Morning Coffee: Goldman Sachs traders' bonus warning as hedge funds prowl. Abnormally elite 30 year-old hedge fund manager goes it alone
Goldman Sachs' traders have had the kind of year that should make some people there very rich. As we reported last month, traders there have had 85 trading days when they've made over $100m this year, compared to 47 in 2021. This appears to be the result of the firm's appetite for risk-taking combined with their own skill: in the third quarter alone, Goldman's traders had 22 $100m+ trading days, Morgan Stanley's had four.
A year like this, in which rates and commodities traders in particular have had performed exceptionally, and when global markets has generated 56% of Goldman's overall revenues, creates expectations. The expectation is that people will be paid for their performance. But this may not be so.
Bloomberg reports that executives in Goldman's global markets division received a warning this week that their compensation 'will be slashed by a low double-digit percentage.' This was not anticipated. Search firm Options Group says traders across the industry are expecting compensation increases of between 10% and 13% in rates, commodities and FX. Only credit traders are expecting a fall.
Goldman's cut is said to be due to cost pressures. Platform Solutions, the new unit including Goldman's credit card and installment lending business, is expected to post a big loss. Marcus, the app-based bank that's been moved into the wealth management division, is expected to lose $1.2bn this year. Spending on technology infrastructure is rising. The return on equity is in danger of lapsing back into single digits. There's not much left to pay people any more.
Goldman traders are already complaining. Bloomberg reports that there are 'internal deliberations' and there could be tinkering with the number. Top traders have alternatives: hedge funds like Verition Fund Management, Citadel, Millennium, Brevan Howard and Balyasny will be only too pleased to scoop up Goldman's disaffected traders. The exit of Anthony Dewell, Goldman's top oil trader, to Millennium in October stands as a warning: the best traders will expect to be paid.
As a result, it seems likely that Goldman will skew its bonus pool towards a few top traders, creating further complaints in the ranks. It could be worse: they could be in the investment banking division, where bonuses are reportedly due to fall by more than 25%. Or they could be in technology, compliance, operations or risk - or any area away from the front office, where bonuses are likely to be squeezed even more.
Separately, it's not clear whether Asfandyar ‘Asfy’ Nadeem has a spouse yet, but if he doesn't, he has just become even more eligible in the eyes of the Daily Mail.
The British tabloid was last seen gushing about Nadeem's 'hunky' and 'drop dead gorgeous' appearance in 2019, when it suggested he was a magnet for women at a wedding. At that time, 27-year-old Nadeem was a mere head of global macro special opportunities at Brevan Howard. Now that he's 30, he's reportedly setting up his own global macro fund (Deem), trading options, with $400m in opening capital. Alongside his apparent allure (he can be seen here in a wetsuit with sandy eyebrows) and macro trading ability, Nadeem has several other advantages: he apparently comes from a 'prestigious' Pakistani family and attended both Eton and Harvard.
James Gorman at Morgan Stanley says the bank is cutting people, but not many: "Some people are going to be let go. We're making some modest cuts all over the globe. In most businesses, that's what you do after many years of growth." (Reuters)
Credit Suisse chairman Alex Weber said clients are returning to Credit Suisse but that it was hairy for a bit. “It was a storm in the retail and partially in the wealth management segment, in particular in Asia, where we had really massive outflows for two to three weeks." (Financial Times)
Blackstone limited withdrawals at its $125bn real estate investment fund following a surge of redemption requests. (Financial Times)
JPMorgan says the outflows at Credit Suisse could lead to the partial sale of its domestic unit. (Reuters)
Kim Kardashian hired an ex-Goldman Sachs banker. (Bloomberg)
M&A boutique Alantra is still hiring. (Financial News)
BlackRock CEO Larry Fink says the next big thing for the markets will be tokenisation. (Decrypt)
An AI chatbot can explain the macroeconomic situation pretty well. (Bloomberg)
Ex-Citi CEO Mike Corbat has joined Apollo co-founder Josh Harris at his new firm, 26North. (Bloomberg)
Jefferies is warning on bonuses. "This is going to be a more difficult compensation season at Jefferies, just like it will be for every firm in our industry.'" (Financial News)
Jefferies' CEO Richard Handler insists the rumours about some of his bankers aren't true.
We independently investigate every complaint relating to Jefferies, even ones that are not presented as complaints through normal channels but are instead posted on random sites that are known for misinformation.— Rich Handler (@HandlerRich) December 1, 2022
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