Archive for  October 2014

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(Bloomberg) — UBS AG, Switzerland’s largest bank,
hired Christophe Gioffredo, to strengthen its London-based
foreign-exchange team servicing hedge-fund clients.
Gioffredo, was previously head of foreign-exchange sales
for France at Barclays Plc. In the job he started this week, he
reports to Michael Bichan, head of currency distribution in the
U.K., according to a UBS spokeswoman in London.
Gioffredo worked at Barclays for a decade after starting
his career in 2001 at Goldman Sachs Group Inc., according to his
LinkedIn profile. He declined to comment when reached by e-mail.

(eFinancialCareers) In the latest hiring roundup, Credit Suisse is hiring investment bankers in EMEA and Asia, BlackRock may need more help in fixed income and Deutsche Bank is loading up on US wealth managers.

New fixed income team in Europe

Liquidnet, a U.S.-based dark pool operator, is expanding into electronic bond trading. As part of the growth, they’re building a fixed income team in Europe.

Credit Suisse hiring investment bankers in EMEA

Credit Suisse is reorganizing its investment bank after seeing a “significant pickup in activity” in EMEA. The Swiss bank is hiring junior bankers and “selectively attracting senior talent” from outside the bank. It’s growing in Asia, too.

And private bankers in Spain

Credit Suisse is also hiring private bankers in Spain as assets under management have nearly doubled since the recession. The bank has hired five in the last few months and is thirsty for more.

Former UBS exec to lead new group

Christian Hess, the co-founder of UBS’s private equity group, has been hired by Investec to lead its newly-created financial sponsor transaction group. Expect hiring to follow.

Short-sellers needed

Research firm Muddy Waters is mulling starting a hedge fund. The firm, which employs just 10 people currently, creates and distributes short-selling research, so they’ll likely be looking for people with experience in activist investing.

BlackRock to grow bond unit?

BlackRock may be in need of more fixed income specialists. The asset manager is enjoying massive inflows within its bond unit, and its CEO is bullish on growth.

UK banks require directors but can’t find them

UK banks including HSBC Holdings, Barclays and the British arm of Spain’s Santander are looking for directors to help ring fence their retail and wholesale banking units. They are so far struggling to find them.

Banker poaching in Belfast

US private equity firm Cerberus Capital Management is hiring in Ireland. The only problem is they seem to be poaching from just one firm: Ulster Bank Belfast.

Deutsche Bank loading up on US wealth managers

Within the last three months, Deutsche Bank has poached four of J.P. Morgan’s private bankers in the U.S. alone.

(Bloomberg) The European Union’s largest securities firms may have to raise fixed pay for bankers or risk losing their highest-paid staff to U.S. competitors after the region’s banking regulator blocked efforts to sidestep limits on bonuses, according to analysts and recruiters.

The European Banking Authority yesterday gave firms until the end of the year to bring their practices into compliance with EU rules that ban bonuses of more than twice fixed pay after finding 39 banks got around the cap.

Barclays Plc (BARC) and HSBC Holdings Plc (HSBA) are among the biggest European lenders with global investment banking operations that have sought to offer employees discretionary payments tied to the role the employee holds. At stake is the firms’ ability to retain staff in some of their most profitable businesses and compete with U.S. firms without boosting fixed costs. Unlike U.S. and Swiss firms that are only subject to the restrictions in the EU, European firms must implement the rules worldwide.

“This is the first time banks haven’t been able to circumvent the continuous pressure from Brussels to stop additional pay to bankers,” said Jason Kennedy, chief executive officer of London-based recruitment firm Kennedy Group. “This can be a total disaster for them. This is the final nail in the coffin for European banks vis-a-vis the battle to remain ahead of U.S. banks.”

Banker Bonuses: Culture of Risk

European regulators have moved to tighten compensation regulations to prevent a repeat of the risk-taking that contributed to the 2008 global financial crisis.

