Online edition 29 June 2020

Setting the agenda for the City +5pt

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Investment Publication of the Year 29 June 2020 Issue 1197 £9.50 | € 11 Fintech envoy Eileen Wirecard: What its rise Back to work: When Burbidge: ‘I was a and fall tells us about and how Square Mile’s Silicon Valley cliché’ the financial industry offices will reopen Page 3 Page 4 Page 9

Setting the agenda for the City Executives call coaches amid Zoom debacles

David Ricketts

Zoom fatigue is real. A senior sales and marketing ex- ecutive at a UK asset manager said that to prepare for a recent pitch for a pension fund mandate via the con- ferencing app, his team conducted seven or eight “dry runs”. “But I walked away thinking, ‘That was horrible’. You can’t read body language and you can’t sense the room,” said the person, who de- clined to be identified. “It was too clunky. We were given feedback that we were a bit cold and a bit distant.”

Peter Grundy Grundy Peter He added: “We’ve done a few vir- tual pitches now. Some of them have been car crashes.” To avoid such a disaster in the The race and ethnicity gap future, the fund management exec- utive enlisted the help of a presen- tation coach for the next set of pitch- es, saying he hoped a professional would give him and his team a “per- Finance sector’s deafening formance” edge. As new business pitches and client meetings are being conduct- ed from spare bedrooms and home silence on diversity in its ranks offices, some City executives have struggled to adapt and are turning to expert help after a series of presenta- Paul Clarke and David Ricketts George Floyd in May and to to have conversations outside their own organisations. tion nightmares. And those who pro- say how passionately they feel of their “comfort zone” while Financial News asked 11 vide presentation coaching to City Jamie Dimon, arguably the about diversity issues. Larry Fink, chair and CEO of leading investment banks and firms say they’re noticing an increase highest profile banking boss on Goldman Sachs chair and CEO BlackRock, said the world’s five asset managers to provide in demand since lockdown began in Wall Street, became the finance David Solomon urged employees largest asset manager must not data on the proportion of black March. sector’s poster boy for the “tolerate shortcomings” on and ethnic minority people they Sandra Davis, head of presenta- Black Lives Matter movement Poll question racial inequality. employ globally. While some fund tion coaching at one such firm, called this month after he took the Do you feel However, the public managers — including Standard Bladonmore, has worked with City knee in a sign of solidarity. your company No Yes displays of support for the Life Aberdeen, Jupiter and bosses to conduct presentations such His bold gesture came is doing 54 % 46 Black Lives Matter movement Schroders — provided numbers, as investor days and financial results. as senior financial services enough to by some finance giants is out of not a single investment bank “A few clients have said the lead- executives came out in droves increase racial kilter with their reluctance to to criticise the killing of diversity? reveal racial diversity within Continued on page 12 Continued on page 2

City wants charter to boost BAME staff Inside

Paul Clarke and sury to set up a programme for fi- disclose the proportion of BAME em- bers of black and other minorities Glitterbugs: Hedge funds Shruti Tripathi Chopra nancial services, akin to the govern- ployees in their workforce. Many of that they employ, so that this issue increase gold bets because ment’s Women in Finance charter, in them do not want to (see story above). cannot be hidden.” ‘the only way is up’ The government has come under order to address the chronic lack of “It would be a big step forward The UK stands in contrast to the pressure to create a dedicated race racial diversity in City firms. if there were a race equality char- US, where the Equal Employment Page 10 charter for the financial sector, in Some of the world’s biggest fi- ter in the same vein as the wom- Opportunities Commission requires How high-tech is the ‘new- a bid to encourage big banks, asset nance firms criticised racism and en in finance charter,” said Diane firms to publish granular data each managers and other City employ- came out in support of the Black Abbott, the first female black MP. year on the proportion of BAME look’ Bank of England? ers to increase the number of black Lives Matter movement this month “It would increase transparency employees. While the government Page 15 and minority ethnic (BAME) workers in the wake of protests over George and might force the finance sec- launched a Race at Work charter in A big job at HSBC for within their ranks. Floyd’s killing in Minneapolis. tor to address racial inequality 2018, many banks — and most asset High-profile figures from finance But at present, UK-based finan- more. There should also be a le- Deutsche’s Bagshaw and politics have called on the Trea- cial services firms do not have to gal requirement to show the num- Continued on page 13 Page 22 2 News 29 June 2020

