Morning Coffee: Would you pay €7m to get the best jobs in finance? PWC report predicts doom for European banking jobs
You want to work in private equity. Of course you do - as an industry it's more prestigious than investment banking. It's also more interesting, pays better and (theoretically) involves less work. But do you want to work in private equity so much that you'd be prepared to stump up €7m ($8.7m) - and if necessary to borrow that money against future earnings, just to get in? We're asking because Financial News reports that this is what it's come to.
Citing an Investec survey of 84 private equity professionals, Financial News says senior people working in the private equity industry are increasingly being asked to put some of their own money into the funds they're working on. The going contribution is 3% of a fund's total value, which as FN points out means that a team of 10 partners raising a fund worth €1bn, will have to find around €7m each.
Not everyone has a spare €7m lying around, even if they're a partner in private equity. Investec is therefore helpfully offering private equity seniors the option to borrow their contributions, using the carried interest they'll hopefully receive when the fund exists its investments (successfully) as security. What could possibly go wrong?
Separately, PWC has written a doomy report for the Association for Financial Markets in Europe. It says that 197,195 European banking jobs have already disappeared since 2009 and that redundancies and business closures will continue and could accelerate once the European Union's full programme of banking reforms takes effect.
With the US Volcker Rule prohibiting proprietary trading at US banks since April this year, it's easy to forget that European banks are still free to prop trade at much as they like. PWC points out that prohibition of prop trading in Europe won't come into effect until January 1st 2017. Along with other looming European regulations, including the ring-fencing of trading businesses, this is expected to render some businesses unprofitable. PWC says European banks' fixed income currencies and commodities (FICC) divisions are most precarious, and that nine of the continent's 'globally systemically important banks' could find their fixed income trading businesses are no longer financially viable. Which are those nine? PWC doesn't say, but Barclays, Deutsche, RBS, HSBC, BNP Paribas and SocGen are all on the long list.
Goldman Sachs just upgraded Barclays because the Bank of England's leverage ratio is more benign than expected and it thinks Barclays' investment bank will recover as volatility returns to macro markets. (Bloomberg)
The Volcker Rule isn't really that bad. (MarketWatch)
Deutsche is closing its physical precious metals trading business and making five people redundant. (Bloomberg)
Duncan Farr, a former Nomura salesman, who left to become head of financial institutions sales at Macquarie in October 2013, is rejoining Nomura. (Financial News)
Credit Suisse has hired Manav Puri from Goldman Sachs as head of consumer banking in Europe. (Financial News)
Hedge fund couple split. She demands half the value of their $1.3bn wealth, gets $530m after he argues that he made a 'special contribution'. (Reuters)
Cheyne Capital just set up a new fund to invest in social housing. (New York Times)
How you will know that you are out of touch at work. (Telegraph)
How to deal with unsolicited career advice from your family. (DailyMuse)