Morning Coffee: Barclays bankers may not want to spend last year's bonuses after all. The three hedge funds to work for

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It has been roughly two months to the day that Barclays announced it had increased the size of its 2018 bonus pool for the first time in five years. Bonuses were up 9% across the board, and incentivized compensation for investment bankers was said to have risen by a similar percentage. Needless to say, they didn’t have much time to celebrate. With the checks barely having cleared in their accounts, investment bankers at Barclays will once again be on the receiving end of bonus cuts as the bank prepares for a showdown with activist investor Edward Bramson.

Bonuses accrued during the first quarter within Barclays’ investment bank are set to fall by double digits compared to Q1 of 2018, according to the Financial Times. The sudden about-face when it comes to compensation is likely due to a combination of factors. Efforts to improve the bottom-line could favor Barclays in its public spat with Bramson, a 5% shareholder who has demanded Barclays take a knife to its investment bank as he pushes for a board seat. There’s also the fact that banks struggled during the first three months of the year, with Barclays being no different. Analysts have slashed estimates by 10% since February at Barclays International, which houses its investment bank.

The third big piece to the puzzle may be related to the departure of Tim Throsby, the former investment banking chief at Barclays who was ousted last month. Throsby was said to have previously shielded investment bankers from bonus cuts, even if they didn’t hit their targets, sources told the FT. CEO Jes Staley has also been lauded internally at times for trying to retain the bank’s top performers, including ridding the firm of its punitive deferral programme and increasing compensation for material risk takers. Perhaps it was actually Throsby who was pushing those buttons? Or it’s simply the case that Barclays now finds itself in a much more awkward position.  

Either way, investment bankers are reportedly set to take the brunt of the punishment. And not just when it comes to bonuses. The bank is also planning on promoting fewer bankers to managing director this year and be less generous with the pay packages it offers new recruits. The moves will surely help Barclays tighten its belt, but they could also spur a wave of defections and result in fewer top-end hires.

Elsewhere, pressure from cranky investors has slowly pushed hedge fund fees well below what was once the industry norm of 2-and-20, or 2% of assets under management and 20% of gains. The average hedge fund now charges just over 1.4% of AUM and less than 17% of gains. But not everyone’s cutting fees. Quant fund D.E. Shaw is reportedly increasing the cost of its flagship fund to 3-and-30, according to Breaking Views. D.E. Shaw joins fellow annual outperformers Two Sigma and Point72 as three funds known to charge such a rate.


While U.S. banks generally unperformed during the first three months of the year, Q1 will likely be the best quarter Wall Street puts together in 2019, at least according to one Citi analyst. (CNBC)

And if you thought U.S. banks dropped the ball a bit during the first quarter, you may want to look the other way come European reporting season. Investment banking revenues across EU banks may drop by nearly 25% during Q1 compared to just an 11% decline at Wall Street banks. (FT)

UBS has issued a memo defending its decision to hire former congressman Jeb Hensarling (R-TX), the ex-chairman of the House Financial Services Committee who led efforts to deregulate the banking industry in recent years. Current UBS staff wrote a letter to a senior executive bashing Hensarling’s appointment due to his voting record on issues like same-sex marriage, abortion and violence against women. (The Telegraph)

Edward Rossetti, head of U.S. ETF trading at Goldman Sachs, has left the bank for a similar role at J.P. Morgan. Three top executives within Goldman’s equities division have now left since March. (Bloomberg)

Facebook has beefed up its executive team in the two areas where it is struggling most. The company named prominent Washington attorney Jennifer Newstead its general counsel while appointing John Pinette, former PR chief for Microsoft co-founder Bill Gates, its new vice president of global communications. (WSJ)

Tech billionaire Mark Cuban shared a $600-a-month three-bedroom apartment with five other guys when he was 24. "I had quit or been fired from three straight jobs" and didn’t have enough money to open a bank account, he said. It ended up working out. The Dallas Mavericks owner and Shark Tank star is worth $4.1 billion. (CNBC)

Among banks and other financial firms, the Big Four – PwC, EY, KPMG and Deloitte – appear to lead the way in mental health and well-being initiatives for employees, at least in London. (Financial News)

Goldman Sachs has re-hired Silvia Biscaldi, who left four years ago to head up Barclays’ European private capital markets division. Banks are making a bigger push into private market deals as initial public offerings have begun to slow in Europe. (Financial News)

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