Morning Coffee: The relaxation techniques of the (hedge fund) billionaires. Deutsche Bank's nascent new plan
The World Economic Forum at Davos attracts the most publicity, and ridicule, but it’s by no means the only super-rich talking shop on the planet. The Milken Institute Global Conference, which is somewhat inevitably known as “Davos of the West” is taking place this week, and when you look at this event, it’s almost as high-powered as Davos and in some ways possibly more so.
It’s very, very rich, for example – founders, private equity tycoons and hedge fund titans show up there. At a rough estimate carried out by Bloomberg, there was at least $100bn of personal wealth represented by the crowd at Milken this year, plus very many CEOs and political insiders. Some of them will have put up the $15,000 ticket cost out of their own deep pockets, others might have got the shareholders to do so.
What do they do when they’re there? Same as Davos, as far as anyone can tell. The central conference is full of seminars and panels where, as the saying goes, “billionaires talk to millionaires about what the ordinary person thinks”, and make a small amount of progress toward solving problems like obesity, Brexit and cybercrime. But all the real action is at the parties and side events.
The unofficial gatherings have the distinct advantage that they’re not sponsored by the Milken Institute and so they’re not covered by the price of the ticket. That means you can shut out the people you don’t want to talk to and concentrate on getting some real quality face time with the ones you came out to Beverley Hills to meet. If you’ve for some reason got an empty spot on your networking card, though, you can either stand out in the hotel lobby hoping to make a random connection, or head for one of the “relaxation” events.
These are the really distinctive characteristic of Milken. In Davos, there’s basically two things to do if you’re not attending a panel or schmoozing – you can ski, or you can get drunk. In Southern California, though, the first isn’t possible and the second isn’t fashionable. So the Milken Institute lays on events more in keeping with the Hollywood setting. There’s a “wellness garden”, for example, where you can go for a yoga and meditation session at 6am. There are massages rubbing wealthy and influential backs all the time. And there’s “sound healing”, where listening to gongs and metal bowls will apparently cure you of digital fatigue and nervous overload (Bloomberg's photo of some balding suited men watching a woman dressed in white playing metal bowls is probably not to be missed here).
The true SoCal heart of the conference, though, is a wire pen filled with a dozen puppies, which attendees can pick up and pet if they feel stressed, or want a cute picture for the corporate Instagram. It “reduces blood pressure, promotes focused interaction with others and stimulates problem-solving”, which sounds like just the ticket for something to help you strategise how to crash the dinner with Ivanka Trump and Jared Kushner. Or, for that matter, if you’ve just been to a panel where it’s predicted that “what’s coming is class war”, a sentiment that appears to have been on attendees’ minds for some reason.
There’s no representation from the Deutsche Bank C-Suite at Milken, though; they have bigger puppies to cuddle. And some of the initial signs of activity in the post-Commerzbank world look almost encouraging. For example, management are now finally getting round to basic blocking-and-tackling moves like putting together an Institutional Clients team at its wealth management arm.
This is a signature move of the Swiss banks – the Deutsche version will be called “Institutional Wealth Partners” and replicates similar teams at Credit Suisse and UBS. The function of the team is to act as a bridge between the investment bank and wealth management, and to put together deals and bespoke solutions which recognise the fact that the biggest individual and family-office accounts are often as big as the corporate and asset management clients serviced by the CIB division.
It’s not a transformational strategy, particularly since Deutsche’s presence in the ultra-high net worth segment is, while material, not really in the top five market share. But setting up this kind of dedicated team has been a reliable and solid money maker for CS and UBS (and for GS and JPM, who have similar functions). The fact that Deutsche has decided to attend to easy wins and proven strategies, and hired CS veteran Claudio de Sanctis to oversee the European wealth management function, might suggest that there’s more strategic direction to the German national champion than just trying to cut costs everywhere.
The Goldman Sachs “SWAT Team” – the investment banking unit concentrating on smaller and medium-sized US companies – appears to have had some early successes, although it’s also been met with a degree of scepticism from companies who think its interest might be opportunistic and driven by the needs to private equity sponsors. (Bloomberg)
As the AGM draws near, Jes Staley is in fighting mood and suggesting that Edward Bramson should “go back home to Connecticut” (WSJ)
Jes has also apparently suggested that Barclays – whose own past problems have been seen by many analysts as echoing those of Deutsche Bank – could have a big market share opportunity to be the last European player standing if Deutsche cuts back. Investment banking market share doesn’t really work that way, but it’s clear that Barclays regards itself as playing offense (Daily Telegraph)
Tales of executive disloyalty at Apollo, where one former partner decided to hang on to a load of confidential documents while making a competing bid for an insurance company against Apollo, and a current Apollo employee spent five hours a day helping him with the modelling for it. Ming Dang and Imran Siddiqui have been ordered to pay $1m and $150,000 damages respectively, but haven’t been forbidden from proceeding with their deal; their lawyer suggested the award was “less than the lawyers’ Metrocard reimbursements”. (FT, Financial News)
JP Morgan’s “Deep Neural Network” is a trading algorithm that looks back over its past execution performance to try to learn to do better (Reuters)
Rare good news for rates trading – Morgan Stanley is making several hires to its European team (IFRE)
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