Morning Coffee: Ex-Deutsche Bank MDs to receive huge loans from unconventional new employer. When 23 year-olds get the biggest pay rises
It seems that several of Deutsche Bank's former managing directors and most senior executives have fallen on their feet. While the German bank's contemporary staff fret about the 17,000 redundancies still to come, some of those who escaped in good time are being offered lavish loans to invest in their new employer - hopefully at a profit.
This is one conclusion from the weekend's revelation that SoftBank is lending up to $20bn to the employees of SoftBank Investment Advisors who work on its Vision Funds, so that they can invest in the second fund and hopefully make some money alongside its investors.
$20bn is a lot of money. It's even more money when you consider that SoftBank Investment Advisors currently only has around 400 employees. This implies the intention of lending each of them an average of $50m. SoftBank reportedly wants to double headcount at the Vision Fund over the next 24 months, but a $25m loan isn't exactly a small amount either.
Who will be the recipients of this generosity? This is where all the ex-Deutsche Bankers come in. The CEO of SoftBank Investment Advisors is Rajeev Misra, the former head of credit trading at Deutsche, who left the bank after the financial crisis in 2008. The managing partner of the Vision Fund in the Americas and Asia is Colin Fan, the ex-head of Deutsche Bank's trading business, who made that viral video in 2014 urging Deutsche's traders to be well-behaved. The managing partner of the Vision Fund in EMEA is Akshay Nikita, a former head of proprietary trading and principal strategies at Deutsche Bank. There's also Munish Varma (formerly an FX and structured credit trader at DB), Saleh Romeih (formerly a Deutsche MD in Singapore) and Faisal Rahma (former co-head of financing and solutions for Central Europe at DB), plus others. Misra has even hired Vivienne Dyksra, Deutsche's former head of graduate recruitment, to help build his team in EMEA. It's like the old days, but on the buy-side.
None of the ex-Deutsche Bankers at the Vision Fund are lacking in money of their own. Most, if not all, of them worked at Deutsche from the late 1990s to around 2012, and did well in the years preceding the financial crisis, when Deutsche was making money and paying well. Colin Fan received $6m in deferred bonuses after he left DB following a dispute over trades.
In theory, the ex-DB men could now get an opportunity to increase their net worth still further if their leveraged investments in the Vision Fund pay off. However, it's worth considering that the first $100bn Vision Fund is facing a few issues. The WSJ notes that shares of Uber Technologies have fallen 30% since the company went public in May and are now trading below the roughly $35 level that SoftBank is thought to have paid to acquire its stake. Meanwhile, WeWork, the Vision Fund's other big investment last week, revealed a loss of $1.6bn in 2018 and another loss of $689.7m in the first half of 2019 (with the first half loss this year larger still, were it not for a one time gain of $486.2m).
What happens if the employees' loans are invested and don't yield a return? This isn't entirely clear - the WSJ notes that SoftBank could lose money, but neglects to mention the risk to employees, who could own up to 20% of the fund compared to an industry standard closer to 5% or less. The loans also aren't being made for free. Deutsche Bank's former traders and the other Vision Fund employees will be expected to pay interest rates of 5% on them. On a $25m loan that will amount to $1.25m a year. Some of the ex-Deutsche Bankers at the Vision Fund might want to pass on their new employer's kind offer...
Separately, mid-ranking lawyers in London have a grievance that will sound familiar to mid-ranking bankers at Deutsche Bank and elsewhere. Just as banks have had a tendency to focus on keeping junior staff happy to the (alleged) detriment of those above them in recent years, so big law firms in London are accused of hiking pay faster for juniors and eroding the differential with employees above them.
“We are seeing real compression in pay,” one associate at Slaughter and May, a London law firm told the Financial Times. “The headlines are all about the newly-qualified pay, but there’s been very little uplift for lawyers who are two, three, four and five-years qualified.”
The cause of the pay hike for juniors is the proverbial competition for talent, along with the generosity of big U.S. law firms in London. Some U.S. firms pay newly qualified lawyers £140k ($170k). By comparison, the most that UK firms can muster seems to be £100k.
The German economy is slowing down at just the wrong time for Deutsche Bank. “Deutsche Bank’s restructuring plan has been ambitious from the start and Germany’s economic slowdown will make it that much harder to achieve.” (Bloomberg)
UBS hired former Deutsche Banker Seth Damergy to head its medical device and technology investment banking practice in the Americas. (Reuters)
A hedge fund hired deception detection experts from the CIA to the analyze the statements of managers in a legal firm it's short-selling. (This is Money)
An ex-Google employee accused the technology company of racism: "Over the last 5 years I’ve heard co-workers spew hateful words about immigrants, boast unabashedly about gentrifying neighborhoods, mockingly imitate people who speak different languages, reject candidates of color without evidence because of ‘fit’ and so much more.” (Vice)
Chinese AI researchers have increased 10x in 10 years and they're most located outside of China. (Technology Review)
Hong Kong bankers are moving money out of the country. (WSJ)
If you want to seem charismatic, focus on imagining a person you feel great warmth and affection for (while or before talking to someone you don't). This, 'can change body chemistry in seconds, making even the most introverted among us exude the type of warmth linked to high-charisma people.' (New York Times)
As it contemplates cutting jobs, UBS has given its bankers a summer reading list that's all about handling change. (Business Insider)
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