Every year is better to some people than others. Here's our look at the winners of 2006.
Anyone saying the private equity space had anything less than a great year must have spent the last 12 months on an island without wireless access. Private Equity Intelligence reports $365 billion of funds were raised last year, compared to $293 billion in 2005. It's no surprise that PE funds have been hiring everyone from partners to associates. Observes one recruiter: "Doing deals is now more difficult and you need more resources to find and transact them."
Despite the demand, this recruiter notes private equity isn't quite the career choice for junior investment bankers as it once was: "It's now one of three options," he says. "The others being staying put and earning a big bonus or joining a hedge fund."
While most derivative products did well this year, hiring was particularly strong in equity derivatives, led by Lehman, BNP Paribas and JPMorgan. Soc Gen, Bank of America and Wachovia also made additions. Macquarie is said to be in the process of staffing a global equity structured products business. That bodes well for bonuses, with search firms predicting awards for top equity derivatives traders, structurers and salespeople running between 25 to 40 percent higher across the sector.
Corporate finance boutiques rode to riches on the coattails of the 2006 M&A boom. Figures from Greenhill suggest smaller firms were advisors in 32 percent of the year's M&A transactions, nearly triple 2005's 11 percent. The biggest splash was made by Perella Weinberg, founded in June by Joseph Perella and still growing.
Recruiters say boutiques are having to pay a premium to land good people. In big name boutiques, pay can run 25 percent higher than in investment banks, says Logan Naidu, a consultant at recruitment firm Cornell Partnership, and bonuses for second-year associates can reach 220 percent.
Emerging Markets (Russia)
Let's face it, there's something funky in Russia right now: former operatives are being poisoned and the government has no compunction about using its energy business as a club to keep its former satellites in line. None of that has dented banks' appetite for exposure there, however. Citigroup forecasts that Russian companies will raise $38 billion in share offerings in 2006 and 2007. Credit Suisse, Dresdner Kleinwort, Goldman Sachs, Merrill Lynch and Morgan Stanley are all getting in on the action.
Taru Oksman Ison, a director at Principal Search, says Russia offers incredible opportunities. "The IPO frenzy is nowhere near abating. M&A is strong, debt platforms are improving, the opportunities are tremendous."
But with Russian banks in the market too, Oksman Ison says Goldman Sachs will be lucky to find the 60 bankers it's said to be looking for in the country: "With the best will (and the biggest checkbook) in the world, there are only so many professionals to go around."
Russia wasn't the only emerging market country for which banks recruited in 2006. BRIC countries (Brazil, India and China), plus Turkey and the Middle East, were equally exciting despite hiccups in the second quarter.
A glut of infrastructure assets, low interest rates and a demand among investment managers for stable returns pushed the value of infrastructure deals to a record $145 billion worldwide as of October, according to Thomson Financial. That's 180 percent higher than the deal level of 2000. The Financial Times observed the pace of deals will continue as "more toll roads, airports, privatized water companies and electricity distribution groups come on the block." Both state-owned investment funds and private equity firms have been involved in the deals, but investment banks are also getting in on the action, launching new funds focused on infrastructure. As a result, it's no surprise that recruiters report an increasing demand for bankers with an infrastructure focus - a trend worth watching as 2007 dawns.