Morning Coffee: Ex-Bank of America MD recalls failed attempts to reduce juniors' working hours. Private equity's new success metric
As we reported last week, Bank of America's new system for monitoring junior bankers' working hours could allow it to reproach the managing directors (MDs) who make its young bankers work hardest. However, not only may be the bank be disinclined to do this, but past attempts at crimping working hours across the industry have come to little anyway.
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Writing in the Financial Times, Craig Coben, Bank of America's former global head of capital markets, says that two decades ago, the bank he worked for introduced a policy called "Thin to Win," in which pitch books were restricted to just 20 pages to alleviate the workloads of junior bankers. It didn't last, says Coben: rivals were still creating 80-page decks, plus appendices, and the bank needed to appear equally diligent. Writing on social media, one of Coben's colleagues who encountered "Thin to Win" said it simply meant that the bank concerned created a separate appendix with all the extra slides; it became even more work trying to distil the key messages into the 20 openers.
"Thin to Win" may have failed at Deutsche Bank instead of BofA, but even now banks have attempted to implement similar policies. Slimming down pitch books became at thing at Barclays, Moelis and BofA during the work hours outcry of 2021 too.
Also in 2021, banks set about hiring swathes of new juniors to help spread the workload. Coben isn't a fan of this. He says adding new staff stands to "muddle coordination, dilute institutional knowledge, and water down accountability." Some of his former colleagues disagree. Junior bankers are often staffed on multiple projects, the former colleague observes: even when they finish one project at 2am, they have to move to the next one; more people would mitigate this.
That same ex-colleague, who was a director to Coben's MD, says the real problem is one of MD desperation and lack of direction: "Chasing every possible deal is prevalent: throw a bowl of spaghetti on the wall and see what sticks. Hence, too many 100p pitches done overnight, leading to absolutely no business."
However, some of Coben's former colleagues look back fondly to their early morning experiences. Yes, the hours were "brutal" but there was also "a lot of camaderie at 4am," says Kay French, a former MD on BofA's sovereign wealth fund team. "Getting models to balance, presentations in, scribbling out names to fax to people who hadn’t told you where they were in the world…Long lasting friendships were made, mentors found, and I look back with fondness and great respect for many people," says French, writing on social media.
Junior bankers' long hours are a training ground "like few others," claims Kay, who is now a non-exec. Mary Callahan Erdoes, head of JPMorgan Asset & Wealth Management, has said something similar. This is the problem, too: long hours are fetishized by the senior bankers who went through them themselves.
Separately, Ludovic Phalippou, an Oxford University professor of financial economics, has made a career railing against the internal rate of return (IRR) as a measure of success in the private equity industry, because he says it's open to manipulation and distortion. Now it seems that the IRR is being dropped - but not due to Phalippou's efforts.
Instead, the FT reports that the private equity industry has adopted a new metric of its own accord. These days, it's all about "DPI”, or distributions to paid-in capital. This is defined as "how much money a fund cumulatively gives back to investors relative to what they originally paid in." It means that funds can simply return money to investors, instead of trying to generate returns by investing it.
Meanwhile...
23-year-old gives up her hybrid job to be in the office. "You’re going into an empty office and it just felt like it wasn’t worth the effort. It was a 50-minute drive [from her home in Bedford] for me to sit in silence.” (The Times)
Last year, Deloitte grew at its slowest rate since 2010. (FT)
At 45.8%, Britain’s banks are already taxed way higher than their peers in the other financial capitals. New York’s banks pay 27.9% and Frankfurt’s 38.6%. Blame the bank levy and the bank surcharge. (The Times)
Hedge fund managers in Dubai are spending up to $33k on kindergarten fees. (Bloomberg)
Nik Storonksy at Revolut sold $250m in stock. (Bloomberg)
Ralph Schlosstein, chairman emeritus at Evercore says deals are making a comeback. “The active dialog with clients is way up.” (Bloomberg)
Inside Andrea Orcel's pre-UBS gardening leave. 'He spent the time off with his wife and daughter and their husky, named Flash, and joked that he had rarely gotten to see them so much during the workweek. The family have homes in Milan and in London, and a getaway in Portugal—where his wife is from—decorated with family photos, contemporary art and a life-size Darth Vader figure.' (WSJ)
Invest in “the blazer, the shoe and a nice watch,” items that famously convey status (especially the latter two). You can “cheat” with other pieces like shirts and pants. (WSJ)
This is the 14 year anniversary weekend of the Lehman Bankruptcy that marked the bottom of the horrible 2008 financial crisis.
Some never before seen texts between me and Lehman CEO Dick Fuld. Also some important lessons. pic.twitter.com/okYyEdtjsh— Rich Handler (@HandlerRich) September 13, 2024
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