Morning Coffee: High pay and short hours? Not for everyone in hedge funds. Managing by numbers at Citi
Baby-faced hedge fund manager David Einhorn didn't say how many hours he worked last year in the investor letter he sent yesterday, but it seems fair to assume it was more than 40 a week. In 2018, "nothing went right" for Einhorn (his own words): "the losses were a mile wide and a yard deep," and his fund declined by 34.2%. None of this is conducive to an eight-hour day.
Einhorn is the new poster boy for the tribulations of working in hedge funds. His instincts may yet be proven right (he says Tesla is like Lehman Brothers and that Elon Musk is "above the law"), but for the moment markets keep proving him wrong. What can you do, except tweak your portfolio, fire your CFO and keep putting the hours in, hoping that Musk's crown slips and your gold hedge against catastrophic U.S. deficit expansion one day comes through?
Today's jaded Einhorn might have a few things to say to yesterday's naive John Paulson. Palulson, who is also a hedge fund manager, and who is himself contemplating turning his fund into a family office after a difficult few years, this week made a podcast explaining why he chose to go into hedge funds as a young man. He thought the hours were shorter in hedge funds than in M&A and that you could make more money. In M&A your fees are "capped by the time you have", whereas in hedge funds there's "unlimited upside", said Paulson.
Einhorn aside, young Paulson might have been onto something - Wall Street Oasis says hedge fund managers work an average of 65 hours a week, compared to 75 for private equity employees, and 80+ for bankers. A previous study found hedge fund managers work 70 hours a week, but thought they had great lives all the same.
One hedge fund manager who does seem to be living the youthful-Paulson-dream is Citadel's Ken Griffin. Fresh from splashing out on a £95m London house once used to interview MI6 recruits, Griffin yesterday sprinkled another $238m on a penthouse condominium overlooking New York's Central Park. A spokeswoman said Citadel is expanding in New York City and that Griffin was looking for a place to stay when he's there. It's not clear how many hours Griffin puts in each week, but he clearly doesn't have time for commuting - his new Penthouse is just around the corner from Citadel's New York office.
Separately, if you're at Citigroup you need to watch your targets. Citi CEO Michael Corbat, who has a reputation for being a numbers kind of guy, explained yesterday how he plans to shrink the bank's 30% pay gap between men and women. "We have a saying that you are what you measure. If you’re held accountable against the right things, you’ll get the right outcomes,” declared Corbat.
Elements of MiFID II are migrating to the U.S. and this could be bad news for equities professionals. - Last month, the Securities Industry and Financial Markets Association’s asset management unit indicted that it wants research to be charged separately. (Bloomberg)
Deutsche Bank is repatriating €400bn to Germany from the UK because of Brexit. JPMorgan is moving €200bn (also to Germany). Other banks are moving at least €150bn. (Bloomberg)
John McDonnell, shadow Chancellor (from the British Labour Party): “I want to make it explicit that we will not introduce capital controls.” (Financial Times)
Brian Moynihan says Bank of America has already spent $400m getting ready for Brexit and that it has "extra liquidity," "extra people to work," when/if Brexit comes about. (Sky)
Ongoing guard changing at Bank of America: Ex-head of global rates and currencies origination, Mike Joo is taking over from David Glaser as COO of the investment bank. (Reuters)
The trial is expected to take up to six months. If they're found guilty, the four men (who say they're innocent) could each be imprisoned for 10 years. (Financial Times)
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