It's a strange time to leave your job in an investment bank. With bonuses looming into view, most senior bankers are sitting tight, waiting to determine the dimensions of their payouts before committing to anything new. Not so Peter Elwin, deputy head of European equity research at J.P. Morgan Cazenove. He just quit after seven and a half years.
Elwin is off to the Universities Superannuation Scheme, where he'll be working in a newly created role as head of research in the investment subsidiary, USS Investment Management. The scheme is the principal private pension scheme for universities and other higher education institutions in the UK. ISS engages in "active investment management" in equities.
Elwin said his "exciting new role" is about more than "just validating recommendations" but will involve helping USS portfolio managers "develop a sophisticated understanding" of the investment process. He was promoted to deputy head of equity research at J.P. Morgan in 2014 as J.P. Morgan shook up its research team when its previous research head returned to New Zealand.
Elwin might be one of the most senior equity researchers to leave banking before the coming (dismal) bonus round, but he's not the only one. As we reported last week, Will Draper, former head of telecoms research at Mirabaud Securities left to become director of investor relations at BT, while the head of Goldman's US medical technology research team left to become a VP at a medical devices firm.
In Europe, equity researchers are being disrupted by MiFID II, under which research providers will need to charge separately for research rather than bundling it in with trading commission charges. A study by Edison Investment Research and Frost Consulting suggested the budgets for banks' equity research teams have fallen by 50% since 2015 as a result.
To make matters worse, bonuses across European equities are likely to be miserable this year, with European equity derivatives and cash equities divisions under-performing the rest. That said, J.P. Morgan's equities trading business was by far the strongest in the first nine months of 2016: equities revenues at JPM increased by 19% on 2015 compared to reductions of 40% at Barclays at 21% at Credit Suisse. If one of J.P. Morgan's most senior equity researchers doesn't see the point in sticking around until bonuses are paid, researchers both at J.P.M. and other banks should probably take heed.