You can make a number of arguments why someone would prefer the buy-side over the sell-side. But really, it comes down to one thing and one thing only. The financial collapse turned investment banks on their head, forcing regulatory, cultural and pay practice transformations that are surely permanent. Life will never again be like it was in 2007. At hedge funds and asset managers, meanwhile, not all that much has changed.
Just look at recent pay projections. Bonuses for U.S. asset managers will likely increase between 5% and 10% for 2014, according to research from Greenwich Associates and Johnson Associates. If those estimates remain true, the average bonus will be just 6% below the 2007 peak.
Then look at the investment banking industry. Despite incentivized comp likely edging up this year, bonuses will still be down 47% from 2007. That’s a massive divide, obviously, and it won’t be closing anytime soon.
Hedge fund compensation is still depressed, down 35% from pre-recession levels, “but it will catch up,” Alan Johnson, founder of the eponymous compensation consulting firm, told Bloomberg. Hedge funds have performed poorly over the last 18 months, but assets continue to climb. If and when strong hedge fund performance returns, record-setting compensation will follow.
Even without a rebound, hedge fund employees are doing just fine. The average senior professional who specializes in stocks will take home around $870,000 in 2014, according to the report. A fixed income specialist with similar experience will earn roughly $750,000. Not too shabby.
DB’s Salary Increases Becoming Burdensome (eFinancialCareers)
Deutsche Bank has increased salaries for its senior investment bankers. Back in April, the German bank said it was hiking salaries for 1,700 of its highest earners. Now it’s complaining that those increases are inhibiting its ability to cut costs.
The Aftermath of an Un-Rigged Market (eFinancialCareers)
Quantitative easing is ending. For the first time in six years, markets will be on their own. It should have a significant effect on traders, particularly those joining since 2008.
No Gross, No Problem (WSJ)
Pimco is bringing back two former executives that left the firm earlier this year when founder Bill Gross was still running the ship. Perhaps some personality clashes were at fault? Um, yeah.
Please Shut Up (WSJ)
Here’s a word of warning for bank employees who don’t work on initial public offerings. You can’t talk about them publicly during the “quiet period” when your underwriter friends are working on the deal. If you do, the bank will lose its entire fee, like what just happened to RBC Capital Markets. A wealth manager brought up the Alibaba IPO on a conference call while talking about something completely different, and poof, $2.5 million in fees gone.
Dirty Laundry (Dealbreaker)
Yet another ridiculous update from the divorce proceedings of Jefferies investment banking exec Sage Kelly. This one centers on allegations of mushroom eating and face painting using his own blood. Really weird.
Deal Squashed (Business Insider)
Alas, J.P. Morgan is not moving to Hudson Yards, as had been rumored. Likely they’ll either stay put on Park Avenue or head to one of the World Trade Center towers.
Insider Trading Probe (WSJ)
An unknown number of Wall Street traders have received subpoenas as part of an investigation into whether a Medicaid agency leaked market-moving news. There are now three overlapping insider trading investigations that involve the Centers for Medicare and Medicaid Services.
Buzz Around the Office
The Power of 2 (NY Post)
A woman in a zombie costume was arrested twice in three hours for driving under the influence. She looked more put together the second time, frankly.
Quote of the Day: “Businesses can be opaque. They’re complex. You don’t know how aircraft engines work either.” – J.P. Morgan Chief Executive Jamie Dimon