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Morning Coffee: Hedge fund job cuts are a reminder why people stay at banks. Credit Suisse people are irking their UBS colleagues

Hedge funds are not immune to cutting staff. Their tendency to "stop" people who make losses above a tolerable level has long been documented, but that's not all. Like banks, they also have periodic culls of under-performers. It's just that the hedge fund culls seem a bit more aggressive. 

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Brevan Howard, for example, did some wild hiring last year, seemingly increasing its staff by 40% in a six-month period. Now it's trimming them back in what Bloomberg describes as an instance of a "twice year review." This review involves the removal of 10% of Brevan Howard's "traders", or 24 people. The implication is that the bottom 20% are sifted out each year. 

The cuts come after Brevan Howard lost 3% so far this year, resulting in one of the fund's worst performances since it was founded in 2002. Portfolio managers there bet too zealously that the Federal Reserve would cut rates. 

Brevan Howard isn't the only fund cutting. Millennium and Citadel cut staff at the end of last year. Balyasny cut people in London after a loss in December. Schonfeld cut 150 jobs in November. Bloomberg reports that Walleye, a comparatively new multistrategy fund which had been hiring heavily, has also cut Raj Sethi, its head of global macro and fixed income and 12 members of his team. 

The cuts are a reminder of the adage about fire and burns. Walleye CEO Will England said last year that portfolio management jobs in hedge fund are inherently "psychologically toxic". "You're going to get kicked in the face a lot," England warned. Brent Donnelly, a former trader in a bank who joined a hedge fund, says it's not worth it. Most people make more money in banks and have more stable careers there, says Donnelly; of his 10 friends still in hedge funds, only four are thriving. 

After several years of heavy hiring at the biggest funds, regular job cuts in the sector are likely to proliferate. Risk-takers might be fine with that, but bank seats will also look suddenly cosy. 

Separately, Credit Suisse people are annoying. This, it seems, is the opinion of their new colleagues at UBS, who despite having rescued them a year ago are being treated as if they're underdogs. Financial News reports that Credit Suisse bankers have irritated UBS people with their “innate sense of superiority”, derived from their higher league table position, and that a "them and us" divide has opened in some places.  

Meanwhile....

David Klein, who led Credit Suisse’s global private fund group out of New York, left for TWG, a holding company controlled by Mark Walter, co-owner of the Los Angeles Dodgers and co-founder of investment bank Guggenheim Partners. (WSJ) 

Edwin Low, Credit Suisse's former chief executive in Asia, has joined private equity firm global infrastructure partners. (Bloomberg) 

Goldman Sachs increased the pay of President and Chief Operating Officer John Waldron pay package 28% to $30 million. (Bloomberg) 

David Solomon says generative AI will "disrupt a wide range of industries" and may increase developer productivity by up to 45%, but that "adoption rates will lag, the most fascinating use cases are in their early stages, and a lot of work still needs to be done in data security, regulatory frameworks and ethical considerations for the technology to reach its full potential." (Goldman Sachs' shareholder letter)

Someone at Deutsche Bank earned more than €14 million ($15.2 million) last year, making them the best-paid person there in at least a decade. (Bloomberg) 

Diego Megia hired Ilana Kaufman from Bank of America as a portfolio manager at Taula Capital, his hedge fund backed by Millennium. (Bloomberg) 

Why Citadel people like living in Miami: the bike path, the beach, the weather, the health and wellness, the arts, the playgrounds, the restaurants. "Miami is an adventure." (Business Insider) 

Sam Bankman Fried's brainstorming on how to exonerate himself is an insight into the amoral mind. Options included: 'Come out as a Republican, go on Tucker Carlson, come out against the Woke agenda; or 'come out as pro-crypto and pro freedom.' (Bloomberg) 

US prosecutors say Sam Bankman Fried exhibited “pernicious megalomania” and a “sense of superiority” and should be jailed for 50 years. “ There's a significant likelihood that if the defendant is released back into society at a young enough age he will have the opportunity to engage in another fraud”. (Financial Times) 

Indian banking salaries could rise 10% this year. (Bloomberg) 

Tom Hayes' barrister says that the judge who his conviction for conspiring to rig the Libor interest rate denied him a fair trial by giving “extraordinarily unfair” directions to a jury. (Financial Times) 

Have a confidential story, tip, or comment you’d like to share? Contact: sbutcher@efinancialcareers.com in the first instance. Whatsapp/Signal/Telegram also available (Telegram: @SarahButcher)

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AUTHORSarah Butcher Global Editor

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