Morning Coffee: UBS is firing while it’s hiring. Hedge fund managers could break their handcuffs
Although we talk about banks being in either hiring mode or firing mode, the reality is that most of the time, they’re going both. Even in the worst of downturns, there will be hiring to maintain franchises, or for jobs which are operationally or legally necessary to fill. And even in the most exciting booms, people will be let go for performance issues, strategic changes, or just because the task they came to do is finished.
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So it’s not quite as odd as it looks that UBS is reported to be planning another round of job cuts in January, when it’s also being identified as one of the banks with the biggest ambitions to grow in 2026. The people being hired and the people being fired are just different.
In particular, it seems that the redundancies are mostly related to the finalisation of the Credit Suisse acquisition. That means that many of them will be mid- or back office, simply because most of the front office bankers who didn’t have a role in the merged organisation have already left. It turned out that there were fewer losses than initially estimated, as the deal coincided with a decision on the part of UBS management that they wanted to run a significantly bigger investment bank than in the past. And many of the departing staff will leave with no hard feelings and UBS’s gratitude, as they include the IT people who have specifically been working on integrating the IT systems.
On the other side of the ledger, UBS is still interested in expanding the ranks of its Managing Directors, particularly in North America, where it has the ambition of fitting into the position of “biggest outside the bulge bracket”. That means that headcount might be slower to accelerate (as they will want to be opportunistic in picking up rainmakers), but might increase later in the year (as the new hires start building out their teams with Directors and Vice-Presidents to execute the business that they’re winning).
Being fired in an environment like this is not necessarily a hardship; unless you have managed to generate a reputation so bad that it reaches other banks, your performance issues can usually be smoothed over, and you can pretend you were just dissatisfied with your bonus. Being fired as a result of a merger is even better in terms of finding a new job fast, as there isn’t even any stigma attached to it. And UBS might not even have to do much actual firing; over the last year, “natural attrition” has been unusually low, but if overall market conditions pick up, we’d expect to see more people leaving of their own accord.
Elsewhere, the UK government is currently considering a ban on non-compete clauses, similar to the one which was passed in the USA last year, but then abandoned in September. As a result, some London hedge funds are planning to increase the length of their notice periods, and potentially to strengthen their NDA, trade secrets protection and other ways of hassling people who want to go straight to the competition.
This might be good news for hedge fund managers, who often have the most interesting and pleasant times of their lives while on gardening leave. And some quant firms might decide to rearrange their code base so that more things are “siloed” and fewer employees have a full picture of the system. But realistically, it’s not going to change much.
At the end of the day, finance is a people business. You can’t really make someone work for you if they don’t want to. And hedge fund managers ought to be in the business of managing money, not engaging in employment litigation. Only in the most egregious cases is it ever considered worthwhile to let your investors see you in court for a few weeks, complaining about a star trader being poached. The best protection against losing your employees is to treat them fairly in the first place.
Meanwhile …
The latest Blackstone Christmas video is out. It’s got a sort of 1980s theme (because this is the 40th anniversary of the company’s founding) and a running joke about Jonathan Gray having a midlife crisis (although it is the company turning 40, not him). It’s got a cameo in which David Solomon encourages Gray to become a DJ. The reviews are, frankly, mixed; although Business Insider ranks it the third best ever, their taste is seriously called into question by the fact that they put last year’s country & western nightmare at number 1. Other commentators are less impressed. There is one good joke at the start, with the parody of Ken Burns (and possibly of Goldman Sachs’ 150th anniversary movie). For the moment, YouTube comments are still switched on. (YouTube)
It’s an equity analyst’s ambition to have a recommendation that’s so good that it makes the Wall Street Journal write an obituary for you. John Olson, who was fired by Merrill Lynch for being too sceptical of Enron, managed it. (WSJ)
Once a Wall Street legend and a prominent character in “Liar’s Poker”, Howard Rubin claims these days to be “just a granddad”. Although the context of this claim is a “sex dungeon trial”, so (without knowing the full context and details), other granddads may differ. (Business Insider)
An unexpected consequence of the introduction of AI to the workflow at law firms is that the “billable hour” becomes less relevant as an economic unit. The firms are now trying to charge on a per-project or an outcomes basis, and presumably they will alter performance measures too. (WSJ)
Omar Nokta covered the shipping industry at Jefferies until a week ago. Now the coverage bankers are going round their clients promising them that the bank still loves them and plans to “cobble together” equity coverage of 10 of Nokta’s 28 names. (Tradewinds)
The track for getting a Presidential pardon is now well signposted. Sam Bankman-Fried appears to have hired some of the best-placed intermediaries and lobbyists. (FT)
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