Credit Continued from page 1 Credit Suisse review of funds Executives call in coaches amid shines light on SoftBank’s roles Zoom debacles Senior bank executives are concerned, write Julie Steinberg and Duncan Mavin

ership team are finding it difficult to Executives at Credit Suisse are re- the sole supplier of the supply chain sill through two tranches that valued engage people,” she told Financial viewing several of the bank’s funds finance deals that go into the Credit the company at $3.5bn. SoftBank cur- News. “For some, we have had to do after becoming concerned about the Suisse funds. rently has a 9.9% equity stake in the it very quickly. It was a big switch go- multiple roles played by Japanese A Credit Suisse spokesman point- company, according to a document ing online and presentations had to conglomerate SoftBank, according to ed to a statement he made last week viewed by The Wall Street Journal and be adapted.” On message: Finance pros are people familiar with the matter. confirming the review. A Greensill people familiar with the investment. Research from Ofcom, the getting tips on Zoom presenting Four Credit Suisse funds have spokesman said the firm isn’t in- The rest of its stake was struc- broadcast regulator, revealed a diz- $7.5bn in assets in total and are sold volved with Credit Suisse’s internal tured as a convertible bond, because zying surge in Zoom usage among UK It is not just clients that execu- to investors and wealthy families as matters and that it has a strong rela- SoftBank would have needed approv- adults, with 13 million users in April tives are looking to impress. Presen- safe, short-term investments. They tionship with the bank. A SoftBank al for a larger equity stake from reg- — up from 659,000 in January. For tation coaches say companies also hold securities backed by loans made spokeswoman declined to comment. ulators in Germany where Greensill Microsoft Teams, users more than want to be more slick in how they to companies to allow them to pay David Erickson, a senior fellow owns a bank. doubled over the same period to 6.5 communicate with employees using their suppliers more quickly. in finance at the University of Penn- The SoftBank relationship with million, up from 3 million in April. internal webinars as well as online SoftBank plays three roles in the sylvania’s Wharton School, said Credit Suisse deepened in recent The proportion of UK online panel sessions. Credit Suisse funds: it is invested in there should be guardrails to protect months as one of the funds bought adults making video calls has also “Everyone has webinar fatigue,” the funds; it is invested in the compa- investors from potential conflicts of securities backed by loans made to doubled during lockdown, with said Houghton. “If you were doing a ny whose loans are held by the funds; interest, such as disclosures about other Vision Fund portfolio com- more than seven in 10 doing so at panel discussion at an event, you can and the funds own securities backed SoftBank’s role as an investor in the panies. Four such companies were least weekly, up from 35% from be- feed off people and the audience and by loans made to other companies fund and its relationship to Greensill. among the top 10 recipients of financ- fore working from home restrictions can gauge when to pitch in. It’s more that SoftBank has invested in. In essence, SoftBank serves as ing from the fund, receiving about were put in place. difficult online and you have to bring The review was launched after both a lender and borrower in the $750m in aggregate as of March 31, Overall, UK adults spent an av- in people in a slightly different way.” senior executives at the bank be- transactions. The fund documents according to a fund document. erage of four hours and two minutes Graham Davies, a presentation came concerned about SoftBank’s reviewed by The Wall Street Journal SoftBank also injected $500m online a day during April — the high- coach who has worked with execu- roles in the funds, one of the people don’t disclose SoftBank’s connection into the Credit Suisse funds, accord- est amount on record. This was up tives at Fidelity International, Inves- familiar with the matter said. But it to Greensill or to the companies re- ing to the person familiar with the from three hours and 29 minutes in co, UBS and Barclays, said that for is wide-ranging, and includes other ceiving financing. matter. It isn’t clear when the invest- September 2019. some clients, the “wake up call” to matters not related to SoftBank. Last year, the Vision Fund made ment was made. Jane Houghton, a presentation bring in professional help only just The company tying this togeth- a nearly $1.5bn investment in Green- The Credit Suisse funds boomed coach who works with private equity started recently, after three months er is Greensill Capital, which offers last year, more than quadrupling executives, has also seen an increase in lockdown. supply-chain financing to compa- assets under management to more in demand for help with online busi- “You can get rapport with peo- nies, a form of short-term cash that than $9bn. But this year the funds ness pitches. Clients are looking to ple you know via Zoom, but it’s dif- lets them pay their bills more quick- $7.5bn were hit by a wave of redemptions make an impression during a time ficult with people you do not know,” ly. Greensill, founded in 2011 by for- amid the economic turmoil, though when competition for deals is fierce, said Davies. mer Citigroup banker Lex Greensill, Assets under management in the flows have stabilised in recent weeks. she said. “A lot of people have been deal- counts former UK Prime Minister four Credit Suisse funds linked to “A lot of private equity firms are ing with Zoom in a far too casual David Cameron as an adviser. It is SoftBank and Greensill From The Wall Street Journal competing for deals,” said Hough- way — treating it as an informal chat ton. “Competition is higher at the to your laptop screen, and not as a moment and they have to stand out. formally prepared, rehearsed and They have to make assumptions on sharpened presentation,” he said. the first Zoom call they make.” “You need to be short, sharp and quite intense in what you are saying “A lot of people have to break through the glass barrier of the laptop screen.” been dealing with Davies said he was getting more Zoom in a far too requests for so-called hybrid presen- tations, where executives present to casual way” a small number of people in the same room, while others tune in via the Graham Davies, presenting coach web. “Hybrid will be the only game in town for about a year,” said Davies. With predictions that the pan- Read more demic will lead to long-lasting chang- es in behaviour, such as a fall in ex- breaking news ecutive air travel, online business pitches are likely to stick. and analysis “It’s a time saver,” said Hough- ton. “If you had to get on a plane to

