Morning Coffee: Goldman Sachs head of M&A does not seem to be getting ready for job cuts. Macro hedge fund pain

Earlier in the year, we were told that 2026 was going to be like 2025, but better – more consistent deal volume and less geopolitical drama.  So far … it’s early days.  Global investment banking revenue is tracking about 10% up on last year (remember, 2025 had quite a slow start) and M&A is up 25%.  But credit losses have begun to show and the geopolitical drama has not quite gone away.  So there’s a lot to play for, and a real two way debate between optimists and pessimists. 

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Stephan Feldgoise, Goldman Sachs’ head of global M&A is definitely among the optimists.  In an interview with Bloomberg, he reminds us of that slow start (and the “Liberation Day” tariff shock) which worried everyone last year, but which quickly “turned into one of the most active if not the most active” second halves of the year on record.

When you look at Feldgoise’s reasons for being bullish, you might worry, though, because some of them are quite long in the tooth.  He talks about  the existence of “massive pools of capital … an incredible amount of capital sitting with investors … looking to invest in transactions into companies”.  And these pools do exist, but the “dry powder” thesis has been a regular feature of investment banker discourse for several years now. 

His other main point, about the strategic rationale for consolidation, is also well made. But although “If there is something that you think you should do to position you for the next, not 10 weeks or 10 months but 10 years or 20 years or 30 years, you should seriously think about doing it” is a good reason for doing deals, is it a good reason for doing deals right now?  You always need to aim-off for optimism when you hear someone this senior talking, because they have to be that way to get where they are – glum bankers don’t win mandates.

The rule is always – don’t listen to what senior bankers say, watch what they do.  And the other rule is that targets are an opinion, forecasts are an opinion but headcount is a fact.  So what are bankers actually doing? 

Well, across the Street, Bank of America has set up a new “Private Capital M&A” team to concentrate on doing deals involving exactly those “massive pools of capital”.  A couple of months ago, JPMorgan also set up a private capital team.  Goldman doesn’t seem to have had a specific team launch, but last year it made Chris Convey and Haidee Lee the global co-heads of “Financial Sponsors M&A” alongside their other coverage responsibilities.

So, it looks like the bulge bracket top management genuinely believe that the pools of cash on the sidelines are about to be put to work.  Or at least, they think it’s a real enough possibility that you don’t want to be caught napping when the next wave of deals begins.  That seems like good news given that Goldman is embarking upon a new exercise in rolling job cuts. Feldgoise seems willing to see through the empty months without removing heads.

Elsewhere, it was quite public a couple of weeks ago that Caxton Associates had been caught on the wrong side of the trade when bond and commodities prices reacted to the news from the Gulf.  Since then, things seem to have got worse.  The drawdown has grown from $600m to $1.3bn; the flagship macro fund is down 15% and the total loss is getting on for a tenth of the total assets under management.

That’s the kind of territory which makes everyone nervous.  Caxton has a long track record and a stable investor base, so it’s less at risk than a smaller or younger hedge fund.  It was even able to tighten its liquidity terms in 2022, and the current drawdown comes after a very strong year last year, during which the employees seem to have fully shared the upside.

But none the less, it’s no fun to look at your “high water mark” and realise that you’re several fathoms further down.  Caxton might claim it's not alone - Business Insider notes that Brevan Howard and Taula have also lost money. But it's not at all pretty.

Meanwhile …

Jefferies results are often prophetic for the sector, and they seem to show the pattern of strong year-on-year performance in the actual business, weighted down by the credit consequences of questionable deals from previous years. (Bloomberg)

If AI is a gold rush, and datacentre companies are the ones selling pickaxes, then KKR has worked out how to make money by selling axe handles in a pickaxe rush.  One of its best investments ever has turned out to be a specialist computer-cooling company, whose employees have apparently gained about $240,000 each as the buyout returns to market. (WSJ)

Hedge funds have decided to make it clear that they’re not running scared from the Middle East. After stories of staff relocating, Millennium have reiterated their commitment to Dubai.  Verition have extended their office lease there by five years, and Hudson Bay Capital have also opened up an office in Abu Dhabi. (Bloomberg)

The SpaceX IPO prospectus is apparently planning to part from industry custom by listing all the syndicate banks in alphabetical order, rather than in order of importance.  So there will be no “top left” position to covet, and league table credit will be hard to apportion. (The Information)

This might or might not be related to the bankers’ willingness to keep it ambiguous whose deal this is, but the SpaceX IPO might also dispense with the usual “lockups” for its current shareholders, and has raised the valuation so that it will be the largest IPO ever. (FT)

Apparently government chiefs of staff aren’t subject to the same rules as bankers when it comes to backing up messages on their work phone.  So after one theft, quite a lot of evidence requested by a parliamentary inquiry is gone forever. (FT)

Brewdog beer is going to be served in the Hamptons this year (NY Post)

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