Morning Coffee: Citi's new hot job requires empathetic interrogators. Jim Esposito talks wrestling and Citadel Securities' world domination

Trading private credit may not be working out so well for JPMorgan, but everyone still wants to know what those privately held assets are worth. And if the private credit and private equity firms aren't providing reliable current valuations, then someone has to do it.

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Step forward, the "private company researcher," who is a bit like a public company researcher, but more investigative and informationally challenged. While researchers dealing with public companies can scrutinize quarterly results and presentations and listen to investor calls, researchers dealing with private companies cannot. They must use other methods to elicit valuations. 

Bloomberg reports that Citi wants some of these other sorts of researchers. Lucy Baldwin, its London-based head of research, has got a list of 100 "large and influential" privately held companies, mostly in tech, that she wants the bank to cover. Heath Terry, who joined Citi from Balyasny to cover privately held tech stocks in May, declares that the bank will be covering these companies "at a granular level — when they have product launches, winning customers, adding a new product line.”  

How do you do this when companies don't give anything away publicly? By befriending management teams, 'talking intensely to customers' and eliciting information from everyone tangential to the company being scrutinized (vendors etc). 

Citi's new hot job is therefore all about forming relationships and extracting facts that are not yet known. It sounds like the sort of thing that might be immune to the march of AI. Terry says it's the way things are going: “This is one of — if not the single biggest — structural change in our markets over the last 10, 15 years.” Empaths with information extraction abilities can apply. 

Separately, Jim Esposito, president of Citadel Securities, has been talking about wrestling, again, along with Citadel Securities' aspirations for market domination. 

Esposito was big on wrestling at college. Wrestling has had a lasting impact on him. "Sometimes in these wrestling tournaments, you might lose a match but have a chance to wrestle back and find your way into the finals again," he told the ICE podcast. Wrestling teaches hard lessons, says Esposito: you can't blame anyone else, you have to grind (not on your opponent), you have to be level-headed. All of this has informed Esposito's career.

Espo spoke of Citadel Securities too. Despite only employing 1,700 people, he pointed out that the firm accounts for nearly 25% of daily US equity trading volumes. Those 1,700 employees include "some of the brightest minds on the planet," many of whom work in quantitative research and came to the US "to get a PhD in mathematics, statistics, physics, computer science." Citadel Securities is presumably not a fan of US plans to restrict student visas.

Citadel Securities is pushing out beyond equities market making and expanding in fixed income. Right now it only covers a "a limited number of products," in the fixed income market, says Esposito. In the future, it will have the "full suite." Its aspirations are big. When Citadel Securities builds something, it makes sure it "can accommodate 5 times, 10 times the historical peak volume of that business." 

None of this sounds great for sales and trading teams in banks, which employ far more than 2,700 people between them. However, Espo says not to worry: banks are wrestling in another ring and interested in other things than pure market making these days. "The banks are growing, but they're growing in a different area than we're focused on," he says. In equities, he says banks are all "about prime brokerage and the financing of their client balances in the prime brokerage business." In fixed income, he says banks are about OTC derivatives and "financing their clients, specifically the private equity industry..." 

Citadel Securities is a friendly provider of trading technology. Not a rival... Try telling that to flow desks, which may yet find themselves flat on their backs.

Meanwhile...

Goldman Sachs CEO David Solomon says London shouldn't take its success for granted. "If you go back, you know, ten years ago, I think we probably had 80 people in Paris. You know, we have 400 people in Paris now... And so in Goldman Sachs today, if you're in Europe, you can live in London, you can live in Paris, you can live in Germany, in Frankfurt or Munich, you can live in Italy, you can live in Switzerland." (Sky)

It's turning out to be a bad year for leveraged loan bankers because big private equity firms are using something called "portability" whereby they buy and sell companies without any new borrowing.  "It raises a difficult quandary for banks who will lose out on the lucrative fees that come with underwriting financing in the LBO market.” (Bloomberg) 

Sean Murphy, a former portfolio manager at Citadel, is setting up a hedge fund called Jerpoint with $200m from Qube. He's in London. (Bloomberg) 

Quant fund Squarepoint pays people to provide it with trading tips. One of them was an Albanian day trader sitting on a grey sofa who's been convicted of insider trading after her brother (also convicted) helped her get a lot of internships. (Bloomberg) 

Barclays hired Alex Ham, the former co-chief executive officer at Deutsche Numis, to help the bank with its efforts to grow market share in both advisory and equity capital markets. It's also hired former Centerview Partners LLC partner Andrew Woeber as its global head of M&A, Royal Bank of Canada’s John Kolz to co-run equity capital markets globally, and Marc Warm from UBS Group AG as co-head of global capital markets. (Bloomberg) 

Citi is embarking upon "disciplined" hiring of private bankers in the Middle East. (Bloomberg) 

Revolut is creating 400 risk, compliance and other jobs in France, Spain, Ireland, Germany, and Portugal.  (Euronews) 

Tom Hayes is the man. He showed off a Kenny Rogers T-shirt under his navy blazer that bore the lyrics of the singer’s song “The Gambler”: Know When to Hold ‘Em.' (WSJ)

Carlo Palombo, who was yesterday acquitted of market manipulation with Hayes, said: “We were accused of things that didn’t make sense. We were caught up in this Kafka-esque nightmare.” (Bloomberg) 

The strongest predictor of career success is being assigned to a complex, high-profile project as a new hire. (WSJ) 

You can get a jet lag app. It might make you more tired in the short term. (WSJ) 

The senior guys at Ares are best friends. “I was in Kipp’s wedding. Our kids grew up together. There’s a psychological benefit that helps us culturally.” (Fortune) 

Don't ask candidates about their background. Get them to ask you a question, any question. (Business Insider) 

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