Morning Coffee: Why Pimco pays. 260,000 people applied for Goldman jobs so far this year

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Pimco pays unfeasibly well. At least so says Bloomberg columnist and blogger Barry Ritholtz. In a piece published on Friday, Ritholtz said Pimco's 2013 bonus pool for its managing directors was $1.5bn and that this was shared between just 60 people. 20% ($290m) went to Bill Gross and 16% ($230m) went to Mohamed A. El-Erian, alone.

Pimco is disputing the figures but Ritholtz is standing firm. If true, they make the average investment banking executive look heavily lower middle class. Jamie Dimon earned $20m for his hard work at JPMorgan last year. Lloyd Blankfein earned around $23m for his work at Goldman Sachs. So Gross and El-Erian earned more than ten times more than Jamie and Lloyd.

Why does Pimco (allegedly) pay so much? Ritholtz points out that several things make the asset manager an anomaly, not only among its peers but across the finance industry as a whole. Firstly, it's been left to get on with things by majority owner, Allianz. - When Allianz bought 70% of Pimco in 2000, it left 30% of the company in the hands of Pacific Life, but Pacific Life didn't want to manage Pimco in a hands-on way, says Ritholtz. That left Gross to make all the decisions - including those pertaining to pay. Secondly, Allianz is a German company. "In the U.S., it is hard to imagine $1.5 billion in spending on anything not being disclosed," says Ritholtz, "...but Allianz is a German company, subject to different regulations." Thirdly, Pimco charges abnormally high fees compared to its asset management peer group (although these may be falling) and can therefore afford to pay more. And fourthly, Pimco's staff generate huge revenues per head compared to every other non-hedge fund competitor (witness the chart, by Ritholtz, below). They are being paid for their productivity.

Pimco revenues per head

Source: BloombergView

We could also add that people at Pimco seem to work far harder than people anywhere else in the industry. There are horror stories of El-Erian waking up at 2.45am every morning (partly to do some writing before work), while Bill Gross purportedly woke up at 4.30am to appear in the Pimco office at 6am.

If true, Ritholtz's figures explain why El-Erian felt he could afford to quit Pimco and take up a portfolio career to spend more time with his daughter and why Jeremie Banet, another Pimco executive, temporarily quit to run an (almost certainly loss-making) sandwich van. Indeed, the real question is why people at Pimco bother working for more than a year or two if they're really earning the sums Ritholtz says.

Separately, Goldman Sachs has issued an update for anyone wondering what the competition for jobs is like there just now. In a presentation last week, CFO Harvey Schwartz said [efc_twitter text="Goldman has received 260,000 applications for employment in the year to date"]. That's a lot considering that Goldman's net headcount rose by just 600 people between January and October. However, it still looks pretty unimpressive compared to Google, which says it receives more than 50,000 applications per week.  


Banks involved in the FX scandal want to claw back bonuses that have already been paid. This hasn't happened before - except at JPMorgan after the London Whale. (Financial Times) 

Back office bonuses will be truly dreadful this year - banks are struggling to work out how they're going to pay revenue generators in light of higher compliance and technology costs. (New York Post) 

Goldman Sachs is trying harder to attract technology students. They're not that keen until they hear about the cash. ""As soon as we start talking to the candidates about what our starting packages look like, the lifestyle questions about flip-flops and beanbags really start to go away." (DealBook)

Technology firms are campaigning for fast track visas so that they can hire from outside the EU. (Telegraph) 

Equity derivatives professionals are ascendant in BofA's equities business. (Financial News) 

Martin Wheatley, chief executive of the Financial Conduct Authority, took a year out to pursue his passion for furniture making. (Financial Times)

Trading floors are still full of ignorant misogynists. Compliance departments' main achievement has been a 100% success rate in training traders to drop a “U” when using company software. (Financial Times) 

Bankers don't want to work in Moscow any more. (Bloomberg) 

The more you earn, the less you will enjoy your work.  (StumblingandMumbling) 




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