning CHF2m ($2m) in cash 

Lastly, Credit Suisse caps its total cash compensation at CHF2m. This is a lot more than UBS’s cap of CHF1m and is likely to have been a lot more than Deutsche, where the number of millionaires fell significantly last year.

 
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Head of division leaves Deutsche Bank 7 months after a promotion

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The Deutsche Bank bonus fallout is still a thing. The latest exit is James Gray, Deutsche’s European head of its ABS syndicate. Gray left today according to Deutsche insiders.

It’s not clear where Gray is off to (if anywhere), but his exit comes before Deutsche’s non-bonuses are paid at the end of this month. It also comes not too long after a big promotion. – Gray was only made head of the European ABS syndicate team in August 2016. 

A Cambridge University graduate, Gray Deutsche started for working for Deutsche in 2010 after completing an analyst programme at Nomura in 2008. His elevation to head of the division just seven years after graduating looks fairly impressive.

Gray isn’t the first to leave Deutsche Bank after this year’s bonus round. David Steckl, Said Boujnah and Igor Akulov also left earlier this month in London and New York. Exits at Deutsche have been modest in light of the 80% reduction of the bonus pool, however. “There are no bids,” says one headhunter.

Deutsche Bank is cutting costs. It wants to trim another €3.1bn from its cost base by 2021, but has said it won’t be cutting headcount in the front office.


Contact: sbutcher@efinancialcareers.com

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Photo credit: Message From The Unseen World by R~P~M is licensed under CC BY 2.0.

Why I stopped being a quant and got back into AI instead

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When I first graduated from Stanford, I’d tell people I have a degree in artificial intelligence and they would reply, “so, you are a science fiction writer?” I would then explain that I was an engineer who studied linguistics, cognition, statistics and algorithmic problem-solving. Their brows would furrow more. Today, AI is hot topic, and the entire financial industry is trying to find ways to leverage it. After a decade in quantitative finance, I decided to return home to AI and build a new kind of wealth management firm – even different from other robo-advisers.

Becoming a quant

Studying AI at Stanford was an absolute blast. Marissa Mayer – yes, that Marissa Mayer – was my CS106B: Programming Abstractions in C++ professor. She pushed our class really hard and imparted her world-famous work ethic. I was also fortunate enough to study machine learning under Andrew Ng, one of the founders of Google Brain. These mentors and others helped to open my mind to ideas and possibilities that I could have never imagined previously.

After graduating, I explored different job options in software, military applications, film and finance. Ultimately I settled on becoming a quant finance consultant because I was able to put my machine learning skills to work understanding real-time data that explained the world around me.

In college machine learning is fun, because the data is provided up front, sparkling clean and easy to use. In the real world, however, you have to aggregate multiple sources and deal with annoying errors and exceptions. I learned that true data science involves a lot of shovel work, and you have to get your hands dirty.

As the years went on, I built factor-based stock selection models for the U.S., Canada, Europe and Asia. Creating a global model was a challenge, because you can’t always compare apples to apples. Different corporate reporting and national market dynamics require critical thinking about fundamentals and currencies. I learned that the craft of quant finance is both art and science, and you have to be creative to extract narratives from the data.

After the crash of 2008, macro analysis gained prominence and I was tasked with building asset-allocation models based on global economic and market factors. The work was fascinating, because I got to view historical events through the lens of data. Bond yields in 1987, Japanese factory orders in 1989 and credit spreads in 2008 all told stories about dramatic market events.

Studying long-term macro trends through the data showed me that the markets were not by any means rational or efficient, and that understanding history by the numbers is the most important discipline in financial services, especially for traders, asset managers and wealth managers.

I wanted to see change in the financial services business

After the better part of a decade, even though I found my work intellectually stimulating, I started to feel like I was running in place. For all of the cool research that I was doing, what did it matter if the clients never really got to see what I was seeing? Seeing the lasting impact of the Great Recession, I also lamented that regular people got the short end of the stick, and I had serious concerns about the ethical impact of my profession.

At the same time, I noticed a disconnect between the fees being charged in my business and the value being added across various parts of the investment supply chain. I saw technology and process inefficiencies everywhere, and it occurred to me that there was a better way of doing business. Around that time I started to think of a new business model.

My vision was to take the investment process I was building for institutions and high-net-worth individuals, and make it available to folks who only have modest savings. My other goal was to make it easy for people to sign up and manage their accounts, and also to do it all for a fee that is reasonable.

My consulting partner Chris Sanford, the co-founder and CTO of Responsive Capital Management (a.k.a. Responsive.AI), and I went to a local bar to discuss this new idea. We both agreed that we needed to strike out on our own and do something exciting. We weren’t getting any younger. We decided at that moment to build our own wealth management company from the ground up, putting the client first and technology front and center.

Applying AI to wealth management

Responsive.AI was born over a couple of beers, but it took more than a year to get it off the ground. Chris and I had to navigate regulators and develop business processes for compliance, the back office and trading. We had to find a portfolio manager and we had to tell our story to as many people as possible. There were so many hats to wear, and although it felt overwhelming, it was strangely liberating: We were creating our vision our way, and we were dead set on creating a radical, disruptive investment service.

Today we are welcoming clients with $10k or more of investable assets to our website and mobile platform. We even have a chat bot that can answer some basic questions. The research we do goes straight out to clients over Facebook and Twitter in a language they can understand. Even better, we are doing this all at a fraction of the cost that our old-school competitors charge investors.

