The former head of CLOs at Jefferies has quit to make the "21st century Tubular Bells"
Peter Melichar never dreamed of being an investment banker. Growing up in Vienna, Austria, he went some way down the road to being a professional pianist, before becoming “obsessed” as a teenager with a new wave of electronica music coming out of the U.S. in the mid-80s.
“Together with a friend of mine, we started creating our own music. It was a bit of a bedroom act, but we were getting played on commercial radio and things started to take off, but then my parents put their foot down,” he says.
Specifically, they wanted him to go to university and learn a “craft” (in this case studying finance and economics at Manchester University). It worked – last month Melichar left his job as head of European collateralized loan obligation (CLO) at Jefferies and with it a 16-year career in investment banking.
He’s not going back to banking. Instead, he’s in the process of creating an electronica album he describes as the “21st century Tubular Bells” through his new band Shock and Awe, as well as kicking off a commercial recording studio called Summer Hill Music.
This giant leap from complex financial products to music came about through a random series of events. For a start, Melichar and his wife are expecting another child, so they bought a bigger house in Kent and, suddenly, he had a spare room for the first time in which to indulge ‘man cave’ tendencies.
His first thought was to rekindle this passion for electronica, so he purchased some 1980s-style synthesisers on eBay.
“I got chatting to the guy who was selling them. He was a music producer, so I asked if I could give him a couple of hundred quid for a ‘master class’ in how to use these machines. He agreed, and I turned up to his house – a big farm in Surrey – and was ushered into a recording studio covered in platinum albums.”
This was music producer Simon Ellis, who has been involved with a lot of 1990s pop acts like S Club 7, Spice Girls, East 17 and, more recently, Britney Spears. Melichar said that he brought some demos along to his meeting with Ellis who immediately told him he “had a hit on his hands”.
“It’s not really dance floor material, more living room. It’s aimed at 35 year olds plus who grew up when electronic music was first popularised,” he says. “It’s a mix of electronica, prog rock, funk, trace and EDM.”
Sub-zero by Shock and Awe:
Leaving CLOs behind
Melichar says that he started out in banking when the securitisation market was in its infancy. His first job was at Salomon Smith Barney (which was later acquired by Citigroup) as a junior swaps trader in the City, but he was given the chance to work on Citi's first European collateralised debt obligations desk in 2001.
“I was the kid, and we had an MD and two other people,” he says. “Securitisation was the place to be then, but the U.S. operation had 50 times the PnL and was 20 times as big as our team, so we were always playing second fiddle.”
Rather obviously, the glory days didn’t last after the blow-up of the securitisation market during the 2008 global financial crisis. “The CLO market has been in tatters ever since, despite the community’s attempts to talk up the market,” he says. “It’s lurched from crisis to crisis since then and has been a tough environment to operate in.”
Melichar moved jobs often in the wake of the financial crisis, working for SocGen, financial advisory firm Key Capital and Deutsche Bank before joining Jefferies as head of European CLO origination in June last year.
“I knew that I wanted to move from a bulge bracket investment bank to run my own CLO origination business and Jefferies gave me a great opportunity,” he says. “Unfortunately, CLO primary issuance has been very slow, the desk was struggling for profitability and I knew my days were numbered even before the shock of Brexit.”
So far in 2016, CLO origination has hit a four-year low, plunging to just $8.2bn in the first quarter of 2016. It is now $49.7bn year to date in 2016 from 110 transactions, according to LCD data.
“It’s brutal out there,” says Melichar. “It’s a cliché, but banking is simply not as fun as it used to be. There’s a feeling that I could have been close to burning out – I was exhausted and leaving Jefferies seemed like a natural inflection point to reflect.”
"A lot of the guys working in senior CLO roles in the early-2000s were millionaires and retired at 40," he adds. "I'm not saying that I wasn't in a well-paid job, but it's not enough to retire on by any means. So, this is a change of direction for me, rather than a self-indulgent hobby."
Melichar says that he hasn’t ruled out a move back into investment banking, but the plan for now is to get the as-yet-untitled album released by early-2017.
“It will be in the form of a long, continuous piece of music, more like a classical symphony than a collection of pop songs,” he says. “It’s not one for hormone-crazed teenagers – more for the connoisseurs.”