Morning Coffee: Credit Suisse’s star 29-year-old trader discovers a new dimension. Morgan Stanley CEO says the deals recovery will be someone else’s problem
It’s good to know that somewhere out there, there’s a guy in a t-shirt looking to reinvent the banking system. No, not Sam Bankman-Fried – former Credit Suisse trader Hamza Lemssouguer, whose fund Arini Capital is now proposing to make short term loans to companies with liquidity needs.
This used to be called “overdrafts” or “corporate banking”, and was something done by middle aged middle managers in a branch office in Lille – today it’s a “credit opportunities strategy” for a private credit fund and it’s the hottest new dimension in hedge funds. Hamza Lemssouguer explained the details in an interview, apparently while wearing a Mickey Mouse t-shirt saying “It’s all going to be okay”.
Lemssouguer has been spotting opportunities like this for a while now. He was the wunderkind of Credit Suisse, back when that was a big deal – in 2020, he generated $120m of profits on their junk bond desk single-handedly at the age of 29. He was going to launch a fund under the umbrella of Credit Suisse Asset Management in 2021, but that wasn’t a great year for the brand, and so Arini (named after a kind of parrot, apparently) was one of the biggest launches last year. So far, his t-shirt slogan seems to have been an understatement.
How do you get a job at Arini? Definitely, make sure you can speak French. Hamza Lemssoguer is an Ecole Polytechnique graduate, and seems to have surrounded himself with other high-flying French traders. He's not forming a clique of Polytechnique alumni in the way that “les X” are often accused of doing – Ardacan Celebi went to the Ponts et Chaussees, while Jeysson Abergel graduated from the relatively “petit ecole” ISC Paris. But if you look at the employees on the company LinkedIn page, you see a lot of French names and people with strong track records from other firms. According to its website, Arini is a division of Squarepoint, which was also founded by four Ecole Polytechnique grads.
Beyond this, the ideal skill set might be more difficult to predict. It’s certainly true that the current staff of Arini have lots of endorsements for things like “Probability Theory”, “Options” and other fields which might suggest that the firm is tres quant. But that’s the workforce they have already got. If they’re launching a short term credit opportunities fund, aiming to make loans of €30m at a time to stressed corporate borrowers, rather than parcelling up CLOs, they might want skills more like “spotting a fraud when you see one” or “phoning around the suppliers and customers”.
Perhaps the next hires will not be well-educated young Frenchmen in stylish t-shirts, but somebody’s uncle from a commercial bank somewhere in Europe.
Elsewhere, a popular saying of the 00s in investment banking was “IBGYBG”. Standing for “I’ll Be Gone, You’ll Be Gone”, it was used to describe a transaction that nobody was particularly proud of, but which probably would not blow up too disastrously before the people who put it together had a chance to collect their bonuses and move job.
For James Gorman at the Morgan Stanley results call, however, it’s more like “IBG” but “You’ll Still Be Here”. The bank has a lot of very ambitious targets, but they’re all going to be estimated over a time frame which concludes after his replacement is in the job.
However, Gorman didn’t seem to be saying this in a manner which suggested he was glad to be off the hook. In fact, he seems a bit jealous of his successor; he’s still making the call that revenues will come flooding back in early 2024, once everyone is sure that the Federal Reserve has stopped raising rates.
There is the small matter of consumer demand, tensions with China and huge geopolitical uncertainty, of course – other bank CEOs are not giving anything like as optimistic guidance. But James Gorman has had a decent track record anticipating the markets so far, and in his view, the biggest problem he’s leaving behind will be how to cope with all the extra winning.
A lot of the time, credit investing is all about financial statements and quantitative analysis. Sometimes, though, if you’re lending is largely secured against intellectual property, it has to be based on a forecast of how durable that IP is going to be. Which means that somebody at Carlyle Group is going to have the job of deciding how well the jokes in early episodes of South Park are likely to age, as they put together an $800m loan. (Bloomberg)
It seems to be a day for profiles of ambitious executives and potential future CEOs. Marc Nachmann at Goldman Sachs has the challenge of growing the asset management revenues to deliver on David Solomon’s strategy …(AFR)
… while Claudio de Sanctis needs to do a similar job for Christian Sewing at Deutsche Bank, picking up the pieces of the Postback IT systems issues and delivering a significant cost cutting and profitability plan. (Bloomberg)
In 2015, banks in the City of London set up the Financial Services Culture Board, to “raise standards of behaviour and competence” after the LIBOR scandal. In June of this year, it seems that they decided that standards of behaviour and competence were high enough now, and stopped funding it. Some disagree. (Standard)
An Irish banker had a second job, pulling pints in a Dublin pub, and kept it for 30 years. Now he’s at an employment tribunal complaining about unfair dismissal – from the pub. (RTE)
No more Mr Nice Guy from the CFTC. In the past, banks have been allowed to pay fines and make settlements of misconduct cases “without admitting wrongdoing”. This is mainly a legal formality to stop them being exposed so much to civil lawsuits, but it has always sounded ridiculous, and apparently the regulators aren’t going to agree to it as much in future. The good news is that there will be more jobs – under the new policy, it’s more likely that banks will have to employ people to monitor their compliance with settlements. (Bloomberg)
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