Morning Coffee: The private equity mogul making insane, human videos. A Citadel guy is hiring in London
Happy Halloween! And as the cobwebs are swept away and the fake blood wiped up, everyone’s thoughts will now be turning to gleeful anticipation of … how extravagant, and how deranged, will the Blackstone Christmas video be this year?
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The Goldman Sachs Talks series brings good news! In an interview with John Waldron, Blackstone’s President, Jonathan Gray, admits that “last year we sort of jumped the shark” on the Blackstone Christmas video. But he reassures fans that this year will be equally as good. “Trust me. We’re on it. Equally insane, cringeworthy. The whole deal. We’ve got to do all of that”.
It seems that Gray is at least slightly aware that he has created a monster. His rationale for doing so is actually quite interesting. The first videos were meant to be a substitute for an office holiday party, as the firm got too big to bring everyone together. But during the pandemic he realised that it was actually quite valuable to incorporate pet photos, holiday news and goofy humour into the firm’s internal communications along with the business stuff – this was the premis of “Blackstone TV”, the first really viral one of the annual videos.
Gray argues that “it shows a humanity to your organization and to your investors around the world” and that “it makes you more approachable … people realize you’re human beings. You’re like everybody else”. That might be quite important when you’re working in an industry like private equity which has a bit of a reputation for sharp elbows and callousness.
The interview has a lot of folksy chat about Midwestern roots, Gray's "human" videos of himself jogging around world cities, and war stories of great deals gone by, but it also, thankfully, has a bit of business content. Gray describes Blackstone’s “thematic” investment process and the way that they aim to buy “good businesses in good neighbourhoods”. Among the sectors he currently considers to be good are datacentres, genomics, India and energy.
Waldron also manages to ask the question everyone really wants to hear Jonathan Gray talk about – as one of the biggest single financial sponsors clients on the Street, how does he see the immediate future of transaction volumes?
The answers are in line with the guarded optimism that’s been the default view of the bulge bracket all year. Gray says that “the healing has definitely begun” with the turn of the Fed rate cycle and narrowing credit spreads, and that “As equities continue to rally, that will be like a magnet sucking in private companies”. He caveats that “geopolitical things could happen … you could get a bad inflation print” but otherwise that “the path of travel is definitely to more transaction activity”. And for investment bankers, that might be the best Christmas present of all.
Elsewhere, although some people have been talking about a “Great Unpodding” in which top hedge fund talent rebels against tight risk limits and employee churn, the big multistrategy firms are still hiring. Drew Gillanders, the head of international equities in Citadel’s London office, has set out the case for joining them.
He’s currently running a small mentorship program, with five “investment teams” of senior analysts feeding ideas into his portfolio, with the prospect of some of them being given money to run by the end of 2025. And he’s also looking beyond the usual hiring pools on the sell-side or at other firms, saying that “We are seeing more talent come from private equity and campuses.”
The advantage of working at Citadel, according to Gillanders, is that if you want to “deploy capital in a scaled fashion”, then it will let you concentrate on picking stocks, rather than dealing with all the other hassles of running a hedge fund business. It “allows you to run your portfolio according to your style”, but also provides “centralised resources that provide data and analytics aimed at improving a risk-taker’s decision-making and portfolio construction”.
Of course, those are often the same centralised data and analytics teams which cut risk allocations. But that’s the tradeoff for working at one of the biggest and best names on the Street.
Meanwhile …
Firing employees is easy, firing clients is difficult. But most of the time, if you try to cut too much, you will end up losing clients anyway, but in an unplanned way which is likely to cost exactly the business you want to keep. Standard Chartered is going about things differently; it’s announced a plan to purge up to 3000 corporate clients (25% of the total) which don’t use enough value-added services, and then see how much headcount it needs to serve the remainder. (Bloomberg)
The benefits of co-operating early – Nishal Singh, the head of engineering at FTX, has managed to avoid a jail sentence, after getting letters of support from both the prosecutors and the bankruptcy examiner for giving them so much help. (FT)
Marko Kolanovic left J.P. Morgan in August, but he still got ranked in the Extel (formerly Institutional Investor) survey as number one for equity-linked products. JPM as a firm managed to regain top position as well, after having lost it to Bank of America for a year. (Bloomberg)
John Paulson (a hedge fund manager who made a lot of money in 2008) is setting out his stall to be picked as Treasury Secretary. He promises to work with Elon Musk to cut government waste, and not to spend on green investment projects. (WSJ)
An interesting approach to the problems of AI hallucinations – Reflexivity is a new start-up which aims to help traders find hidden correlations between securities. Its unique attribute is that (unlike many new graduate Analysts straight out of prestigious universities) it is sometimes capable of admitting that it doesn’t know the answer. (Business Insider)
Jefferies is famous for aggressively clawing back bonuses paid to people who leave the firm. Now it’s in court suing a former portfolio manager at one of its hedge funds, who it accuses of being a “faithless servant” in buying some bonds from a company that went bust. (Bloomberg)
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