Credit Suisse troubles due to wrong Leadership Development

Media Pundits and Deal Makers are keen to give free advice to Credit Suisse - sell this, spin off that - especially with reference to its Asset Management unit. But one thing should not be forgotten: there is no clear rationale against combining Retail, Investment and Private Banking and Asset Management as JP Morgan demonstrates. What is required, however, is superior management, and that means having the right people in charge. This means not only hiring potential saviours or mercenaries from outside but creating a HumanResource strategy that develops and fosters talent from the bottom up as demonstrated by GoldmanSachs. Neither the Chairman nor the previous CEO had any proper training as a banker. Head of Risk Management had no previous trading experience or appropriate qualification for the role.

Are CVA's undermining Real Estate Investment?

The widespread practice of reducing rent obligations is leading to problematic outcomes. The UK restaurant chain Leon just last December completed a CVA and today's media report that the operation is sold for an eye-watering amount, giving the founders a substantial multi-million pound pay-off. One has to assume that the sale was made much easier now that the rent bill was reduced - at the expense of the landlords one has to assume (happy to hear about details of the CVA in case you are privy to the information).

Outsourced CIO (OCIO) - solution of fad?

Basically the OCIO (or 'fiduciary') approach to manage institutional portfolios is a move back to what once was popular as the 'balanced' approach to portfolio management. The provider is given more or less discretionary authority though tailored constraints transfer more or less responsibility back to the client. The more constraints are included in the mandate the less responsibility for the ultimate performance can be pinned on the OCIO and in the end the whole thing ends up in a messy outcome where each side blames the other when results are sub-par.
Reading this statement from the quoted report one has to wonder whether or not those responsible for the management of the portfolios are really qualified for their tasks.

The Pandemic Is Spurring OCIO Growth. Transparency Will Follow 

"Crises cause many institutional investors to realize that they are not comfortable or properly structured to effectively navigate a volatile, complex, fast-moving capital markets environment under the traditional consulting relationship, much less fully independently."

            

Limits of Homeworking

All very well, we all will sit on our sofas and - between walking the dog and helping with the housework - do our work on the pc and telephone. But all this new thinking falls down in one important aspect - how to bring new people, experienced and - more importantly - those starting their career - into the business. You cannot just have a fresh graduate sit at home and being taught all the ins and outs of the job. Sooner or later any organisation will be short of talent and will have to face the fact that office life will have to be resumed. Organisation like large retail banks are more and more similar to a utility and basically just have to make sure that a lot of routine transactions get handled smoothly - but this indicates that they are also very easy to be replaced by upstarts that can perform these functions cheaper and more efficiently.

Wuhan Virus turns City into a Ghost Town

One piece of consolation, the cities that want to steal London's crown will not be in a much different position, what price an office tower in Frankfurt or Paris? Always thought the vast expanses of entrance lobbies in the towers were an absurd waste of money, one or two receptionists and a lonely plant, in addition to the inevitable 'security' personnel....and is there really enough business for the cast of thousands employed by the major banks, brokers, lawyers and accountants?
Virus turns City into a Ghost Town

ESG creates quagmire for Fund Managers

And business in general. The demands from lobbies and interest groups will expand and no action by managers and businesses will be enough to satisfy them. Once pandora's box is opened issues that really should be settled in the realm of politics will lead to never-ending complications for what should really be the priority for business and investment - obtaining profits or a satisfactory performance for savers.
(27-July-2020)
Boohoo supply chain allegations reveal challenges facing ESG investors

London is Top City Brand

London is the world’s top “City Brand”, with Sydney, Paris, New York, and Rome rounding out the top five, according to the people in ten countries surveyed for the Anholt-Ipsos City Brands Index.

www.ipsos.com

Let Politicians sort out Climate Change

And Fund Managers should get on with doing their job, which is find good investments for their clients. Has ANYONE ever heard of this 'ThinkTank'? (and should many of them not just simply be called non-representative/unelected lobbies?). So who should care about the latests moan (sorry, 'Report') by 'InfluenceMap'? Why should companies and shareholders, and the investment managers accept lock, stock and barrel what is bandied about regarding 'Climate Change'. Let politics set rules in a democratic fashion, that is its role and business and investors can work in the framwork that is given. Everything else is just Virtue-signalling - esp as long as the 100 pound gorilla in the Climate 'Emergency' discussion, rampant growth in world's  Population, is swept under the carpet.
Biggest Asset Managers not holding Companies to account on Climate Change 

