This was an eventful year bringing some much needed volatility back into the market, although not without consequences. And while FX revenues were strong this year for many institutions, it was not enough to overcome the pressure of dwindling Fixed Income business, higher cost-of capital, continued regulatory pressures and client malaise. With cost cutting being the best way to improve bottom-line figures, banks targeted their more senior, more expensive personnel when it came to making cuts. Senior management made up a large percentage of lay-offs as these institutions streamlined their teams and reorganized business lines.
Fin-tech, non-bank liquidity providers, agency business and electronic trading platforms picked up market talent along with second and third tier banks, while the top tier continues to shrink their headcount. A notable trend was seen in analysts and associates leaving the markets altogether for other pursuits.
Compensation season is underway, and there is a greater range of disparity from bank to bank than we have ever noticed in the past, illustrating in sharp relief the changing commitments to the business and the region. We know of one bank that paid their FX people up 10-15% and are hearing of another that is about to announce a bonus pool down by over 50%.
Research/Strategy Market Moves and Commentary for 2015
As G-SIFI banks strive to meet capital ratios and ROE targets, business units are carefully scrutinized for cost cutting. This year we saw further consolidation within fixed income research teams. One G-SIFI bank CEO commented in his latest address to investors “there are parts of the group that aren’t offering a return that’s anywhere near their cost of equity, and we’re working on restructuring those”. While cost cutting is the motivation behind moves at HSBC, MS, CS and Barclays, European regulations and their impact on the investment research market may be playing a role. Nonetheless, banks were capitalizing on the availability of talent. Some 2015 moves were expansionary hires, “redeploying” capital in areas that “customers view as valuable and will pay for” as per CEO of Wells, John Stumpf. This resulted in banks recruiting for newly created roles and as well as actively replacing any lost talent.
Despite a volatile year for hedge fund performance, we continue to see upgrades to research teams with notable senior level hires, many of which are well respected veterans of the sell side. We feel this shift from the sell side to the buy side will continue in 2016 as banks shrink their research coverage and demand by investment teams for macroeconomic analysis builds.
Lastly, the attrition rate from the industry is on the rise. We have witnessed voluntary departures of mid to senior level economists and strategists departing the industry for technology firms, corporate firms and start-up ventures.
Download the full report: Artemis Consulting 2015 Moves and Commentary