Meet the "digital investment banks" coming for your IBD job
First they came for the equities traders and the FX traders. Then they came for the CDS index traders. Now, it seems, the computers are coming for the jobs of people working in M&A and capital markets.
In an effort to cut costs make junior jobs more interesting, U.S. investment banks are busy trying to automate the process of doing deals.
J.P. Morgan has something called the "Emerging Opportunities Engine", which helps predict which clients might want to do a deal soon. Goldman Sachs CFO Marty Chavez has said he wants to automate the initial public offering (IPO) process and Goldman is already busy hiring London-based Java developers for the purpose of, "automating the wide-ranging workflows and processes that form the execution of an Investment Banking project".
Junior M&A bankers have long complained about boring and repetitive work. It seems their wish for more interesting tasks will soon be granted - with the corollary that there aren't many interesting jobs and fewer people will needed to do them.
The automation of 'workflows' within big banks isn't the only threat to analysts and associates in investment banking divisions, though. Lurking on the sidelines are also "digital investment banks" trying to win the big firms' dinners.
One such is Overbond, a Toronto-based start-up run by a Vuk Magdelinic,a former salesman at CIBC, which aims to "digitize" the process of bond issuance.
"We're building a cognitive computing algorithm that can predict who is going to be an issuer and is likely to come to market in the short term," says Magdelinic. "We also have an algorithmic pricing tool which prices securities and we can algorithmically match investor portfolios with industries and issuance opportunities."
There aren't many IBD professionals at Overbond. The company employs 30 people, but most of them are "engineers" and most are based in Toronto, which is known for its artificial intelligence community. As Overbond expands this year, Magdelinic says sales and relationship managers will be added globally.
If Overbond doesn't want archetypal analysts and associates for its digital debt capital markets platform, the same can't be said of Dealglobe, a self-described "independent digital investment bank" which aims to match European vendors with Chinese investors. Based in London and Shanghai, Dealglobe has been hiring juniors from big banks. They include Robert Cole, who joined from Lazard as an M&A analyst in January and Frédéric Bloquel, a former UBS associate who joined as a VP last November. Dealglobe's founder, Lin Feng, spent eight months at UBS in London before leaving for private equity in 2012. Its chairman, Andrew Bell, is a former head of global M&A at HSBC, and the head of its UK business Nick Adasi once worked for Goldman Sachs.
Dealglobe didn't respond to a request to comment for this article, but headhunters said the digital investment bank may not provide a great alternative to traditional careers in M&A. "People there keep calling me up and saying they want to leave," says one, speaking off the record.
At Overbond, meanwhile, Magdelinic is adamant that AI tools will supplement rather than supplant existing banking jobs: "Bankers in the 1970s didn't have laptops or cellphones - technology is simply evolving," he says. "The skillset and the added value of bankers are here to stay, this is just about making people more efficient."