Morgan Stanley’s Investment Bank Must Invest in Compensation, But Can They?
Mark Eichorn, the co-head of Morgan Stanley’s investment banking division, isn’t afraid of M&A boutiques from a league table perspective. He seems pretty salty about their propensity to steal top talent, though.
During an investor dinner hosted by Bernstein Research analyst Brad Hintz, Eichorn acknowledged that M&A boutiques stole market share from bulge bracket banks following the economic collapse. But smaller firms are rarely sole advisors on transactions, he said, and lately they’re more prone to cannibalize each other than the likes of a Morgan Stanley.
The real worry, according to Eichorn, is the ability of boutiques to out-recruit large banks, particularly at the MBA level.
“He admitted that [Morgan Stanley] needs to invest in compensation, since the sacrifices involved in an investment banking career are significant and the way to win new recruits is to provide a medium-term financial payoff,” Hintz said in a research note highlighting the dinner.
Eichorn may be facing an uphill battle. While every U.S. bank is working to keep salaries and bonuses under control, Morgan Stanley appears the most vigilant. Compensation expenses during the first quarter fell to $4.2 billion, down from $4.4 billion a year earlier. If you exclude severance payments for laid-off workers, Morgan Stanley’s compensation ratio – pay and benefits costs compared to net revenues – was around 40%, a really low number for Morgan Stanley, but one that may remain unchanged.
Chief Financial Officer Ruth Porat said in April that the bank is targeting “40-ish percent over time.”
Sallie Mae will split its consumer banking unit from its education loan-management business in an attempt to boost its market value. Both units are “in a position to grow,” said Chief Operating Officer John Remondi. Sallie Mae has also named a new CEO.
Apparently sick of watching hedge funds and private equity firms dominate the real estate investment market, Morgan Stanley is preparing to breathe life into its dormant real estate unit. The firm plans to raise as much as $3 billion for its global property fund. No word yet on potential hiring plans.
Guy Chiarello, J.P. Morgan’s Chief Information Officer, is leaving the bank after nearly six years. Chiarello said his departure is unrelated to the London Whale trading scandal.
Managing money for wealthy families is becoming less about asset management and more about making sure the generations that inherit that wealth know how to keep growing it.
The worst kind of Wall Street parent: “formerly uncool high school students who want desperately to live vicariously through their children.”
The insider trading scandal engulfing Steven Cohen’s SAC Capital is starting to put some serious strains on the hedge fund’s purse strings. Ironwood Capital Management said it will redeem $100 million from the fund. Blackstone already noted it will withdraw some – if not all – of its $550 million investment.
Shareholders have voted for “significant opposition” and are likely to oust one-time dot-com star manager Kevin Landis. Bulldog Investors principal Phillip Goldstein explains why.
Buzz Around the Office
A non-practicing Orthodox Jewish man posted his spot in heaven on eBay with a starting price of $0.99. The bid reached $100,000 before the auction site shut down the listing, noting sellers are only able to peddle “tangible” items.
List of the Day: Helping a Fired Friend
We’ve all had friends and colleagues who have been let go from their jobs. Here’s how to soften the blow.
- Avoid saying shoulda, woulda, coulda.
- Remind them of other successful people who were once fired.
- Listen way more than you talk.