Fund Management Consolidation - a caveat

Anath Capital acquires Stratton Street  and will integrate the credit fund manager's $500 Mio AuM with its Garraway Capital subsidiary to bring combined AuM to $ 1 Bio.
While consolidation in the Asset Management space continues it will not end in a completely oligopolistic landscape. The bigger the dominant firms become the less able they will be to differentiate their products or achieve outperformance. This will always leave room for up-and-coming managers - apart from the human desire to run their own business rather than being stuck in huge bureaucracies.

Asset Managers strive to cut Banks out of Forex Dealing

Not sure that FX trading is such a significant drag on performance. Maybe fund managers should just do less frantic in- and out trading. And trying to find counter parties directly at the right time and right size is not going to offer significant rewards. Who wants to take the other side of a 1 billion trade when one knows that the other side HAS to trade?
Asset managers strive to cut out banks from forex dealing

Hedge Fund blows up - where was Citi's risk management?

If the lenders - in this case Citigroup is quoted - of liquidity don't manage their risk and losses result it is easy to blame the hedge fund. Careful monitoring of exposure should have prevented this loss quite easily.
(27-Mar-2019)
Hedge fund blow-up costs investors and Citigroup

Pay Gap reporting - nothing but an Employment Scheme?

Ever since Pay Reporting for senior Executives became standard practice (and started an upward spiral of executive compensation) virtue signalling via pay gap reporting became more and more pervasive. But does it really help anyone if pay differentials by gender, race, age are scrupulously registered and reported? The inevitable pay gaps will only breed resentment and be endless fodder for self-appointed campaigners and lobbies. After all, there will never be perfect equality and there will always be one group that is paid less than the other side. And why not report by religious affiliation? there might be interesting aspects to discover as well - did not some scholar relate economic success to Protestantism?
That some businesses find it worth their time to call for MORE (!) mandatory regulation (bureaucracy) reminds one of Lenin's bonmot: "The capitalists will sell us the rope with which we will hang them" (6-March-2019)
Companies call for mandatory ethnicity pay gap reporting

Yellow Vest Protests - France

Violence certainly is not a pleasant experience but neither is life under a semi-democratic state that gives citizens no say except in a box-ticking exercise every few years. And even that is not addressing specific problems but is mostly based on personalities and vague statements that are never properly followed when a politician is elected.
France plots tougher response to 'undeclared' protests

Balyasny said to cut 125 People

It is quite amazing that a Hedge Fund - or any Investment Manager - with an AuM just under $12 billion can have a cast of hundreds, more than six hundred staff in Balyasny's case. So it is no wonder that such a large cut in staffing numbers became inevitable.
Hopefully most Firms have a tighter control over their headcount - a strategy of hire and fire is not conducive to a good working environment and investment clients are less than happy if they see frequent staff changes.
Balyasny Cuts 125 People as Hedge Fund Bleeds Assets

RBS/Natwest worried about Irish Border question

One should think that RBS/Natwest has more problems than this one. Not sure why there is such a fuss about the Northern Ireland border. Simple Solution: UK keeps it open, should go for unilateral free trade anyway. Then it is up to Ireland/EU to make their move. If there is hard border it is clear who is to blame
RBS on Irish border questions

Beware of Age Discrimination with targeted Ads

Facebook job ads allow age discrimination lawsuit claims (Marketwatch)

Bitcoin: Regulators wash their hands - too long for some?

While some are supposed to have become rich due to the wonders of the digital "currency" hype one should remember that this is a giant ponzi scheme where the lucky few owe their winnings to the late-comers who splash out serious money in order to get hold of one ephemeral electronic bit - wherever that is. A chain letter at least gives you a piece of paper to put on your wall. Where are the regulators, why are they busy concocting ever more intrusive regulations that hardly serve any purpose except increasing costs for ordinary savers? Should they not at least apply the rules for the digital space?
CNBC

Bitcoin: Regulators wash their hands - too long for some?

