Morning Coffee: The most extravagant personality in private equity, and the bank that's replacing its traders with A.I.

The latest “40 under 40” list has come out for the private equity industry, and a most impressive bunch they are too (some of them really quite frighteningly young for the deals they’re leading).  There’s a spread of unusual hobbies: rowing from Barcelona to Ibiza, brainwave hacking and extreme cold exposure, ancient and medieval history.  But leafing through the profiles, there is a real sort of … sameyness to them.  Went to a top university, did an MBA, associate at a consultancy or investment bank, joined one private equity firm, left for another private equity firm, got promoted, led a deal and then appeared on this list.  That’s a summary of the majority of entries, optional space to give a shout-out to a Big Name as “mentor” or mention that you play volleyball.

Compare it too … Nearly killed a schoolmate by slamming a desk onto him, lousy A-levels, got into Oxford University by basically refusing to leave at the interviews, set up an art-selling business, lost vast amounts on a bad property deal, took a job as a trader to avoid bankruptcy, 12 years at Goldman, eight at Nomura then started up their own private equity firm.  That is, of course, the story of Guy Hands, the former punk, who partly attributes his drive to succeed (or occasionally, drive to sue his advisors) to his extraordinarily tough childhood, where failures of the educational system to cope with his dyslexia saw him severely bullied at a number of “special” schools (the desk incident is by no means the most alarming).

Of course it’s a commonplace to say that the industry is running out of “characters”, and there surely can’t be a banker over the age of about 45 who hasn’t at one point mused that he or she (usually he) “wouldn’t have any chance at getting an offer today”.  But it might possibly be a serious issue in the long term.  The “forty under forty” list are impressively diverse in most ways.  But none of them seem to record a background of suffering from a learning disability, for example.  In fact, the overwhelming majority of them have had a career path so clearly directed at the top jobs that it’s hard to believe they’ve ever had hopes and dreams of anything other than what they’re doing right now.

Compare that to the world that Guy Hands was recruited into; bankers and traders came from market stalls, the Army, the civil service and even trade journalism.  There was a certain overwhelming paleness and maleness (Hands himself was one of the first to look for a competitive advantage in hiring people whose faces didn’t fit the template).  But there was a lot of diversity of background and experience.  It’s sometimes worth worrying that we’ve replaced a system made up of “all different types of people, as long as they’re white men”, with one of “a rainbow nation of cognitively identical graduates”.

The next step, of course, is to get rid of any human diversity whatsoever and replace everyone with computers.  And elsewhere in the market, that’s potentially what’s happening.   In the middle of its staff cuts, Nomura moved 66 key IT and quant staff onto its new “E-Trading Strategy” team, and told them that they would be recruiting more.  It seems that  Jez Mohideen’s empire is expanding; Nomura has been investing in electronic trading for rates and credit, but the new moves cover FX, equities and even commodities as well.  The aim is to develop “a market making platform based on artificial intelligence” (it’s not completely clear whether this means an algo platform like BarcX, or something more science-fictional) and to grow revenues by 15%.

It is, of course, an “arms race” for recruiting talent with A.I. skills, and given the bad vibes created by the recent cuts, Nomura has to pitch its offer carefully. Apparently the carrot for new staff is that they will “get the exposure to understand domain knowledge in finance, to work with experienced senior traders”, which seems to mean that the new team has a bit more autonomy than might be the case at other banks, and more scope to offer a start-up kind of environment.  If you’re cynical, you might also notice that the platform will be jointly developed with Brevan Howard, possibly offering a fast track to hedge fund-land for the right employees.

Meanwhile …

Some quality dad-dancing from Tidjane Thiam, as Credit Suisse’s corporate philanthropy earns it a gala performance from Wyclef Jean in aid of Room to Read (Finews)

In normal times, an endorsement of Deutsche Bank’s franchise as “very good and highly professional” by the President of the USA would be an unalloyed piece of good news.  Less so, perhaps, when it comes in the middle of a series of angry tweets over a New York Times article making new allegations about the relationship. (Guardian)

Also according to Deutsche's survey of top cities, San Francisco is top for salaries, Zurich is best for quality of life (as long as you’re married) and Frankfurt is … kind of meh.  The analysts behind the survey to not comment on the extent to which their own bank was responsible for Frankfurt dropping down the salary rankings. (Bloomberg, WSJ)

David Solomon, who apparently eats out five nights a week, discusses his favourite incredibly expensive New York restaurants.  One of his choices, Manhatta, seems to be endorsed by his competitors at JPM and Barclays. (Bloomberg)

Acadian Asset Management is applying its quant skills to ethics, sustainability and governance data.  Early indications are that “there is no straightforward connection” between high ESG standards and stock performance; it’s to be hoped that they don’t end up concluding that evil is the best strategy. (Institutional Investor)

If you’re an accountant with dreams to audit a bulge bracket investment bank, it’s no longer necessary to be at one of the Big Four – Goldman Sachs International has retained Mazars for its audit work (FT)

Pimco employees have been spending so much time gossiping over which senior executives are going to get dragged into the college-admissions scandal that it’s becoming “a distraction from work” (WSJ)

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