Morning Coffee: Leaving banking for private equity is no longer aligned to the reality of the world. Continued excitement over Morgan Stanley email leak

If you're working in banking and you're thinking of leaving for private equity, you should maybe think again. Private equity is not what it was. Long live careers in investment banking.

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This has been apparent for a while, but Bloomberg suggests a tipping point may have been reached now that private equity carried interest payments are withered and dried. If you stay in banking you might get paid more in salaries and bonuses than you will earn in private equity once carried interest is removed from the wallet. Maybe you will also work less. 

This reality is slowly percolating through junior bankers, who until recently were so keen to work in private equity that they would apply for jobs in the industry before they'd even begun working in banking after leaving university/college, and would then interview through the night. 

Now, junior bankers are detecting that the world has changed. “These people have modelled their financial futures on a reality that isn’t materializing now,” Sloan Klein, a careers coach who works with analysts and associates, told Bloomberg. “And that’s really stressful.”

It's not just juniors. In a Substack post earlier this week, Ahmed Husain, a former Goldman Sachs' managing director who's spent the past 12 years in family offices, said that too many people working on Wall Street have made "a straight line bet on nothing changing." 

Banking is full of people who are members of a "single income family with $1mm pre-tax income with a $500k burn rate," said Husain. They are "masters of the universe". They are also living paycheck to paycheck. 

When the future is not like the past, Husain said this becomes particularly problematic. "The 30-year mortgage, the career built on a credential, the bond portfolio, the pension. It all works fine when the world changes 3% a year."

With the world changing faster than this, modelling your financial future on a glide path to receiving tax-efficient carried interest payments of $10m+ a year is no longer appropriate. You may be better off hanging around in banking, or even leaving to work with trucks.

Bloomberg spoke to one former private equity professional who now runs a company fitting equipment to trucks. Garrett Werner ran the gauntlet of working for Evercore, jumping to private equity, becoming a principal and then leaving for his truck company in Oklahoma. Werner is now aged 32 and wearing steel toe-capped boots. 

This may not be for everyone. And private equity might still come through. Bloomberg notes that private equity firms are sitting on investments that are in the black but that still haven't been sold, and that if they were this would generate $17bn in carried interest payments. Working in private equity now is a bet on this happening, or on future investments being easier to exit profitably than those of the low rate world past. If this isn't for you, you can always earn a steady $251k as an associate in banking. 

Separately, Mohamed Atmani at Morgan Stanley had been having a fine year until he accidentally emailed a list of potential deals with 'sensitive' prices to clients and then attempted to retract it. 

Bloomberg says that Atmani's list has come to the attention of competitors, some of whom said they will be using it to target potential clients. Regulators in China and India have reportedly starting looking at the matter. The list mostly focused on Asia and EMEA and reportedly included stalled projects and names of funds backing the deals. 

Citing "people familiar with the matter" Bloomberg says Morgan Stanley itself has been holding urgent and apologetic meetings with private equity firms to assure them that the fallout will be mitigated. Maybe Atmani might want to work with flat bed trucks in Oklahoma instead. 

Meanwhile...

The private equity sector is managing a record $4.7tn in assets. But a growing portion of these assets are unsold companies, the median holding time for which is now seven years. (FT) 

Taula Capital is down 9.4% for the year through to September 18. This reverses a recovery it had made since March. (Bloomberg) 

Goldman has earned more than $200m in fees this year from lending to Situational Awareness. This is more than it's earned from any other client in its prime brokerage business. (FT) 

Ken Griffin wants a helicopter landing pad near his new house in Miami but people are not keen. “You are giving one person a permit for something that could be potentially annoying for a thousand.” (Bloomberg) 

The CFA 1 pass rate is now above 40%, which is above the average for the past 10 years. It's all about a "consistent study plan" apparently. (Bloomberg) 

HSBC was also providing its Hong Kong bankers with a $26k subsidy for joining private members clubs. Not any more. (FT) 

HSBC was going to have a board meeting in Dubai. It's moved it to London for safety reasons and is only allowing “business-critical” travel to the UAE. “Local executives are dealing with a lot still," said one insider.  (FT) 

Chandler Bocklage, head of business development at Point72, says Steve Cohen is an exceptionally inquisitive person and that working in hedge funds is a hard job. "The dedication and sacrifice is complete." (PitchThePM) 

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