Britain has challenged the rules at the bloc’s highest court in Luxembourg, arguing that they overstep the powers laid out in the bloc’s treaties. The British Bankers’ Association estimates the rules apply to about 35,000 employees globally.

‘Fundamentally Flawed’

“The EU bonus cap is a fundamentally flawed approach,” Andrew Tyrie, a British lawmaker and chairman of Parliament’s Treasury Committee, said in an e-mail. “It will encourage banks to increase fixed pay rather than embed incentive structures that improve standards.”

Salaries for senior bankers rose an average of 26 percent in 2012 as banks prepared for bonus caps, the EBA said in a June report, which surveyed 137 banks across the EU.

Officials at HSBC and Barclays in London, Paris-based BNP Paribas (BNP) and Deutsche Bank (DBK) AG declined to comment today. Stefan Krause, the Frankfurt-based company’s chief financial officer, estimated in April the bonus cap would cost the bank 300 million euros ($383 million) in 2014.

U.S. investment banks with businesses in Europe have already moved to increase pay for some bankers in light of the bonus caps. Goldman Sachs Group Inc. (GS) is planning to raise fixed pay for some senior employees and traders in Europe, a person with knowledge of the plan said in January. Representatives of the firm in London declined to comment as didCitigroup Inc. (C)

‘Creates Weakness’

Banks affected by the limits are likely to try and find a way around the restrictions by increasing benefits-in-kind, according to Simon Maughan, head of research at financial-analysis firm OTAS Technologies.

Firms may also scale their activities and seek to reduce costs through greater use of technology, according to Neil Smith, a banking analyst at Bankhaus Lampe in Dusseldorf,Germany.

“It reduces the flexibility and it creates weakness for European investment banks,” Maughan said. “They will find a way around.”

(Bloomberg) London investment firms are raiding the competition and raising pay for money managers as cash pours into funds that invest across a range of assets, from stocks to high-yield debt.

Companies from Goldman Sachs Group Inc. (GS) to Aviva Plc and Pictet & Cie. Group SCA are hiring multi-asset managers and executives in Europe as they look to open new funds to meet demand that has accelerated since the global financial crisis.

“I’ve got a client at the moment looking to add three or four people to their team from a competitor,” said Chris Apostolou, director at London-based recruiting firm Arbitrage Search & Selection Ltd. “Salaries are being squeezed higher, there is massive pressure. Some firms have increased bonuses for their managers to 200 percent of their base salary and guaranteed them for two years in order to make them stay.”

Firms are hiring and creating new products amid increasing demand for multi-asset funds that money managers surveyed by State Street Corp. say will be the biggest growth engine in the next three years. Mixed-asset funds in Europe attracted 62 billion euros ($78.6 billion) in the first half of 2014, about 1 billion euros more than stock funds, according to data from Lipper Inc.

Almost 30 mixed-asset funds domiciled in the U.K. have been started this year, drawing almost 4 billion pounds ($6.4 billion) from investors, according to Morningstar Inc.

Big Sellers

Across Europe, four of the top five funds that attracted the most money this year have a mixed-asset strategy, the data show. Richard Woolnough’s 23 billion-pound M&G Optimal Income fund, which invests predominately in fixed income as well as some equities, was No. 1, with an estimated 5.5 billion euros of net inflows this year.

A multi-asset fund typically spans several investment classes from U.S. stocks to European corporate bonds or high-yield credit and can include as many as 20 investment strategies designed to provide steady returns under all market conditions. Standard Life’s 21.6 billion-pound Global Absolute Return Strategies Fund (SLIGARS), known as GARS, targets a return of 5 percent above the London interbank offered rate over three years.

GARS posted a gross annualized return of 8.1 percent for the last three years, according to the company. That compares with the MSCI World Index, which had an annual return of 18.7 percent over the same period. The fund’s volatility was 4.1 percent versus 9.2 percent for the index.