While some are supposed to have become rich due to the wonders of the digital "currency" hype one should remember that this is a giant ponzi scheme where the lucky few owe their winnings to the late-comers who splash out serious money in order to get hold of one ephemeral electronic bit - wherever that is. A chain letter at least gives you a piece of paper to put on your wall. Where are the regulators, why are they busy concocting ever more intrusive regulations that hardly serve any purpose except increasing costs for ordinary savers? Should they not at least apply the rules for the digital space?

https://www.cnbc.com/2017/12/05/winklevoss-twins-head-the-list-of-people-getting-very-rich-from-bitcoin.html

Bitcoins: The drumbeat goes on

The drumbeat goes on, any number of self-appointed 'experts'  push bitcoin etal, still not clear what 'value' it has or provides, just question of time that regulators impose restrictions, to market, buy/sell it through traditional banking channels unless full 'know your customer' disclosure is made. and who REALLY needs bitcoins, internet banking is so efficient already! Price easily manipulated due to complete lack of transparency, and who are the idiots that pay $10,000 for a bit with REAL money?
Here's why not to put your money into bitcoin (Evening Standard)

Active ETF's - just a type of Closed-end fund?

ETF's have not been really tested in a major market downturn or panic. 2008-09 does not count as amounts involved were still quite small, and focused on simple structures linked to major indices. The next 'Big One' will be different. As I see it, active ETF's are pretty similar to Investment Trusts (UK) or Closed-end Funds (USA). They are just trying to keep NAV and Market Prices as close as possible. But will they succeed? Only time will tell. I for my part will be happy to capitalize on any price distortions - and distortions there will be (or the 'Authorities' will shut the market).

Vanguard to launch active ETF's

Super High Margins required on Bitcoin Futures

In my opinion the collateral required to back up futures trading - but also all over-the-counter derivatives trading - is way too low and not sufficient to withstand a market crash like the one in October 1987 or during the GFC (Great Financial Crisis).
2%, even 8% margin as suggested in this article are never going to be sufficient when markets move 10, 20 per cent of more within days.
The outcome can only be described as truly catastrophic, not only for market participants, but for society and the economy as a whole. It would drive a stake right through the heart of Capitalism.
Why Interactive Broker's Founder fears Bitcoin Futures (Barron's, Pay Wall)

MIFID: Now the Tax Man wants to have his cut

Just when you thought the 1000+ pages MIFID nonsense could not get any worse this news hits the wire. Could it be that it was all along the main purpose of this unnecessary and counterproductive EU edict to create new tax raising opportunities for the voracious appetite that quasi-democratic politicians so desperately are looking for? Just one more reason to make it more attractive for the Financial Service Industry to decamp to friendlier climes, such as New York, Dubai, Singapore. Maybe a successful Brexit will make Britain to abolish this convolut.
Bloomberg

Deutsche Bank: Lacks top managers

This article points to a weakness in the bank's staff development program. It should be one of the key - if not the key - responsibilities of Top Management to make sure that enough talented managers are moving through the ranks.
Temple Associates is able to conduct a 'Talent Audit' and put 40 years of experience at the disposal of your company.

Manager Magazin

Zero Fund Management Fees?

Maybe at first sight it appears reasonable to wave any fund management fee if the performance does not match the agreed benchmark. And why not ask the fund manager to make a penalty payment as well? But to be serious, any business that agrees to a zero fee would not be viable in the long run. Better to agree fees to be calculated on a (three year?) rolling basis and set the fee in a narrow zone, for example basic 1% and a band of +/- 0.5% to adjust for over/under performance?
Bloomberg

Bitcoin: What is the Value of Hot Air?