from FN at travel, you may find it easier to lis- Getty Images ten to an event on a webinar. I don’t fnlondon.com think this will disappear.” Senior executives at Credit Suisse have become concerned over the multiple roles played by SoftBank

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was made chair of Tech Nation, the government-backed trade group, in September the same year. “There was then a little bit of a flurry in terms of No 10 and No 11 talking about which one would be announced when, because I don’t think either knew that the other one was going to approach me,” says Burbidge. Since 2015, she has advised three successive Conserv- ative governments, and perhaps more than anyone is ide- ally placed to gauge the extent to which fintech has been a priority for each administration. Under Cameron and Osborne, she perceived a “genu- ine intention to establish milestones and momentum and really accelerate or encourage what was already a bur- geoning fintech ecosystem”. Theresa May, while admit- tedly side-tracked by Brexit, appeared to Burbidge less “naturally inclined” to pour resources into the sector. Under Prime Minister Boris Johnson and Chancellor Rishi Sunak, the government’s support for the fintech and the wider tech sector has had to take a much more tangi- ble shape than bridge agreements and innovation sand- boxes thanks to the coronavirus crisis. In April, amid warnings that the UK risked losing a generation of startups in the pandemic, the Treasury un- veiled a £1.25bn relief package for early-stage firms, with £250m in “match funding” available from a new Future Fund. Burbidge is broadly supportive of the initiative, but says the government faces an “impossible” task determining which tech startups should be saved and which would have failed with or without being hit by the economic impact of the crisis. She has, however, pointed out to the Treasury — while making her conflict of interest clear — that Future Fund money will not count as regulatory capital for digi- tal banks, such as Monzo. “If you want to see fintech con- tinue to flourish and challenger banks as a specific sub- sector within that, this is what they might struggle with. Things like Future Fund don’t help them, so I don’t know if there is something else to be done there,” she says. Burbidge’s prized bet, Monzo, has been struggling on a number of fronts during the crisis. The fintech bank has been forced to lay off hundreds of staff in the US and UK, while stomaching a 40% hit to its valuation in a $60m fundraising. In May, Blomfield stepped down as chief executive to assume the newly-created role of president. During the dotcom bubble, Burbidge spent a decade working in Silicon Valley, and says she was “very much the cliché” at that time.