Diversifying Risk

Mark Dampier, head of research at Hargreaves Lansdown Plc, said the trend has largely been created by a desire among institutional investors and advisers to not put all their clients’ money “into one basket.”

“It’s not a new way of investing,” he said, adding that similar funds have been around for at least 30 years. “Multi asset still got hit quite badly in 2008. Ultimately, the fund manager still has to make the right decision.”

Tim Wright, a director at PricewaterhouseCoopers LLP in London, said demand to open new funds and the small pool of executives with the skills and experience to invest across various asset classes had increased the competition among firms to hire the right staff.

“There is a price to pay,” said Wright, who provides compensation advice to the asset-management industry. “High demand and short supply means that the cost of employing someone increases.”

Musical Chairs

The average salary and bonus for a multi-asset fund manager last year was 200,000 pounds, according to Apostolou, the London recruiter. Next year that is expected to be closer to 300,000 pounds, he said, with some of the “top guys earning into the millions.” Firms needed to work to retain their managers or risk large asset outflows when they leave, he said.

Baring Asset Management Ltd.’s head of multi assets, Percival Stanion, joined Geneva-based Pictet in August to help the firm open a new set of funds. His departure, along with colleagues Andrew Cole and Shaniel Ramjee, saw the Baring Multi-Asset fund lose 60 percent of its assets, cutting the fund to 403 million pounds in the two months through September, according to data from FE Analytics.

Stanion was replaced by Baring’s current chief investment officer, Marino Valensise. Baring also added Ken Lambden as CIO, who left Schroders Plc last year.

Goldman Sachs Asset Management hired the head of JPMorgan Chase & Co. (JPM)’s global multi-asset group, Neill Nuttall, in June, naming him co-chief investment officer of the global portfolio solutions group, which oversees more than 15 billion pounds in assets. JPMorgan’s division has about $165 billion under management.

Aviva Restocks

Aviva Investors recruited Ian Pizer from Standard Life Investments’s multi-asset team in May, rejoining his former boss Euan Munro, who started as chief executive officer in January. Munro, who helped create the GARS fund at Standard Life, was hired late last year to revive the profitability at the insurer’s investment unit.

Munro announced the firm’s new multi-asset strategy in July and named David Lis as CIO of equities and multi assets in September. He also hired Wei-Jin Tan from State Street Global Investors.

Schroders, which lost its former head of multi assets for Europe, Gregor Hirt, to UBS AG this year, turned to academia to bolster its 57 billion-pound multi-asset business. Duncan Shand of the University of Warwick in the U.K. and Fred Dopfel of the Dominican University of California in the U.S. were hired last month as senior advisers. Both previously worked for BlackRock Inc., the world’s largest money manager.

Schroders CEO Michael Dobson said in July the multi-assets unit was the firm’s fastest-growing business. The U.K.’s largest publicly traded money manager reported 4.8 billion pounds of net inflows in the first half of the year — 4.1 billion pounds of which flowed into the unit.

“Investors want to have exposure to a broad range of asset classes, and they want to use a manager to make those judgment calls,” Dobson said in a telephone interview. “It will be a big growth area.”

(Bloomberg) Bond traders at JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C) face the fastest-shrinking bonus pools on Wall Street this year, while Morgan Stanley investment bankers head for the greatest gains.

JPMorgan’s fixed-income trading revenue fell 14 percent to $10.6 billion in the first nine months of 2014, the steepest drop among the five largest Wall Street banks, according to data compiled by Bloomberg for the first half and analyst estimates for the third quarter. By contrast, Morgan Stanley probably had the biggest increase in revenue from advising on mergers and underwriting stock and bond deals, the estimates show.

Wall Street thoughts turn to bonuses this month as firms report third-quarter results, giving a sense of how they’ve done for most of the year and how much they will allot to bonus pools. While markets lulled by Federal Reserve intervention have crimped trading, investment bankers have fared better amid a surge in mergers and issuance of debt and stock.

