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Morning Coffee: The failed quest to become Goldman Sachs 2.0. Secrets of a hedge fund genius

It's hard to believe that Matthew Westerman only spent 19 months at HSBC. The former Goldman Sachs banker, parachuted in to thrust a U.S. investment bank culture on to an unsuspecting crew of London-based HSBC bankers used to a more gentile working environment, has unleashed so many changes that his influence is likely to be felt long after his unexpected departure yesterday.

Westerman introduced a system that tracked exactly what his investment bankers did with their time, he skewed the bonus system to towards top performers at the expense of the rest, changed the way employees were assessed and he implemented deep cuts to the top of the tree - chopping 100 investment bankers at director or managing director level, and then started hiring big hitters of his own. According to FT reports on his exit, he also reduced the number of bankers allowed to speak to the media from 240 globally to 30, regularly scheduled meetings for 6am and ruffled so many feathers with his "abrasive" and "direct" style that his exit was a matter of time.

"He had a different mindset to the rest of the bank and that rubbed people up the wrong way. A lot of people found him difficult to work with," one former HSBC banker told Financial News.

Westerman might have cut heads, and moved some bankers across to HSBC's markets division, but he also brought in his own people. As we pointed to yesterday, hires this year included Ray Doody, as global head of leveraged and acquisition finance, who joined from J.P. Morgan in January; Alexis Maskell as global head of financial sponsors, who joined from Deutsche Bank, also in January; and Rob Ritchie, as co-head of global banking in the UK, who joined from Goldman Sachs in July.

Some observers have suggested that Westerman's exit was down to being overlooked as HSBC's new CEO - a position that eventually went to retail and wealth management head John Flint - or that he was outgoing chief exec Stuart Gulliver's man, and was therefore unlikely to last long under the new regime.

But, it could also simply be a case that HSBC's ambitions didn't match the reality of what it expected from Westerman. The FT suggests that Westerman was given a free rein to hire and fire, but after ousting some long-time senior bankers used to a more old-fashioned approach to client relationships and hiring in a some big names, he found that HSBC's pockets were not as deep as he thought. Even after all the comings and goings, headcount in the investment bank is still largely flat on when he joined.

Let's not forget that Westerman was brought in to shake things up. As Euromoney reports, the idea was to expand away from HSBC's traditional strength in debt capital markets, land some big advisory deals - especially from private equity clients - and push the bankers who stuck around harder so that it could compete with the big U.S. banks. But it's one thing saying you want to be like Goldman Sachs, and another getting the buy-in of your employees.

“I guess they’ll now go back to the old ways,” one friend of Westerman told Euromoney. “Any chance they had of being a proper investment bank is gone. It will take a long time for people to take HSBC seriously again.”

“Outside of Hong Kong and apart from foreign exchange, they don’t really have the ambition or the appetite to take on the global investment banks,” Citigroup banking analyst Ronit Ghose told the FT.

Maybe HSBC bankers will be secretly grateful for the return to the norm.

Separately, James Hanbury, the 34-year-old Odey Asset Management portfolio manager who so impressed senior management that they decided to create a new fund just for him, continues to repay the faith placed in him. As most hedge funds continue to struggle, his Absolute Return Fund - which has generated returns of 204.9%% since 2009 - is still performing. As a company, Odey isn't having the best time (its assets under management have halved over the past two years to $5.5bn), but the $772m run by Hanbury is up 11.2% this year, according to Financial News.

Hanbury has said previously that his secret is relatively simple. He targets stocks where the 'perceived risk is less than the actual risk’, and that he preferred to go long on companies owned by large families.


Deutsche Bank's asset management arm has nearly secured a new office for 1,400 employees in Frankfurt (Bloomberg)

Squeaky bum time - you have one week left to prepare for MiFID II (Financial News)

Sanctuary for research analysts - China (Bloomberg)

TCI wants regulators to investigate Xavier Rolet's exit from the LSE (Financial Times)

The increase Brexit workload has prompted the European Central Bank to hire 170 more staff (Bloomberg)

"We’re confident that men and women are paid equally for doing the same job at the Bank; however, the greater proportion of men than women in senior roles creates a gender pay gap.” (Financial News)

"Self-love, loving-kindness, and awareness of mortality" = the solution to dinner with your in-laws. (Wired)

A Holidays survival guide (Quartzy)

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AUTHORPaul Clarke
  • Ja
    Jasmine Lim
    25 November 2017

    "We're confident that men and women are paid equally for doing the same job at the Bank; however, the greater proportion of men than women in senior roles creates a gender pay gap." (Financial News) - This statement is amusing at best and obnoxious at worst. Women require to do much more and proof much more to achieve the same role / title (ie: you have a much more experienced woman holding the same job as a man). This creates the gender pay gap.

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