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Morning Coffee: Well-rested Goldman analysts told to prepare for insomnia. Boomer hedge fund managers disappearing in London

There’s a new comedy double act in town – Goldman CEO David Solomon and his predecessor Lloyd Blankfein have been “drawing laughter and smiles” as they bantered and passed on career advice to an audience of 4,000 analysts.  The event was a charity pitching competition, in which four analysts from London won $250,000 for an education nonprofit. 

While it may all be fun and laughter and gratuitous drips to the coffee machine during 60 hour work weeks now, however, things may change soon. Amidst the chuckles, Lloyd cautioned the assembled analysts that things could change in 2024. “There are cycles to everything - we're in a cycle now," he informed them wisely. "So all of you people feel underused now, get a good night's sleep, because next year you're going to be working double time”. 

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It's a reminder that while junior bankers at Goldman and elsewhere don't have much to work on right now, it's not long ago that people there were complaining of 100 hour weeks. It's also a reminder that after teams have been cut multiple times in 2023, when deals do come back there could be more work per person than ever. 

The Solomon-Blankfein show also had the happy side-benefit of demonstrating good vibes the day after a retired partners’ dinner.  Last year, a similar event was a source of leaks about dissatisfaction among the Goldman Sachs old guard about the direction of the firm. There were suggestions that Blankfein might have criticized Solomo. It can’t have hurt the overall atmosphere to have such a public demonstration that the popular former CEO is still definitely on the team.

Separately, the joke always used to be that the City of London was rather like the All-England Tennis Club at Wimbledon – it was one of the greatest venues in the world, but there were only foreigners playing at the top level.  Increasingly, that seems to be true of the hedge fund district in Mayfair too.  With Michael Hintze of CQS selling up to Manulife, who’s left at any size in the British hedge fund industry, other than EMEA offices of global funds?

Basically, Marshall Wace, Chris Hohn’s TCI and not all that many more.  Of the big names of yesteryear, Crispin Odey is a name not to be mentioned in polite company, Lansdowne Partners are a shadow of their former self and Mike Platt’s BlueCrest is closed to outside investment and largely managed out of New York.

It’s partly a matter of generational change and partly developments in industry structure.  The world has become more complicated and more highly regulated.  That means that the overhead costs of research and compliance (and the fixed cost investments in software development for quant firms) are much higher than they were in the old days when a hedge fund consisted of two chaps, a phone and someone nice to charm the investors.

So if you think about the story of Michael Hintze; a former officer in the Australian army who was disappointed at not making partner at Goldman Sachs, then got hired at Credit Suisse who then provided him with $200m as a startup investment (which he later bought out), it’s just something that couldn’t happen today.  Anyone in anything like that position would just go to a pod shop.

Which means that the gradual decline of the Great British Hedge Fund isn’t really a thing.  It’s just the rise of the multi-strategy firms, most of which are based in the US.

Meanwhile …

The FT notes that there’s been a bit of movement in the London operations of Elliott Associates.  Gordon Singer (son of founder Paul) had built up quite a tight team of close compadres, but a few of them have been on the move lately – the most recent departure is top trader James Bayliss.  The company says it’s just normal turnover. (FT)

The market for hedge fund talent in Hong Kong is so hot that several local funds (most recently Nine Masts Capital) have decided to move to the “pass-through” model of charging costs to investors in order to compete with global multistrats.  It’s not obvious that investors are going to be keen on this, given that overall performance across the industry hasn’t been particularly stellar. (Bloomberg)

“Lifestyle advisory services” are what private banks like Morgan Stanley are calling the concierge and perks they offer to super-rich clients.  It involves things like getting hold of tickets for sold-out concerts, recommendations to medical specialists, elephant processions to weddings. Basically, all the things that people might think money can’t buy, but actually it can. (Business Insider)

David Wah left Credit Suisse at the time of the UBS merger, with everyone noting that the experienced tech sector veteran had plenty of options.  It turns out he’s going to be joining PJT as a partner, specializing in activist defense and private capital raising. (Bloomberg)

When Softbank accused the social network IRL of having inflated user numbers with loads of bots, lots of people assumed this was typical Silicon Valley stuff.  Now a lawsuit claims it was something weirder – the founders claim that Softbank just got embarrassed in the aftermath of FTX and commissioned a report that would allow them to pull their cash back.  Softbank is still suing the same founders over the original claims (FT)

Ken Griffin is still on his soapbox about remote working – he’s now told a conference in Hong Kong that it “weakens the social contract that holds people together in a company” and that this might make it easier for bosses to lay people off.  Griffin has never himself had much of a reputation for being squeamish about looking employees in the eye while firing him, so he’s presumably talking hypothetically. (Business Insider)

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AUTHORDaniel Davies Insider Comment

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