Morning Coffee: The richest people in finance are brilliantly eccentric. Key to enjoying a banking career
Some of the 300 people who work for quantitative hedge fund Renaissance Technologies are rich. Not just the garden variety managing-director-in-an-investment-bank sort of rich, but very rich. Fly into work in a helicopter rich. In the the words of Bloomberg, which isn't usually given to hyperbole, people working for Renaissance are blessed with, 'vast wealth is greater than the gross domestic product of many countries.' It's easy to see why: in the 28 years that Renaissance has been in operation, its secretive Medallion Fund alone has produced about $55 billion in profit.
Whilst enriching its employees, Renaissance has managed to avoid the sorts of management jargon and behavioral norms that are pervasive in banks. Bloomberg reports that Robert Mercer, co-head of the firm, rarely speaks in meetings and is more likely to be heard whistling Yankee Doodle Dandy than articulating sensible sentences. Peter Brown, the other co-head, usually sleeps in his office on a fold-down bed. Twin brothers, the Della Pietras, have adjoining offices and scream and shout at each other through a purpose-built hole in the wall. They're almost telepathic says their former professor; the arguments are simply how they work.
The eccentricity might be because Renaissance, like Winton Capital in the UK, eschews finance types and prefers to hire PhD scientists and engineers. Signal processing specialists with PhDs in maths and physics are favourites. So too are statisticians and experts in probability. Renaissance's core employees come from IBM rather than Goldman Sachs. Today, they're inordinately rich (profits are distributed twice each year and only 25% of pay is deferred and invested in Medallion), but this wasn't always so. - When three of the current partners met in the 1990s they ate in restaurants and used a random number generator to work out who should pick up the tab (whoever got the highest number). That's a trick analysts and associates might want to bear in mind today.
Separately, the latest study into work life balance in financial services by Financial News, uncovers an important anomaly. Fewer than 10% of people working in finance say they "love it," but more than 69% plan to stay working in banking forever. “I hate finance but [am] not qualified for jobs outside the sector – and I need the pay to support my family!”, said one fund manager. So, how can you stay motivated in finance? Ken Costa, the former UBS and Lazard Chairman (and evangelical Christian) has just written a book saying you need a sense of "calling": a sense that you're being guided by the "spirit of God" rather than a "random accident." Costa himself seemingly sustained his banking career on this basis.
The European Union is threatening to make international banks in Europe set up locally capitalized European subsidiaries (in retaliation for the U.S. doing the same). This might discourage banks from having offices in the UK post-Brexit. 'he need for a separately capitalised holding company in Frankfurt, for instance, would make London less attractive as a headquarters for European operations.' (Financial Times)
Trump has been checking out the global head of real estate at Blackstone and the president of hedge fund Bridgewater Associates for his administration. (Bloomberg)
President-elect Donald Trump doesn’t respect JPMorgan CEO Jamie Dimon, who was never under consideration for an administration post anyways. (Bloomberg)
Trump’s presidency is going to be all about debt. But record existing levels of debt have only been sustainable because of artificially low rates. (Northman Trader)
Most hedge fund managers' tastes are far too fancy for their much reduced status. (Reuters)
2017 - the year of MiFID II: “There’s a lot of pain to get through in the next 18 months. We have to digitize the market. We have to turn a very manual, voice-driven market into an electronic market.” (Bloomberg)
Standard & Poors says it will be too expensive to move clearing out of London post-Brexit. (Guardian)
Why Europe isn't necessarily a better bet: "As these things are starting to line up; Italy, France, Germany, Holland, if they do start of go off-piste we are going to have to figure out how we can manage this from a risk management perspective.” Marc St JohnHead of investor relations at CVC. (WSJ)
Have you been invited to one of Theresa May's new monthly dinner parties for the elite? (Bloomberg)
The larger your pupils, the higher your cognitive ability. (DiscoverMagazine)
As Michael Sherwood leaves Goldman Sachs: "The only one who is sad that I’m leaving is my daughter, who says I will be so annoying to have around.” (Financial Times)