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Morning Coffee: The elite trading team that likens itself to an army unit. UBS banker points out inconvenient truth about ESG

When it comes to the use of military language in a business context, there are two schools of thought on Wall Street.  There’s the Lloyd Blankfein view that it’s a little bit excessive and cringe – “You’re getting out of a Mercedes to go to the Federal Reserve, you’re not getting out of a Higgins boat on Omaha Beach”, as he famously said. But there are plenty of other bankers who take the view that everyone understands what a metaphor is, and that there’s no reason for people involved in high-pressure situations which demand commitment and effort to deprive themselves of fairly obvious figures of speech.

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Joe Femenia is definitely in the second camp – he’s happy to be quoted as saying of his Jefferies global distressed debt trading team that “We do not want to be the conventional army … We want to be a special operations team: Smaller, smart and nimble, but equally impactful”.  He can get away with this because he knows whereof he speaks – Femenia was a Navy SEAL before joining Goldman Sachs, where he rose to the rank of Managing Director before being headhunted by Jefferies in 2016.

As well as having earned the right to use army-talk, Femenia has gained bragging rights more generally; despite being small by the usual standards of fixed income trading desks, his team is rated top-five in the last Coalition Greenwich client survey. That’s particularly impressive because since it doesn’t have a banking license, Jefferies is allowed to run proprietary trading, and Femenia’s team takes advantage of this freedom to generate enough profit to be worth singling out in the company’s earnings reports. Keeping clients happy while occasionally taking the other side of their trades certainly requires the smartness and nimbleness that Jeff Femenia associates with special forces.

So the model works for Jefferies. Are there any downsides? Perhaps.  Whether it’s earned or not, some people are turned off by the macho approach, and it’s been noticed that in the picture accompanying Bloomberg's piece on Femenia it’s possible to see 11 people (out of a total team of 17), all of whom are white men.  There are female SEALs these days, but not very many, and potential recruits to the Jefferies distressed team might be put off by the thought that the SEALs’ version of development training is called “Hell Week” and involves “repeated immersion in freezing water” as well as the “simultaneous sleep and food deprivation” that junior investment bankers might be more used to.

Elsewhere, it seems that Judson Berkey, UBS’s Group Head of Engagement and Regulatory Strategy, has been dropping some truth bombs.  At a closed meeting with global regulators and market participants, which was meant to be a “check in” on progress toward meeting all the new rules and guidelines on climate finance, he apparently made an “impassioned speech”, culminating in the message that “Banks are living and lending on planet earth, not planet NGFS” (referring to the Network for Greening the Financial System).

Somebody had to say it.  Banks have agreed to all sorts of targets for reducing the carbon intensity of their loan books over the last few years, many of them based on assumptions about data that didn’t really exist at the time they were making them.  As the information has been collected, it’s become apparent that the only way to make the crude reductions agreed to would be to drop clients in huge numbers.  As well as decimating revenues, this would leave carbon-reducing projects (like speeding up the closure of coal-fired power plants) without lending, while the real climate villains simply got their funding from outside the regulated banking system.  It shouldn’t really have required Judson Berkey to make the obvious point that bank regulation isn’t really a climate measure, and that if governments want such a huge reconfiguration of the industrial world, they need to directly legislate (and pay) for it.

Meanwhile …

The back and forth of attempted renegotiations is over, and the former Credit Suisse Securitised Products Group will be heading off to Apollo, without the controversial management fee arrangement that CS agreed in its dying days, but accompanied by enough assets from the legacy portfolio to make Apollo feel good about the deal. (Bloomberg)

Back in the early days of 2020, the status symbol for remote workers was a really cool “rona rig”, with multiple screens and high quality webcam to make you look and sound better than colleagues.  Looking forward, interior designers are proposing to curate your whole house, with lines of sight giving exactly the view of your books and furniture that you want to project. (WSJ)

One of the many reasons why bankers feel awful – insufficient sleep can drastically increase your “subjective age” and literally make you feel years older. (New Scientist)

Strategic priorities and vision statements can change overnight, but real estate is a long term commitment.  So it’s probably significant that UBS has announced it’s going to take all the space in Hong Kong’s Sun Hung Kai Tower, rather than just half. (Bloomberg)

Sir Chris Hohn is top of the list of “best paid (including gains on own capital in fund) hedge fund managers”.  Ten of the top 25 managers (including Hohn) lost money last year. (Institutional Investor)

In the storm over FTX, Terra and 3 Arrows, people slightly overlooked Genesis, and former Houlihan Loukey banker Barry Silbert.  But now he’s close to becoming crypto’s public enemy number one. (NY Magazine)

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AUTHORDaniel Davies Insider Comment

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