“This will be a good year for investment bankers, and the largest banks have figured out a way to compensate their best individuals,” said Devin Ryan, a New York-based analyst at investment bank JMP Group Inc. In trading, “if returns are still challenged, and in 2014 they will be, that will impact where the compensation pools are for those businesses.”



Earnings Season

JPMorgan, Citigroup and San Francisco-based Wells Fargo & Co. (WFC) kick off U.S. bank earnings season when they release results Oct. 14. Bank of America Corp. (BAC),Goldman Sachs Group Inc. (GS) and Morgan Stanley report later in the week.

The six banks probably will post $15.9 billion in combined third-quarter profit, a 19 percent increase from the previous year, according to the average of analysts’ estimates compiled by Bloomberg. That’s driven by a rebound at JPMorgan, which may post $5.34 billion in earnings compared with a $380 million loss a year earlier caused by $7.2 billion in litigation and regulatory costs.

While the companies don’t disclose pay pools for business lines such as fixed-income trading and advisory, compensation is largely determined by revenue. Declines and gains don’t reflect which firms will pay the biggest bonuses. Wells Fargo, whose securities business is much smaller, European banks and other advisory firms haven’t been included in the revenue comparisons.

Market Volatility

Market volatility increased in the final weeks of the quarter, sparked by a stronger U.S. dollar, concern that Scotland would secede from the U.K. and Bill Gross’s departure from Pacific Investment Management Co., manager of the world’s biggest bond fund. Volatility leads to increased trading as clients buy hedges or make bets against further moves.

“It does look like trading results this quarter will come in better than worst-feared,” said Chris Mutascio, a New York-based analyst at Stifel Financial Corp.’s KBW unit. “It doesn’t mean we’re back. It’s one month, and even with September, we’re at fairly low levels compared with three or four years ago.”

Led by declines at JPMorgan and Citigroup, fixed-income, currencies and commodities trading revenue at the five firms probably fell 7.2 percent to $38 billion in the first nine months, based on company filings and the average of analysts’ estimates. Goldman Sachs, Morgan Stanley and Charlotte, North Carolina-based Bank of America probably did better, with results almost unchanged from a year ago.

Spokesmen for the five banks declined to comment.

JPMorgan, Citigroup

JPMorgan and Citigroup, both based in New York, are hurting the most because of their dependence on interest-rate and currency markets, which are experiencing some of the steepest revenue declines as central banks keep rates low to spur economic growth. JPMorgan is first in rates trading and third in currencies, according to research firm Coalition Ltd. Citigroup Chief Financial Officer John Gerspachhas said more than half of FICC revenue at the firm typically comes from those markets.

Even with the declines, JPMorgan and Citigroup are expected to remain the two biggest fixed-income trading firms, with $10.6 billion and $9.72 billion of revenue in the nine months, respectively. Morgan Stanley probably will be the top equities trader with $5.16 billion in revenue and Goldman Sachs the No. 1 investment-banking firm, generating $4.94 billion.

Morgan Stanley, based in New York and led by Chief Executive Officer James Gorman, 56, is the only firm that advised each of the five biggest acquisitions that closed this year, including serving as the sole banker to WhatsApp Inc. in its $18 billion sale to Facebook Inc. (FB), according to data compiled by Bloomberg. The firm worked on Alibaba Group Holding Ltd. (BABA)’s initial public offering, the largest ever, and jumped to fourth place in underwriting U.S. high-yield debt from seventh last year.

Compensation Pools

Goldman Sachs set aside $12.6 billion for compensation and benefits last year, equal to an average of $383,374 for each of its 32,900 employees, data compiled by Bloomberg show. Morgan Stanley (MS) allocated $16.3 billion to pay its 55,794 workers, or enough for $291,734 per person. JPMorgan allotted $10.8 billion, or an average of $207,368 for each of its 52,250 corporate and investment-bank employees. Actual pay varies widely within banks to reflect employees’ roles and seniority.

