Morning Coffee: The new highest-paid bankers on the Street. The “blacklist” of hedge fund managers that quants won’t work with

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Morning Coffee: The new highest-paid bankers on the Street. The “blacklist” of hedge fund managers that quants won’t work with

Whenever an employer is complaining about how difficult it is to attract exactly the right kind of talent, the first question that should come to anybody’s mind is “have you tried offering more money”. According to a number of headhunters interviewed by Business Insider, after a long period of making speeches and recording inspirational YouTube videos about their commitment to diversity, some of the biggest names in private equity and asset management have finally got round to doing the only thing that’s bound to work.

This is obviously a pretty sensitive area. It’s perhaps surprising that so many people are prepared to be quoted by name, and understandable that everyone wants to talk about “diverse candidates” and “under-represented groups” rather than say out loud exactly which personal characteristics people are prepared to pay up for. But they’re explicitly saying that the premium is there now, and it can be as much as 20% to 30% per cent.

Jim Cooper of Concentriq, an asset management and fintech headhunter, says that nearly all of his search engagements are coming with an explicit preference for diverse candidates and that “In some cases, asset managers are willing to go above the targeted compensation range to attract diverse talent”. For staff at the principal or MD level, that could be the difference between a $700k-900k offer and an offer as high as $1.2 million.

On the other hand, Sasha Jensen of Jensen Partners points out that people from diverse groups are significantly more likely to get bid-backs and counter offers from their existing employees. That makes a certain amount of sense, as many of the largest financial companies now have board-level diversity targets, sometimes affecting C-Suite bonuses. As top managers try to make their targets, in an overall environment where it’s not possible for everyone’s goals to be satisfied, they’re going to be very reluctant to give up the small amounts of progress already made.

It also appears to be a premium that the industry is stuck with. The pipeline time to create senior level investment professionals is at least ten years, but stakeholders appear to have lost patience and to be demanding results now, according to Alan Johnson of Johnson Associates. It’s also likely to be a case of increasing returns – the headhunters suggest that “corporate culture” is at least as important as compensation for candidates weighing offers, and the most visible measure of that culture is likely to be the diversity of the employees already there – nobody wants to stand out and feel like “a checkbox”.

If this is happening in US asset management recruiting, it’s likely to be happening everywhere else in the industry, with other parts of the financial world just being a little more reluctant to talk about it. It seems that when it comes to diversity, the old bankers’ proverb holds just as firmly as it does everywhere else – “money talks”.

Elsewhere, the “alt-data” industry is not quite as hot a recruitment market as it used to be a couple of years ago, but there are still plenty of high-paying jobs for data scientists and quants who are capable of turning weird and wonderful datasets into market signals for sale to hedge funds. However, the collision of finance and tech cultures appears to have resulted in bad blood on a number of occasions.

The problem appears to be that some hedge fund managers are keen on taking samples and trials of data from multiple vendors and then not buying anything. Others have a habit of leaning on alt-data firms to give away hints about their methodology, then using them to help develop their own systems, again without paying. There’s now a “blacklist” shared between a few alt-data vendors, with about twelve funds, “including some big names” who are perceived to habitually do this.

What’s most interesting, though, is that the blacklist is in many cases applicable to individuals as much as it is to firms. It’s possible to get off the blacklist when a particular manager leaves for another job, and sometimes the problem is “ego-related” according to a consultant who used to work at ExodusPoint. The markets have always worked on a “cold shoulder” basis of rumour networks about clients who you shouldn’t share information with because they took advantage; it appears that the data nerds have rediscovered the practice quickly.

Meanwhile

“There is really a ton of alpha” on social media platforms, and the best financial Twitter accounts often have fewer than 2000 followers. It’s also possible to find people doing TikTok videos in which they impersonate Cathie Wood. A state-of-Financial-Twitter article notes that more and more people are getting jobs as a result of being noticed on the platform. (Bloomberg)

Higher salaries for junior bankers are all very nice, but everyone knows it’s the bonuses that really make the difference. Luckily, bonus accruals in the first half of the year seem to also be reflecting strong revenues and a tight labour market. (Reuters)

But not everywhere is joining the party. Ireland still has restrictions on senior bankers’ bonuses and the banking unions think it would “not be acceptable to the general public” to remove them yet. (The Journal)

SPAC volumes went off a cliff in Q2, down 82% on the previous quarter. This might be simply because the overall calendar is full, or it might indicate an end to the boom. (Financial News)

Eugene Ross lost his job at Bear Stearns after uncovering a hedge fund fraud and got bankrupted by his legal bills. Now, seventeen years later, the SEC has confirmed that he’s not going to be given any whistleblower settlement. (Institutional Investor)

“People in finance seem to think it’s somehow exceptional, but it’s just another industry, and all industries are going to become much more technology and data-driven”. Sandy Rattray of Man Group warns that neither bond trading nor private equity are likely to escape the onward progress of quants. (FT)

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