Morning Coffee: Top German banker confesses colleagues' preference for Paris. The happiest 240 people in hedge funds
It seems almost hard to believe today, but it was not so long ago that lots of people thought Frankfurt would be the natural European location to take market share from London post-Brexit. After Frankfurt, there was also talk of Amsterdam (with its excellent datacentres and telecommunications) and Dublin (English speaking, great tax regime).
Paris was on the map, particularly for people who thought the main purpose of a financial city was to provide good restaurants for bankers and shopping opportunities for their spouses, but it was taken much less seriously; it just seemed like it might be too regulated, too insular, too French to be attractive to global Wall Street banks.
Well, we now know how the relocations happened; JPMorgan, Goldman Sachs, Morgan Stanley and Bank of America have all built their main sales and trading hubs in the City of Light. And now, bowing to the inevitable, even Germany’s national champion, Deutsche Bank, has begun to move its flow credit trading desk there.
It isn’t a huge personnel move – fewer than ten Deutsche Bank traders are off to Paris in the near term. But the reasons for moving anything at all, set out straightforwardly by Fran(c)k Krings (Deutsche’s German CEO of Western Europe), are themselves quite revealing. He said that “Virtually all of our relevant competitors have chosen Paris for credit trading … To position ourselves away from key clients and where relevant talent sits would have been an odd choice”.
This gives an interesting perspective on remote working and the importance of presence. When you work in sales and trading, there’s no immediate need to be in and out of the clients’ offices, or even to eat and drink with them in the evenings. But traders are nonetheless a community; if you’re absolutely never seen out and about, then however much contact you have with the clients, you’ll always be a voice on the phone to them, not one of the gang.
The talent pool issue is likely to have been even more important. If all the experienced traders live in Paris, and they aren’t willing to relocate, then a trading desk located anywhere other than Paris is going to struggle to compete. Not having a presence would multiply Deutsche’s management problems; they would keep losing people to the Paris firms, and every vacancy might be ten times as difficult to fill.
Why is the talent pool in Paris, though? There’s a slightly shallow and obvious answer, but it’s doubtful that it’s the right one. Decisions in global investment banking just aren’t made for the convenience of the employees, let alone their desire to feel cool.
The simple fact of the matter is that Paris won the day because it’s a bigger player in the relevant markets these days; once upon a time “Mainhattan” was the place to be, but that was when Dresdner Bank and Commerzbank had large trading franchises; now it’s only a somewhat smaller Deutsche Bank that calls it home, compared to BNP Paribas, SocGen and Credit Agricole in Paris. The thing that really attracts investment bankers and traders to a city is other people like them.
Elsewhere, Mike Platt is semi-famous for the cherubic smile plastered all over his face in an Instagram video where he was explaining (allegedly with “tongue firmly in cheek”) to a limo driver that he was the best-paid person in the whole financial industry. We fact-checked this claim at the time and concluded it was possibly misleading but defensible – the founder of BlueCrest has achieved escape velocity from such mundane concepts as “highly paid”, because his firm only manages his money, his co-founders' money and that of a few partners.
So, given that so far BlueCrest is up 114% year-to-date after having been very, very right on bond market moves, Platt’s earnings for this year are roughly 1.14 times whatever his wealth was at the start; a figure that could be knocking on the door of double-digit billions.
There will be quite a few other happy faces at BlueCrest too. Since becoming a private fund, BlueCrest has recruited a lot of traders and money managers, and allegedly hands over 30% of P&L as variable compensation. Company filings suggest that for last year, one of the companies in the group had 240 employees and paid out £62m of wages and salaries, an average of over £300k ($340k) each. That’s also likely to be the tip of the iceberg; this disclosure might not cover all the fund management entities, and certainly won’t include returns on the senior portfolio managers’ own investments. It’s been a good year for some.
Meanwhile …
Depending on whether or not 114% of a big number is more than 29% of an absolutely huge number, Ken Griffin of Citadel might have done even better than Michael Platt (Bloomberg)
Crypto millionaire Justin Sun (who once paid $4.5m to have lunch with Warren Buffett) has now offered to buy the assets of Credit Suisse and pivot them to Web3. If we were cynical, we might suspect some sort of publicity stunt. (Cryptoslate)
The JP Morgan equivalent of Marcus – the UK retail online challenger bank operating under the Chase brand – has had a really bad website outage. (FT)
One of the casualties of the Wirecard affair is beginning to build back his career and reputation. Felix Huber resigned as head of the German regulator BaFin, but has now arrived at Apollo Management as a senior adviser. (Bloomberg)
“Ask the lawyer” is usually good advice in any ambiguous compliance situation, but not always; a partner at Jones Day gave the advice “burn that communication app because it would be embarrassing for people to find out I used my wife’s identity as a code name”. He’s been fined £635k. (FT)
Another one gone … Christopher Chua, formerly deputy head of M&A APAC at Credit Suisse, is leaving for HSBC (Bloomberg)
“The companies that have really planted the flag and gone yeah we’re green – hardcore grifters”. Carson Block is to be counted among the ESG sceptics. (Financial News)
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