Within fixed income, credit traders were the most positive about their performance, expecting a 13 percent median increase in compensation from last year, according to a survey by New York-based recruitment firm Options Group, which polled 344 traders and sales people in August and September. Interest-rate and foreign-exchange traders predicted no change.

Traders in investment-grade credit at the vice-president level made $400,000 to $600,000 in total compensation last year, with high performers earning $800,000 or more, according to Options Group. Investment bankers working on mergers and acquisitions made $350,000 to $500,000 at the vice-president level, with outliers pulling in at least $750,000. Managing directors make significantly more.

‘Flight Risk’

Banks won’t cut compensation for high performers who could depart for a competitor, said Jason Kennedy, CEO of London-based recruitment firm Kennedy Group.

“Managers are putting their reasons together why they need certain bonuses,” he said. “They will look after the guys who are a flight risk, and only then think about the others.”

Equities trading declined 6.6 percent at the five companies in the first nine months to $18.7 billion, led by a 12 percent drop at Goldman Sachs, according to data compiled by Bloomberg and the average of estimates from analysts at Macquarie Group Ltd., Wells Fargo and KBW. Only Morgan Stanley was seen boosting equities-trading revenue, by almost 1 percent to $5.16 billion.

Trading Declines

Lower trading revenue led JPMorgan CFO Marianne Lake to cut the 2014 expense target by about $1 billion to $58 billion because of the impact on pay, she said at a Sept. 9 conference.

If “volatility increases and markets revenues go through the roof, God willing, we would be willing to pay for that” with higher incentive compensation, Lake said.

While volatility picked up at the end of the third quarter, banks would require a significant trading boost to save the year. If analysts are right about the third quarter, the five firms would need trading revenue to jump 27 percent in the fourth quarter to match last year’s total.

Wall Street’s rising investment-banking revenue, led by Morgan Stanley and Goldman Sachs, isn’t enough to offset the drop in trading revenue, a much bigger component of industry profits. Total banking and trading revenue probably dropped 3.3 percent to $78.2 billion in the first nine months, data compiled by Bloomberg show. Investment-banking revenue makes up about a quarter of the total.

If trading declines persist, convincing banks that a shift is permanent, “there are more cost-saves to be had, not just from lower expenses on compensation, but also the number of people you have,” Mutascio said.

Oct. 6 (Bloomberg) — U.K. financial-services firms are
expected to add 28,000 jobs this year as the banking industry
increases profitability and confidence, according to the
Confederation of British Industry.
Britain’s banks, insurers and other financial companies
will employ about 1.15 million people by the end of 2014 from
1.12 million in the year-earlier period, Britain’s largest lobby
group and accounting firm PricewaterhouseCoopers LLP estimated
in a survey today. Banking profitability was “up markedly” in
the third quarter and this will continue, it said.
“The U.K.’s financial-services sector is enjoying its
strongest run of growth since 2007, with activity rising across
all customer categories and profitability bouncing back,” Rain
Newton-Smith, CBI director of economics, said in the statement.
“Financial-services firms are relatively upbeat about future
prospects, despite some big geo-political risks that remain on
the horizon.”
U.K. banks are benefiting from an economic recovery in
Britain with statistics released last month showing the economy
expanded faster than estimated in the second quarter. Royal Bank
of Scotland Group Plc, Britain’s largest state-owned lender,
said on Sept. 30 it reclaimed funds it had previously set aside
for souring loans as the U.K. and Irish economies recovered,
sending the shares to their highest in almost a year.
The CBI survey comes as separate study by recruitment firm
Astbury Marsden said job vacancies in London’s financial center
jumped by more than a third in September to 3,470 from a month
earlier, driven by hiring in regulatory and compliance
The CBI said it surveyed firms from Aug. 18 to Sept. 4.