Let self-interested promoters and their acolytes in the Media invest their hard-earned savings in a bit of (hot) air, or better: some digits in a far-away computer that nobody controls. Shares (hopefully) pay dividends, bonds pay interest, land can be rented out, but bitcoins and the like? Nothing but the hope of finding a Greater Fool down the road.
And Bitstamp, a 'digital currency exchange', should it not be banned from calling itself as an exchange by the SEC and fellow regulators? No surprise that its chairman sings the praises of 'crypto' 'currencies' (their are neither crypto nor currencies, you might as well start paying your groceries with some rare shells)
CNBC

Invesco may acquire Guggenheim ETF Biz

All very well, consolidation, getting critical mass etc - but is 3% of AuM not a bit rich for a business with wafer-thin (and still trending down, towards zero?) margins?
Invesco may acquire Guggenheim ETF business

McKinsey's Spur der Verwüstung - Inside Paradeplatz

Maybe a bit exaggerated, but there is an element of truth in it. The fees charged by Management Consultants - esp. the largest ones - are out of line with the benefits they often bring. Fees are paid independent of ultimate results, if they are below par there is no chance to get reimbursed. And quite often the gruntwork is done by very junior staffers that never had any real business experience. But the fees that are charged for them do not reflect this. So why not use someone with frontline experience gained over many decades, over many market cycles and in many company cultures?

McKinsey's Spur der Verwüstung - Inside Paradeplatz

MUFG said to pick Amsterdam for Securities Base after Brexit

The Securities Diaspora gathers pace. There is only the little problem of human 'resources' to consider. While Japanese and Expats from other countries (less so) can be shifted quite easily - how about the workforce that has its roots in London? And how easy will it be to find willing recruits in London, Paris or other centres that will consider job offers in a smaller regional centre - however brilliant some aspects or life might be there? And managing dispersed teams all over Europe will be a major challenge for management!
(Bloomberg)

30% of Bank Jobs May Disappear in Next Five Years - Former Citi CEO

Vikram Pandit, who ran Citigroup Inc. during the financial crisis, said developments in technology could see some 30 percent of banking jobs disappearing in the next five years.

(Bloomberg)

Investment Management: No limits to Size?

Talk of (inevitable?) concentration in the Investment Management universe must lead to the obvious question: is it really inevitable as many consultants and industry bigwigs are saying or is there a natural limit to ever-expanding amount of aum among the industry giants such as Vanguard, Blackrock or JP Morgan?
There may well be the result of at best matching the investment benchmarks (minus fees, costs) as the sheer size of portfolios makes any meaningful divergence from the benchmark more and more impractical. So even active management will be not much different from passive management the bigger a provider becomes.
Product differentiation may provide a (temporary)?) solution as the myriad of strategies can again try to be nimble small fish in a big pond. So effectively big investment houses become a congregation of investment boutiques under the same roof - be they separate subsidiaries (as at Natixis for example) or just different teams under the same umbrella.
Which leads to the next conclusion: if boutiques are the way to at least try to make active investment management work who is to say that free-standing boutiques or even mid-sized firms are necessarily at a disadvantage? Everybody knows where the big pools or money are and digital distribution channels will keep the costs garnering assets under control.
Largest US pension fund CalPERS in talks with BlackRock to outsource buyout business, source says

Top Execs sell stock before bad company news breaks

When well-paid (overpaid?) top executives behave like this one should not wonder that Capitalism and the Market System increasingly lose public support. It is only fortunate that the average citizen is not really able to properly put such blatant abuse of position into proper perspective. After all, how many do really understand what a million dollars (life changing amount for 99% of the population) means? The maths scores tell a story! And it will be interesting to see how regulators and the trustees of the savings of ordinary people (aka investment managers, private bankers) and the corporate and 'socially responsible' investment crowd are going to do about this.
http://www.marketwatch.com/story/equifax-executives-sold-stock-after-data-breach-before-informing-public-2017-09-07?siteid=rss&rss=1

Diamonds are Forever?

