Morning Coffee: The harsh truth about pay for many 'bankers.' Most eligible hedge fund billionaire
Faced with weekly reports on the gigantic earnings of some people in the investment banking industry, it can be easy to assume that anyone with a seat in the hallowed halls of wholesale finance is doing very well for themselves indeed. That, however, is a fallacy. And a new compensation study reveals just how large a fallacy it is.
Salary benchmarking firm Emolument compared the pay data of 9,351 employees working in 'front office' and 'back office' banking jobs in the City of London. The results, reported in the Tally, show that while the front office people who interact with clients and bring in revenues are doing very well for themselves, back office staff who provide the infrastructure necessary for the front office to function, are not. On average, front office staff with a Bachelor of Art degree earn nearly £100k ($139k) a year, while their back office counterparts earn £49k ($68k). Front office staff with a Bachelor of Science degree earn around £105k, while back office staff earn £50k. And front office staff from Oxford or Cambridge Universities earn an average of around £120k, while back office Oxbridge staff earn an average of around £65k.
This matters. It matters because most of the people employed in banks are working in the back office. Take Deutsche Bank, which last year added 2,700 people to its back office headcount, whilst cutting 243 people from the front office. Deutsche now has nearly three back office employees for every front office banker - compared to a ratio of just 2:1 only three years ago. Moreover, infrastructure roles like risk, IT and compliance are preponderating, forcing banks to cut jobs in the front office and to find ways of paying all their new support staff less (like shifting them to 'low cost locations.') In the same way that most 'bankers' are not really bankers at all therefore, most people who work in banking are not well paid - and those who are, are under increasing pressure to justify their wages.
Separately, some people are still making obscene amounts of money. They are the male hedge fund moguls aged 60+. Forbes has a list of the 25 highest paid hedge fund managers in the world here. The top four all earned more than $1bn last year. 85 year-old George Soros earned a mere $300m and is, in any case, taken, but Dealbreaker helpfully points out that newly-divorced Ken Griffin will get to keep the entirety of the $1.7bn he earned in 2015.
Barclays cut its investment banking bonus pool by up to 12%. (Bloomberg)
HSBC is having a push in IBD again. It just hired Matthew Westerman, a chairman of investment banking from Goldman Sachs, to become co-head of a new global banking unit. (Financial Times)
Credit Suisse hired Stephen King from Morgan Stanley for algorithmic trading in Asia. (Global Capital)
Peter R. Orszag, a former cabinet official in the Obama administration turned investment banker, has joined Lazard as a senior deal maker, the company (NY Times)
Centerview Partners hired a senior banker from Goldman Sachs. (NY Times)
All change at Panmure Gordon. (Financial News)
US high yield underwriting has had the slowest start to the year since 2009. (Bloomberg)
Mizuho: now hiring bond traders. (Bloomberg)
Records show just one Goldman employee, a financial adviser in the wealth management division, has donated to Mr. Trump — $534.58, to be precise. (NY Times)
Standard Chartered might not be able to claw back those bonuses after all. (Reuters)
Facebook’s foolish interview question. (Sky)
The words of Warren Buffett: “It’s important that neither ego nor avarice motivate him to reach for pay matching his most lavishly-compensated peers, even if his achievements far exceed theirs.” (Bloomberg)
I surrender to my paunch. (AdequateMan)