Had I stuck with quant consulting, I may have been more comfortable, but I would have been missing out on the chance to put my ideas into action and to build something that has the potential to change the wealth management industry. The Responsive team is very excited about the potential for fintech to create better services and tools for clients and professionals alike.

Whether it’s chat bots keeping clients informed and up to date or AI helping financial advisers to do a better job, we think the future is bright for financial services professionals and organizations that embrace the changes that fintech is bringing as it evolves.

Davyde Wachell is the founder/CEO of Responsive.AI, a fintech startup that offers a digital investment advisory service.

Photo credit: jokerpro/GettyImages
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Morning Coffee: The amazing trading job you never knew about. Mnuchin makes a mean Kool-Aid

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Behind the scenes of Amazon, day traders, quants and coders of artificial intelligence algorithms compete as third-party vendors selling products alongside Amazon’s own goods – an unseen world complete with volatility and even flash crashes similar to a stock market. In fact, the wild pricing gyrations sometimes resemble the peaks and valleys of a penny stock during heavy trading.

The portion of Amazon’s business driven by independent sellers is a juggernaut that translates to tens of billions in revenue a year – 100k of the 2m registered sellers each sold more than $100k in goods in the past year. What better way for unemployed or burnt-out traders to gainfully apply their skills in their spare time?

The biggest of these vendors are growing into sophisticated retailers in their own right – with powerful software, according to the Wall Street Journal. The cream of the crop use pricing algorithms, competing with one another for the coveted “Buy Box,” the designated default seller of an item, a big driver of sales equivalent to the top ranking on Google search.

Amazon’s retail business “is like this massive slowed-down stock exchange,” Juozas Kaziukėnas, founder/CEO of Marketplace Pulse, a business-intelligence firm focused on ecommerce, told the WSJ. You can identify typical market dynamics: Sellers enter and leave the market, prices rise in response to temporary scarcity and sellers test consumers and each other with prices ranging from dirt-cheap to exorbitant.

Some vendors attempt to bait competitors into raising their own asking prices for particular items. Kaziukėnas said that this works because Amazon sellers of commodities constantly monitor and update their prices, sometimes hundreds of thousands of times a day across thousands of items. Most use “rules-based” pricing systems, which simply seek to match competitors’ prices or beat them by some small fraction. If those systems get into bidding wars, items offered by only a few sellers can suffer sudden price collapses—“flash crashes.”

New York-based Feedvisor claims to use artificial intelligence to learn the market dynamics behind every item in a catalog and touts its platform as a “set it and forget it” system for Amazon pricing. The algorithm will often raise the price on items in a seller’s catalog to entice other sellers will follow suit in an attempt to maximize sales while avoiding race-to-the bottom bidding wars.

If you’re sick and tired of spending long hours in the office to further your traditional financial services career, then maybe it’s time to jump off the hamster wheel and try your hand as an Amazon third-party vendor.

Separately, in addition to his investment banking skills and knack for Hollywood film production, Treasury Secretary Steve Mnuchin makes a mean Kool-Aid. He’s certainly been drinking plenty of it since starting his new job in the Trump administration.

Speaking at Axios’ News Shapers event series on Friday – several hours before his party failed to pass the much-loathed American Health Care Act intended to “repeal and replace” Obamacare – the former Goldman Sachs chief information officer called Trump the “negotiator-in-chief” who closes “big deals” and touted his stamina by basically saying he’s an Übermensch: “He’s got perfect genes. He has incredible energy and he’s unbelievably healthy.” It is true that he never misses a round of golf.

Part of that newfound energy may be down to Trump’s healthier diet, as Mnuchin claimed the president no longer eats KFC or McDonald’s and said the White House food is “great.”

Trump, KFC

Meanwhile:

Kweku Adoboli thinks banks need to change their culture – he blames it on paving the way for him to make “morally unsound” decisions as losses started to pile up. (New York Times)

Once the highest paid banker in the U.K. who dated supermodels and hung out with celebrities, Roger Jenkins is now in hot water with the Serious Fraud Office. (The Times)

Two sisters who work at a Moscow bank stole tens of millions of rubles from clients’ accounts to bankroll their lavish lifestyle, which included driving a Ferrari. (The Moscow Times)

How much of a bonus should Credit Suisse have granted CEO Tidjane Thiam? Perhaps nothing at all, which is what Deutsche Bank CEO John Cryan got after a lesser loss of €1.4bn ($1.5bn) in 2016. (New York Times)

At a time where cost efficiency has become the new world order, outsourcing almost everything from trading technology to post-trade processes has become the next big thing. (The Trade News)

Brevan Howard 1, Reuters 0. (New York Times)

A fund run by a Goldman alum and two former associates of billionaire shipping and rig tycoon “Big Wolf” has returned 46% in its first nine months by buying distressed and out-of-favor oil-related assets. (Bloomberg)

Champion rower Barry Meyers has returned to J.P. Morgan as a managing director in EMEA ECM –previously he spent almost a decade at the bank, rising to executive director before leaving to join Barclays as the head of UK ECM in 2015. (Financial News)

Michelle Gill, a Goldman Sachs partner who oversaw packaging mortgages and other consumer loans for sale to investors, will join TPG Special Situations Partners (TSSP), an investing arm of the San Francisco-based buyout shop. (WSJ)

Cities and towns with ties to Wall Street and Silicon Valley are among the 100 places in America with the highest U.S. household incomes. (Bloomberg)

Image credit: Getty Images
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