Morning Coffee: BNP Paribas’ unfeasibly hot employees, and the bankers who rarely see their children

For most people in investment banking, the news that your bank is making a strategic decision to get out of your business line, and will be closing your division down is about the worst news you can possibly get.  The traders at BNP Paribas’ prop trading desk (“Opera”), though, don’t seem to have had much reason to worry.  The decision to close Opera down was announced in January of this year, and ever since then LinkedIn and the regulatory registers have been lit up with news of former BNPP prop traders showing up in new jobs, usually at prestigious hedge funds.

The reason for their popularity isn’t that complicated.  People with a track record of making money are not too common, and people with a track record of doing so at large scale are even rarer.  The team of senior traders who managed BNPP’s prop book had been doing so for years, and with a portfolio size of $3bn between about a dozen of them. 

Admittedly, Opera had a tricky 2018, but then so did the rest of the hedge fund industry thanks to the wrong kind of volatility. Long term, however, Opera's record is very strong, and BNP got rid of the traders largely because the regulatory capital hassle was getting too much to deal with, not because they were bad employees.  Added to that, the majority of them were French quants, and the graduates of elite French engineering colleges tend to have a pretty good network across the financial industry.  It’s doubtful that there was much time spent nervously waiting for calls back from headhunters.

So far, Citadel, Brevan Howard, Capstone, H2O, Eisler and Capula have taken on Opera alumni.  This isn’t a wholly risk-free move for the new shops; it’s practically a cliché in the hedge fund industry that traders who were kings of the market when they had the resources of a bulge bracket firm backing them up often fall embarrassingly on their faces when forced to rely on their personal franchises.  But it’s noticeable that for the most part, the Opera team have moved to big, quasi-institutional funds where they will be part of a big money-making machine rather than carrying the entire fund on their own.  And although a fund that’s subject to inflows and outflows can never have quite as stable funding as a national champion too-big-to-fail bank, it’s unlikely that any of the blue chip names that have taken them on will be at much risk of forcing their traders out of a position to meet redemptions.

Unfortunately, there’s not much to be learned from this for the rest of us, except the evergreen lesson that “it’s nice to be at the top”.  It is noticeable, though, that this small team had clearly built up a franchise which was their own rather than their parent bank’s – nobody seems to have thought it reflected badly on the staff of Opera when BNPP closed it down.  How many teams in the industry, even leading franchises, can really say that?

Elsewhere, it’s Mental Health Awareness Week, and that means once more looking at the long hours culture in the financial industry.  It’s difficult for bankers to get much sympathy here – although it tugs on the heartstrings a bit to hear a child saying “see you Saturday” as his father sets off to work at the start of the week, we’d do well to remember that people do shift-work and drive trucks for a lot less money, not to mention doing tours of duty in the armed forces. 

But that shouldn’t stop people thinking about whether what they do makes any sense or adds any value.  An anonymous head of investment banking remembers telling his staff “Life is like a stove where you have four burners — work, health, family, friends. Turn one burner off if you want to keep your job here. If you want to be a star, you’ll turn off two.”  If any readers remember being on the receiving end of that analogy, you might be interested to know that in retirement, he’s realised it was crazy.

The trouble, of course, is that any change to the long hours culture is going to have to depend on the clients.  If people keep asking for new presentations by 8am tomorrow, then people are going to keep doing all-nighters.  And the clients, in general, feel like they’re paying big fees to get a service from bankers who are in general richer than they are, so it’s going to be an uphill struggle to convince them that work-life balance and less burnout might be worth aiming for in the long term.

Meanwhile …

Obviously it’s not the greatest situation to be in if “the cost of hedging exposure to us is too high” is a major competitive issue for your bank to deal with, but Deutsche Bank has to play the hand it’s been dealt, and the launch of new CDS contracts based on its most senior category of debt will help.  Another sensible, unshowy blocking-and-tackling move in the post-Commerzbank strategy? (FT)

Raising memories of the dot com boom among the older heads in the market, Morgan Stanley used its position as lead underwriter of the Uber IPO to boost its wealth management business by offering customers access to IPO allocations.  That currently looks like it might lead to some tense conversations at the country club. (Bloomberg)

The “get s**t done” signs aren’t on the walls any more, but Revolut is still determined to move fast.  It’s now applying for a banking license in Russia and hiring a regional head there to deal with the Russian regulators.  This might not go down well in Lithuania (where Revolut’s EU banking licence is held), as the Parliament continues to investigate whether the bank’s existing Russian links via the founder’s family are a threat to national security (Financial News)

Credit Suisse can’t put the US tax scandal behind it, seemingly.  The bank has always maintained that its problems were caused by a small number of bad apples who broke US law.  But one of those apples has sued in a Swiss labour court for unfair dismissal, and has now been awarded CHF4m compensation, along with a judgement that he was only doing what top management urged him to do.  Awkward. (Finews)

Not many changes at the top of the UK hedge fund rich list, although all the actual amounts appears to have gone up. (Financial News)

Deutsche Bank and UBS are currently unable to agree on who would have ultimate control of any entity arising from merging their fund management businesses (Bloomberg)

Top tips for a professional-looking LinkedIn photo from a freelance photographer.  Some of them are useful, so it’s worth persevering past “Women: Avoid Cheap”. (Finews)

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