Morning Coffee: The huge hedge fund pay packages that are causing a buzz among juniors. Squabbling at Facebook

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While many people still love the idea of working for a hedge fund, the industry has lost a bit of panache in recent years as dozens of big-name firms have closed their doors due to poor performance. However, many quant funds that rely more on algorithms than human traders seem to be doing just fine. One possible reason is that they are offering huge pay packages to poach blue-chip junior talent away from investment banks and tech firms.

Some quant funds are now paying their junior tech staff more than $130k, according to Financial News. That dwarfs the compensation packages of top investment banks and tech firms, where analyst pay tops out at around $90k. “This is what all the tech interns are talking about,” one junior told the media outlet.

Quant funds can justify such comp packages because they aren’t hiring fresh graduates as back-office staff. Junior quants may not be making trades directly, but the software and algorithms they develop can help bring in millions. Citadel, a multi-strategy firm known for its quant funds, returned nearly 9% during the first half of the year, well surpassing the hedge fund industry average of 1.2%.

Of course, banks hire quants and strats too, but they don’t have the freedom to pay juniors at that level. Pure quant funds have been using investment banks as their own personal recruiting pool all year. Millennium Management, for example, has hired at least three lifelong sell-side quants in the last two months alone.

Elsewhere, Facebook continues to make headlines for all the wrong reasons, showing what can happen to tech startup culture when companies make it big. First, the two co-founders of Instagram quit, with insiders citing a clash with Facebook executives over strategy. Then, Brian Acton, co-founder of fellow acquisition WhatsApp who left $850 million on the table by quitting Facebook before his earn-out, went scorched earth on the social network in an interview with Forbes, citing Facebook’s leadership and its monetization efforts as the reason for leaving early. Facebook executive David Marcus responded on Wednesday in a blog post first reported by Bloomberg, calling Acton’s decision to go public with his thoughts “low-class.”

As part of his response, Marcus provided a window into what can happen to work culture when startups like Facebook become big corporations.

“WhatsApp founders requested a completely different office layout when their team moved on campus,” Marcus wrote. “Much larger desks and personal space, a policy of not speaking out loud in the space, and conference rooms made unavailable to fellow Facebookers nearby. This irritated people at Facebook, but Mark [Zuckerberg] personally supported and defended it.” The narrative around working at Facebook has gone from ping pong and beanbag chairs to clashes over politics and conference room usage.


Boutique investment bank Perella Weinberg has hired Goldman Sachs and J.P. Morgan as bookrunners to work on a potential initial public offering that could value the New York firm at roughly $1.5 billion. Interestingly, the boutique decided against included Morgan Stanley, where Joe Perella and Peter Weinberg cut their teeth. (Bloomberg)

The SEC has accused Tesla founder Elon Musk of misleading investors with his now-infamous tweet that he had secured funding to take the automaker private. The lawsuit is seeking unspecified monetary penalties as well as an order that Musk can’t serve as an officer or director of a public company. Tesla shares were down 11% as of late Thursday afternoon. (Bloomberg)

Investment bankers at UBS are showing mixed emotions as they say farewell to their boss, Andrea Orcel, who is leaving to become the chief executive of Banco Santander. “He’s the best banker I’ve ever worked with and the worst manager I’ve ever seen,” said one UBS banker. Ermotti has a legendary work ethic and expects to see the same from those working underneath him. You can read Orcel’s farewell letter to employees here. (FT)

Despite his background, Orcel won’t be making radical changes to Banco Santander’s M&A group. His first focus will be to upgrade the bank’s retail banking operations. (FN)

A former Morgan Stanley trader who used a fake hedge fund to bilk $22 million from friends and family, including his own mother, has been sentenced to eight years in prison. Michael Scronic blamed his gambling addiction as the root cause for his behavior. (Bloomberg)

Goldman Sachs officially has a retail presence in the U.K. The firm launched its web-based consumer bank, Marcus, which has grown to $23b in deposits in just two years of operation in the U.S. (WSJ)

Goldman Sachs credit trader Shawn Joshi has left the firm to join Morgan Stanley to head up its index trading desk. He’s just the latest trader to move on from Goldman since David Solomon was named incoming CEO. (Business Insider).

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