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Morning Coffee: Goldman Sachs’ “fixer” is hiring, not firing. The top banker who earns less than a first-year associate

When Marc Nachmann was made sole head of Goldman Sachs’ asset and wealth management businesses back in October last year, it looked like an ominous piece of news for employees.  As one insider said at the time, the asset managers “are about to experience what it’s like to work with Marc, which they definitely have not experienced before”. Nahmann had earned a reputation over the years for cutting costs, and in the context of the overall headcount reductions going on at Goldman, one might have expected him to be cutting heads (and co-heads) across the board.

Apparently it’s more complicated than that.  Although asset management has contributed a fair share to the overall program, an interview given by Ashish Shah, the CIO of public investing at GSAM, suggests that some teams there are still adding headcount, and that senior promotions are still happening.

The interview was in the context of the retirement of Samuel Finkelstein, the long serving global head and CIO of fixed income and liquidity solutions, to be replaced by two co-heads (Kay Haigh, based in London, and Whitney Watson in New York).  The global co-head structure is apparently motivated by the fact that asset and wealth management is “a very large and complex business”, which has got larger and more complex over the last few years, particularly with the acquisition of NN Investment Partners.

There’s no disclosure of exactly how large the fixed income asset management team is, but NNIP had 900 employees at the time of acquisition, so it’s not in any sense a niche operation.  And although the team is “well staffed”, according to Shah, it “will add employees as the platform continues to grow”. 

That could be seen as reassuring for Goldman staff – the suggestion is that the move toward technology and platforms is meant to complement their human employees, not replace them.  according to Shah, “Being part of Goldman Sachs, we have technology and scalability […] We don’t really have to add heads to [carry out the mechanics of portfolio management], we have to add heads to talk to clients, which is a neat feature of our platform”.

In the era of artificial intelligence and technology, this might be a key feature of the industry going forward.  There are some parts of the asset management industry (and the banking industry in general) which can be industrialised – with the right platform and infrastructure, a small portfolio management team can be leveraged over a massive based of assets under management. But money has to come from clients, and for the mean time at least, clients have to be spoken to by a human being. As an old banker once said on seeing the first quant trading systems, “I’ll only get worried when they invent a machine that can kiss asses”.

Elsewhere, working long hours under extreme pressure for $190k of total comp is a reasonable deal if you’re young and energetic and looking forward to making a lot more in the future.  But what might make someone take on a banking job for that money at the age of 70, with his best earning years behind him?

Of course, the comparison is being made somewhat facetiously, after Fed chair Jay Powell surprised everyone by opening up about the salary which goes with his post.  Obviously, Mr Powell doesn’t need the money, having spent decades as a managing director on Wall Street and eight years as a partner at Carlyle.  But people have been surprised, and it does raise the question – how can the central banks of the world attract the best people if they aren’t prepared to pay remotely near the going rate?

At the very top levels, the answer’s obvious – Chair Powell might have some late nights, and he might have to face the occasional tetchy Congressional committee, but nobody’s sending him charts of CPI inflation with “pls fix”.  The wages of being a central bank governor are largely psychological – you get the experience of ultimate power over a whole economy, something that money simply can’t buy.  But lower down the org chart, the problem is acute; public institutions struggle to recruit IT staff and lawyers of the calibre they need.

Meanwhile …

The hiring has begun, for bankers who like to run toward the sound of gunfire.  Credit Suisse Australia has hired infrastructure banker Joel Chalhoub from Jefferies, and is promising new recruits that they will be getting in on the ground floor of the CSFB superboutique. (AFR)

Crypto continues to reinvent all the practices of conventional finance – Sam Bankman-Fried is now going to be forbidden from using WhatsApp unless “monitoring technology is installed on his cellphone that automatically logs and preserves all WhatsApp communications”. (Law & Crime)

They’ve also discovered activist investing – there’s a proxy battle in the offing at the Grayscale Bitcoin investment trust, with one unhappy shareholder saying that as a result of its poor performance his wife now calls him “the bitcoin bozo” (WIRED)

Patrick Bateman, the fictitious investment banker played by Christian Bale in the film “American Psycho”, is now a TikTok meme. (Yahoo)

Demonstrating their relative importance compared to many OECD heads of government, JP Morgan bankers have managed to book a meeting with Ukraine’s Vladimir Zelenskiy, to advise on financial reconstruction (Reuters)

Economic studies find that the EU bonus cap has no measurable effect on the risk-taking behaviour it was meant to prevent (Bloomberg)

One to suggest for the next offsite?  You can do a “darkness retreat”, spending periods of three to four days in complete blackness.  Apparently once you’ve got used to not falling over on the way to the toilet, you start having visions and develop a clear sense of priorities. (WSJ)

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AUTHORDaniel Davies Insider Comment

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