Lending ONE BILLION against some baubles supposed to be in envelopes or safes? NUTS! Did they never hear about the Great Salad Oil Swindle in the early 1960's? What do these risk managers do? Do the 'Elite' Business Schools teach them the basics?
https://www.bloomberg.com//news/articles/2017-09-07/how-standard-chartered-lost-400-million-on-risky-diamond-debt

London Job Losses: Trickle rather than Bleeding

One always had to wonder why Deutsche Bank needs 9000 people in London, or HSBC needs 43000 in the UK. Was that not always padded by quite a bit or over staffing? Given the arrival of Fintech and the plummeting cost of communicating with low-cost centres there was always the prospect of job diversion, especially in support roles. Globalisation also means that other centres such as Dubai, Singapore, Shanghai etc would grow in stature and staff would be relocated closer to customers and markets.
In the opposite direction there are forces that might in the long run strengthen the role as hub and nerve centre coordinating and directing the regional centres. Higher Value-added roles might well be concentrated in the UK - if politics and regulation are creating a business-friendly environment.

https://www.cnbc.com/2017/08/29/bank-jobs-are-bleeding-out-of-london--and-brexit-hasnt-even-kicked-in-yet.html

Russia To Ban Cryptocurrency Sales To "Ordinary People"

Rightly so, time our often over-reaching regulators wake up to this charade, and please don't call these 'Coins' a 'Currency', they are neither coins nor currencies but should be relegated to the game universe.
Russia Backpedals On Bitcoin - Unveils Plan To Ban Cryptocurrency Sales To "Ordinary People"

London Job Losses - trickling rather than bleeding

One always had to wonder why Deutsche Bank needs 9000 people in London, or HSBC needs 43000 in the UK. Was that not always padded by quite a bit or over staffing? So large banks move dozens or even hundreds of jobs, dispersed in various regional centres? Given the arrival of Fintech and the plummeting cost of communicating with low-cost centres there was always the prospect of job diversion, especially in support roles. Globalization also means that other centres such as Dubai, Singapore, Shanghai etc would grow in stature and staff would be relocated closer to customers and markets.
In the opposite direction there are forces that might in the long run strengthen the role as hub and nerve centre coordinating and directing the regional centres. Higher Value-added roles might well be concentrated in the UK - if politics and regulation are creating a business-friendly environment.
https://www.cnbc.com/2017/08/29/bank-jobs-are-bleeding-out-of-london--and-brexit-hasnt-even-kicked-in-yet.html

A Dim View of Investment Consultants

How Wall Street Gets Rich Off Savers - Bloomberg

Bitcoin Hype - Regulators asleep or afraid

Given the thousands of pages of detailed regulation that has been produced in all major industrial countries one has to wonder why the Regulators are keeping stumm about the Bitcoin craze. Claims that thses 'coins' are Digital 'Currencies' are clearly misleading (try selling a 'Digital House', or a 'Digital' Brooklyn Bridge). Neither are they a safe haven, they are digital assets and given the way they are offered and promoted they are investments and as such should be brought under regulatory umbrellas.
(22-Aug-2017)
The price of Bitcoin and Ethereum is slipping but Bitcoin Cash is rising

Bitcoin hype - stop calling it a 'Currency'

Tulips, Tulips anyone, or maybe you want to buy a Bridge? Play the hype but please stop calling Bitcoin a currency. All sorts of stuff served as currency at one time (shells, salt for example) but currency is what is generally accepted in payments at the time. So Gold is no longer a currency, neither are shells or salt.
Bitcoin hits another record high, value has risen over $15 billion in one week alone

Goldman Sachs is scaling back market-making for exchange-traded funds

This will not make it easier to maintain orderly markets if and when the tide turns and markets enter a bear market. Markets move faster on the downside and panic is never far away then, even more so now that global markets are linked by ultra-fast communication and the crowd/herd effect can accerate trends.
Goldman Sachs is scaling back its role as a lead market maker for exchange-traded funds

Goldman Sachs is scaling back trading exchange-traded funds

This will not make it easier to maintain orderly markets if and when the tide turns and markets enter a bear market. Markets move faster on the downside and panic is never far away then, even more so now that global markets are linked by ultra-fast communication and the crowd/herd effect is easily generated.

