Morning Coffee: The special send-off for the most storied partners at Goldman Sachs. A hiring freeze at Barclays?
Some banking careers end in tears, some with a cardboard box full of family photos, and some with a five piece marching band to lead you off the trading floor. Justin Gmelich left Goldman Sachs’ fixed income trading floor in the latter style earlier this year. - Gmelich, Goldman Sachs's departing head of credit, was reportedly played off the trading floor by a 5-piece band to Frank Sinatra's "My Way." Brian Levine seems to have experienced something similar.
Organising marching bands and elaborate leaving ceremonies is something you do on a trading floor when the phones aren’t ringing. It's not clear whether Goldman's traders have time to do the same thing for all partner exits. And quite a lot of partners have left Goldman this year, or are planning to leave, according to the Wall Street Journal, which says that as many as 15% of the current partners leaving. That would be a little bit more than 70 people, and given that the 2019 class of partner promotions was particularly small at 69, it would suggest that the number of partners will shrink – not drastically, but shrink – for a second year.
Exiting partners are not necessarily a big deal in and of themselves – the number of departing partners is not a fixed quantity and some years (2011 and 2015, for example) see more than others. More or less by definition, a partner at Goldman Sachs is someone with enough money in the bank to do what he or she wants, and the last few years have not been the greatest fun.
However, the suggestion from “people familiar with the matter” is that this is an intentional policy of David Solomon’s, and that he wants to shrink the partnership in order to keep it “aspirational”. That’s maybe a little hard to believe – at just under 500, Goldman Sachs has fewer partners than Allen & Overy, despite being almost twenty times the size. A Big Four professional services firm would have over 2,000 partners and roughly the same revenues as GS. Both PwC and A&O certainly manage to maintain a partnership culture, and the Goldman Sachs partnership seems to be significantly more exclusive than both.
What’s also possible, as banking analyst Dick Bove points out, this is a bank which is going through a strategic transformation; given the massive changes in regulation and market structure over the last ten years, it would be extraordinary if this wasn’t matched by a certain degree of personnel turnover. Mr Solomon has made a big bet on developing Goldman Sachs as a consumer brand through Marcus with less emphasis on trading and securities, and that in turn means that it’s natural for some of Goldman Sachs’ top traders to find a more natural home in another bank; although they’re called “partners”, they’re actually senior employees.
The fact that this is being seen as a “shrinking of the partnership” rather than a “restructuring” or “cost cutting exercise” is testament to the power of the Goldman mystique. Partners are being incentivized to go. “Last year, the firm set up a program to connect partners to boards and charitable opportunities, hoping to coax some out of the door,” says the Journal. Like the band that played for Justin Gmelich, the new CEO wants to do things “My Way”, and for some other partners that means the highway.
Elsewhere, Barclays may have imposed an “informal hiring freeze”. Stories like this have to be taken with a pinch of salt (there was a similar one about Credit Suisse trading a month ago which was strenuously denied). Although Business Insider has five sources, investment bankers often find it difficult to distinguish between “a hiring freeze” and “me not getting my team budget approved”. Tushar Morzaria said on a recent conference call that the bank was being “very selective” but that “a freeze was probably not really the right way of doing it”.
If there is a freeze, it must have been quite recent; over the last few months, Barclays has noticeably been picking up Deutsche bankers like Alastair Blackman and Kristin DeClark. It seems possible that Steven Dainton has agreed to throttle back on recruitment as the new Head of Sales and Trading, but less likely that Fater Belbachir would have joined from JP Morgan if the role was premised on not being able to fill vacancies. It’s likely that things are as they appear and everyone’s telling the truth – the bank is being very, very tough and selective on the new hires it approves, and the line managers are experiencing this as being quite like a freeze.
High speed trading is still apparently a growth industry – Virtu has hired Marc Rosenthal to a corporate development and strategy job from Morgan Stanley. (TheTrade)
…but the previously hot “internal investigations” compliance niche may slow down, as banks are being advised that their legal advice in internal processes may not be as privileged as they had thought if things end up coming to court (Financial News)
A new set of Institutional Investor rankings – congratulations to the Global Fixed-Income Research Team (Institutional Investor)
Coalition data suggests that H1 investment banking revenues were a 13-year low, with equities worst hit. However, this may have been driven by a uniquely bad Q1, and analysts are suggesting that Q3 is up on the previous year. (FT)
A series of court cases has been going on for the last six years between Citi, the UK tax authorities and Mukarram Sattar, the former global head of treasury and trade solutions. It seems to relate to Mr Sattar’s habit of using those global systems to find solutions to his own problems relating to moving money around for his family and a charity he ran, but the details are confusing and he denies wrongdoing. (Bloomberg)
A useful conversation-starter for one’s French colleagues – the famous baccalaureat exam is being overhauled and modernised. (WSJ)
Previous experience in a different organisation is a surprisingly poor predictor of whether an employee will succeed or fail, suggesting that interviewers should concentrate on behavioural and personal questions to focus on knowledge and skills directly rather than trying to infer them from past success or failure. (Harvard Business Review)
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