Morning Coffee: The 'rare humanity' in the way Deutsche Bank made its redundancies. Jeffrey Epstein, the hedge fund manager nobody knows
Fundamentally, there’s no good way to sack thousands of people. The bad thing is the news itself, not the way it’s presented. And, although they might not be the first claimants on anyone’s sympathy right now, it isn’t a particularly pleasant experience for the managers handing out the redundancy notices either. Nobody goes into investment banking for days like Monday.
So although an FT columnist might have been a bit tongue-in-cheek in saying that it was evidence of “rare humanity” that Deutsche Bank let its employees stay in the bank for three hours rather than sending them into the July sun with their belongings in garbage bags immediately, that’s actually close to the truth. A trading floor is full of computers which are capable of sending out billions of dollars’ worth of orders in a couple of minutes, after all, so the normal protocol is to eject laid off staff immediately. It's not clear whether Deutsche Bank's traders actually had access to the systems during this time - but Deutsche's recent history of making traders work their gardening leave, suggests they might have.
The logistics of mass layoffs are never easy to manage and maybe DB didn't do too badly. When you’re firing a couple of dozen people, you can give each one a long and respectful exit interview, fund a couple of months’ outplacement and organise a party. When you’re laying off a couple of thousand, it’s all you can do to find enough conference rooms to hand over the envelopes in person. As an individual caught up in the process, the one positive side is that, like block trades, mass layoffs are not taken by the market to be informative. There's no stigma to losing your job in situations like this.
And in any case, as we've been observing, not everyone at Deutsche Bank is losing their job. Fixed income traders have reportedly had it confirmed by Ram Nayak that the downsizing of the trading book won’t involve dismissals. This might lead to some survivor guilt (although Nayak himself is a survivor of many reorganisations and management reshuffles in his decade at the bank and should be able to help his people through this).
The other big story of the week has been that of Jeffrey Epstein, the … “financier” arrested for sex trafficking. And in the world of finance, people have been asking questions along the lines of “Jeffrey Who?”. For someone who is regularly described as a hedge fund manager, he doesn’t appear to have any friends, counterparties or clients who anyone else in the industry knows. In a gossipy industry, that’s suspicious.
Given the nature of the charges, it’s perhaps unsurprising that people aren’t falling over themselves to admit that they knew Mr Epstein. But a hedge fund usually has a prime broker. It has an auditor. It employs traders, who talk in Bloomberg chatrooms. It has a compliance staff. A big one, as Mr Epstein’s is meant to be, has an account manager at every major house on the Street. It would be pretty unique for a hedge fund in the normal sense to have as tiny a footprint as Mr Epstein’s if managed as much as the news stories claim.
Family offices sometimes manage to keep a much lower profile, and some of them can be pretty big. But wealth management accounts that want to stay anonymous … well, they stay anonymous. They don’t fly around in jets with Bill Clinton and throw constant parties in ostentatious real estate in New York and Florida. It’s a puzzle, and if anyone has any clues the tip address is below.
“Not since Lehman have we seen an opportunity on such a wide scale for competitors and new entrants to cherry pick some of the City’s best bankers.” (Financial News)
Another minor mystery – in the transcript of the conversation between members of Italian political party Lega and shady-sounding Russian financiers, an “investment bank” which is “regulated by the FCA … and BaFin” is mentioned but never named. (Buzzfeed)
Morgan Stanley is releasing an AI chatbot which is meant to be able to sift through the output of its research analysts and answer simple questions from clients to guide them to the notes that might be most interesting. This was traditionally a key function of generalist sales, and it’s slightly dystopian to think that future analysts, rather than building a relationship with the sales desk, will be concentrating on learning the equivalent of search engine optimisation skills (Business Insider)
After the pause earlier in the year, the Saudi market is back at the front of bankers’ priorities. Goldman Sachs has hired Mohammed Nazer (currently based in the USA) to join their team in Riyadh (Bloomberg)
According to a memo sent to clients, Deutsche is actually keeping a large proportion of its equity analysts, outside Asia, merging them with the credit research team. (Bloomberg)
Harvard has disciplined its star economist Roland Fryer, putting him on a two year leave of absence after serious harassment allegations (WSJ)
Satirical social media accounts are collecting together the worst examples of vacuous self promotion from LinkedIn (FT)
Joke of the day is to call up your competitors at JP Morgan and pretend that you thought the ship full of cocaine that was intercepted by US Customs (and which appears to have been registered to a finance subsidiary owned by JPM Asset Management) was destined for them. (CNN)
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