Goldman Sachs is scaling back its role as a lead market maker for exchange-traded funds

Impressions from Paris - Europlace Conference

This year more than in other years this annual event was to be interesting given the fact that Brexit is in full swing (or not if you listen to Remainers and assorted moaners). So the lack of a strong attendance by non-French visitors was a surprise. Naturally the locals did their best to put Paris in a good light. Not so sure about the 'City of Love' as some panelists did not forget to mention. But then why has prostitution then be made illegal in 2016? Cannot be so good for love!
On a more serious note one has to accept that Paris was a large financial centre before Brexit. How much it will be able to add now is not so clear. Most market professionals may speak English so incoming staff may be able to fit in, but their private lives may not be so easy. Nice property is as expensive as in London, and finding a house with garden will be a struggle. And giving preferential tax treatment to financial staff - and only the heavy hitters among the foreigners - may not go all too well with 'Fraternite' as it is a blatantly discriminatory law (do the EU and the ECJ dare to intervene?)
Dublin, Frankfurt are already busy nibbling on London's cake and only time will tell how much they can grab. Will financial firms be more efficient if they spread themselves thin all over Europe? Communication is cheap, but lack of face-to-face interaction will do little to improve either the work climate or coordination.

EU Regulators Take Aim At London's Asset-Management Industry

No surprise there, EU is basically a protectionist racket, dominated by socialist parties and lobbies, where even pseudo right wing parties are praying from the same hymn sheet and embrace big government. Also means that the UK has to negotiate harder, I suggested a while ago that if local production would be required for asset management services then the same rule should be applied to manufactured goods. So come on BMW, Daimler, start producing in the UK. And someone has to tell the Eurocracy: keep your MIFID and Financial Transaction Tax nonsense!
EU Regulators Take Aim At London's Asset-Management Industry

Soothing Words about ETF - But Liquidity disappears when we need it most

The market does provide super liquidity that one could never imagine in the past. But when the music stops there will NOT be enough chairs! This type of complacency makes a major debacle even more likely. How many (highly paid) risk managers are really prepared for nearly instantaneous price changes of 20-25 % in all major markets? Tiny slivers of margin will just not be enough to cushion the blow, esp when some potholes open up and a player (or players) fail.
Junk Bond ETFs Are the Future. That's a Good Thing. - Bloomberg

NYC proposes to prohibit asking candidates about current salary

Not clear why Messrs. Schwarzman (Blackstone) and Corbat (Citigroup) would have any objection. All prospective employers need to know is what salary a job candidate expects.
https://www.nytimes.com/2017/06/13/business/dealbook/job-salary-pay-women-men-wall-street.html?_r=0

Money laundering laws - waste of money and attack on privacy

Anti Money Laundering laws - nearly as useless as the attack on alcohol during the 1920s in the USA. And instigated from the same legislative mob!
Money laundering laws also harm the innocent - Washington Times

Outsourcing without limits?

Should national and supranational regulation allow the unconstrained outsourcing of vital enterprise functions? Information Technology is no longer a low skill 'back-office' job but a vital ingredient of today's business. And this applies more than ever to the finance industry where security is more important than in most other lines of business.
Job-Spirale nach unten: First London, dann Zürich - Inside Paradeplatz

Credit Ratings - still no reform

While regulators have produced tons of paper simple and effective reform of Credit Rating Agencies has not happened.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2969086

Is big better in Money Management Biz?

Bigger does not necessarily mean better. Big fund managers did something right otherwise they would not be big. But that could also be their undoing. Once you manage billions you are going to find it very difficult to achieve any out performance. That will mean that smaller firms will find room to grow.
Big money managers are squeezing smaller ones at worst possible time - Business Insider

EU wants a ban on UK firms setting up Brexit shell companies

So what is supposed to be a 'Shell Company'? Are the Eurocrats going to prescribe the exact number of jobs that have to be hired by a subsidiary? As I repeatedly said - starting in Feb 2016 - one has to look at the different business lines in detail. M+A businesses are quite often already on the ground in the 'Rest EU'. One office should be enough, same can be said for most other finance businesses.
EU wants a ban on UK firms setting up Brexit shell companies

Goldman Sachs Charity donations

The honrable thing - do good and do not talk about it!

Room to Read Goldman Sachs party - Business Insider