Morning Coffee: Goldman Sachs opens rift in a top investment banking team. What happened to the best people at a failed hedge fund

Investment bankers organise themselves into groups around the industries they cover.  And the three biggest groups are almost always “Resources” (oil, gas, mining). “FIG” (financial institutions) and “Tech”. Sorry to all the excellent Healthcare, Industrials, Retail and Real Estate bankers out there, but you know it’s true.

While resources and financials are reasonably fixed targets, the boundaries of tech banking keep changing – once upon a time it was more commonly known as “TMT”, for technology, media and telecoms.  In recent memory, tech bankers have been expected to pitch to crypto clients, and you can almost tell where we are in the business cycle by looking at whether fintech specalists report to the head of technology or the head of FIG.

With that in mind, it’s interesting to see that Goldman Sachs is having a bit of a reorganisation in its Tech group, reflecting yet more change in the nature of the underlying clients.  Going forward, there’s going to be a Global Technology Infrastructure group, led by Yasmine Coupal and Jason Tofsky, and a Global Internet and Media group, co-headed by Brandon Watkins and Alekhya Uppalapati.

The first of these is going to be staffed from the “Core Tech” team (including semiconductor coverage) and from telecoms, while the second will take on some Media bankers, and might look more like a traditional picture of Silicon Valley investment banking. Effectively, it’s a TMT group, split down the middle.

Why?  It looks like it follows a split in the tech industry, and the differing needs of two kinds of clients.  “Tech infrastructure” companies are technology companies in the sense that they do complicated sciencey and engineering things, but from a financial point of view, a data centre is very much like any other big shed.  It might need a lot of electricity and a reliable supply of cooling water, but the cash flows can go straight into an Excel spreadsheet.

Morgan Stanley has realised this too; they have done extremely well out of AI companies, but it’s been on the debt side of capital markets, not equity. Historically, tech banking has been about taking relatively asset-light companies from venture capital to IPO, but that’s not really how it works any more.

Does this mean that other banks will follow Goldman’s lead?  And if it does, will it be Infrastructure or Internet & Media that ends up paying the bigger bonuses?  It’s hard to make predictions, but as long as the AI boom continues, the clients are more likely to be wanting financing for capex, so the pressure for banks to concentrate on delivering this kind of service will be there.  Perhaps we’ll know that the top of the cycle has been reached when the last bulge bracket bank announces the formation of its Tech Infrastructure team.

Elsewhere, the gradual process of dismantling Eisler Capital is showing that there is one advantage of working at a multi-strategy firm; if it all falls apart, nobody is going to blame it on you, and you can get another job quickly based on the performance record of your own pod rather than that of the fund.  At least 13 former Eisler portfolio managers have already shown up somewhere else, and that’s despite contractual provisions that can cut their bonuses by as much as 30% if they don’t stay to the bitter end.

Sam Wisnia, the co-founder of the firm with Ed Eisler, also seems to be coming out of things with his reputation intact.  He was responsible for designing the firm’s risk management and portfolio analytics system, which was called Photon, and is apparently well regarded in the industry for having told Eisler’s principals exactly how much their returns were lagging by.

Interestingly, the intellectual property in Photon, and any possible sale proceeds, are owned by Wisnia and Eisler personally.  This is apparently causing a little bit of ill feeling on the part of the investors whose fees paid for its development, but it’s legally watertight. 

Meanwhile …

Are London traders unusually honest, or did they just not think of the same “guess the URL” trick? An inquiry into the accidental early release of the UK budget last month finds no evidence of any suspicious trading patterns. (FT)

If you think that the law firms are upstream of their banking clients, good news.  Poaching is still rife in London, with two partners going from Kirkland & Ellis to Sullivan & Cromwell. (Financial News)

Robert Sobelman, currently the head of the public corruption unit at the Southern District of New York, is leaving for a new job at Goldman Sachs.  He’s going to be “head of investigations”, a title which sounds like it will be an easy like most of the time but with the constant possibility of becoming really stressful. (NY Post)

Junichi Hanzawa, the incoming new CEO of MUFG, seems keen to maintain the momentum inside and outside Japan. He says that “we want to close the gap with global financial institutions”, and that “having a growth strategy in Asia and the US is important”.  This probably means more hiring, and potentially a deepening of the relationship with Morgan Stanley. (Bloomberg)

The fact that BlackRock’s main technology platform is called “Aladdin” gives an attractively seasonal pantomime theme to the announcement of its latest five “Tech Fellow” promotions (Business Insider)

Don’t underestimate the kids.  The trial of Ken Leech, the star bond trader at Western Asset Management, has heard that the first alarms were raised by a junior analyst who didn’t understand why trades were being allocated to specific portfolios, and started asking questions. (Bloomberg)

There is something about managing a fund with a forty year investment horizon located a few metres below sea level that keeps climate risk at the front of your mind.  BlackRock have lost another Dutch pension fund mandate over concerns that they are no longer taking ESG as seriously as they used to. (FT)

Former Credit Suisse analyst and Landsdowne Partners hedge fund manager Marc Rubinstein says that he “makes a living” these days, from a Substack with 97,000 subscribers. (Institutional Investor)

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