Danilo FN Agutoli for “I bought a sports car, I bought a house in San Fran- cisco with friends. I loved being in the technology sector.” She gave a very Silicon Valley explanation for Mon- There are few people in UK tech better connected than zo’s current predicament: “The reason why [Monzo] is in Eileen Burbidge — partner at the venture capital firm Pas- the position it is in today is because it was totally unpre- Eileen Burbidge sion Capital, a non-executive director of the digital bank dictable growth — not forecasted, exceeded everyone’s Monzo and fintech envoy to the Treasury. expectations, even the management team — and because Her more than 25-year career in tech has seen her of that costs have increased, but revenues didn’t increase cross paths with everyone from Skype founder Niklas accordingly,” she says, adding that the company now has ‘I was a Silicon Zennström — who fired her in 2005 — to Starling Bank’s more than four million customers. Anne Boden, whose startup she very nearly invested in “If you weren’t in a pandemic, it is a first-world prob- prior to backing Tom Blomfield’s Monzo in 2015. lem. The cost base got ahead of itself because of the phe- Boden and Blomfield had initial- nomenal growth which is what most Valley cliché’ ly worked together on Starling, and CV 2009-present companies actually really struggle to Burbidge had shaken hands with the Co-founder, achieve or even buy.” pair of them on an offer of invest- White Bear Burbidge blames herself and the ment, but was outbid by another Born Yard startup’s board for this, rather than venture capital investor. Ultimately, 16 June 1971 2008-2009 its founders, who she says can’t be neither company invested. Education Non-executive blamed for trying to capitalise on the “So we got dumped for some- 1989-1993 director, The company’s gains. body they ended up not marrying, BSc, Computer National In hindsight, there are specif- but that’s okay,” says Burbidge, in an Science Archives ic areas where she thinks the board interview conducted over Zoom. (Engineering) 2007-2011 could have interceded sooner, one When Blomfield and Boden later from University Advisor, being Monzo’s Las Vegas customer parted ways, she says he took 11 Star- of Illinois Ambient Sound support centre, which it shuttered in ling employees out of 12 with him to at Urbana- Investments April, resulting in 165 redundancies. start Monzo, and Passion Capital in- Champaign 2005-2006; The site was dedicated to over- vested. Some five years later, she sees Career 2007 night support for UK customers. It that Monzo investment as a “once in 2019-present Director, took roughly 12% of customer sup- a lifetime” event. Non-executive comms port calls, yet accounted for 19% of But being a Monzo investor is director, Dixons products, then cost. It was, in other words, “very just one of Burbidge’s many hats. Carphone contractor, much a luxury,” she says. Her tech expertise is so in demand 2015-present Yahoo! Europe As the lockdown in the UK be- that at one point in 2015, No 10 and Fintech envoy, 2004-2005 gins to ease, Burbidge is hopeful that The UK government’s fintech envoy No 11 Downing Street got into a ker- HM Treasury Director, the silver lining to the pandemic for fuffle over which department would 2015-2016 product, Skype Monzo is that it will emerge “with a has come a long way since the dotcom announce her as an adviser first. Member, Prime 1993-2004 much, much leaner cost base”. She was appointed as fintech en- Minister’s Various roles “It is going to be so much better boom. Now she thinks challenger banks voy by former chancellor George Os- Business in tech sector, positioned now as a company that borne in July 2015. That same month, Advisory Group including it gives me greater confidence as a might need a helping hand through the Prime Minister David Cameron 2011-present at Verizon, shareholder about its [unofficial] signed her up to his business adviso- Partner, Apple and Sun plans to be cash-flow break-even by pandemic. Interview by Ryan Weeks ry group. And for good measure, she Passion Capital Microsystems the end of next year.” 4 Comment 29 June 2020 FN Staff/Getty Images Wirecard’s collapse does not indict one company, but a whole system

story is how many separate red flags it raised. PwC and Anglo-Saxon critics. This is hardly a good look for David Wighton One of the simplest was that the company didn’t EY to be Germany as it tries to turn Frankfurt into the EU’s generate cash. The income claimed was not reflected investigated new financial centre. It is remarkable how many in its cashflow, a classic symptom common to most over London Then we have the asset managers who continued frauds, including Enron. Capital audits to back the stock. Over the years, Hiley tried to red flags were missed for so In addition to pulling apart the accounts, Page 10 persuade large holders of the shares that were not Hiley’s team did some international gumshoe work, his clients to listen to the evidence. “Most were just long — this grim saga now checking up on the customers and acquisitions that not interested.” it reported. Way back in December 2015 it went Some big supporters, notably Alexander leaves a great many people through all the 200-odd customers Wirecard had ever Darwall, have had the decency to apologise to their announced and could verify only a third of them. investors. The former Jupiter star who quit last year across the industry with These are exactly the sort of checks that to set up his own outfit and now runs the European auditors should do on a routine basis. Yet EY has Opportunities investment trust, still has a good serious questions to answer been signing off the accounts for a decade. With some record despite this disaster. justification, auditors say they cannot be expected But the fact that at one point the trust had 17% The Wirecard scandal is the most to detect every sophisticated fraud. But there were of its assets in Wirecard raises more questions about serious indictment of European so many alarm bells with Wirecard that EY has very the oversight of such star managers. finance since the global banking crisis. serious questions to answer. Hiley says he managed to get some big In terms of frauds, the collapse of the They are not alone. Wirecard’s collapse is an shareholders out and most of his clients made a lot German payments business is one embarrassment for the many banks that did business of money shorting the stock in the last year. But he of the most damaging ever for the with it, including Deutsche Bank (whose asset admits, with understatement, that the whole thing reputation of the European financial system. management arm was a big buyer of the shares), has been “rather stressful”. It has revealed a pattern of negligence (or worse) and its lenders led by ABN, Commerzbank and ING. He persuaded some clients to short the stock in among leading banks, auditors, rating agencies, It is another reputational hit for SoftBank, 2015 and they got badly burned. When Wirecard made investors and regulators that is simply breathtaking. an affiliate of which last year arranged a complex it into the Dax 30 index of top German companies Among the few actors to come out of it looking €900m investment in Wirecard which was laid off “we looked like right idiots”. Hiley was always good are the dogged band of independent analysts, by Credit Suisse to investors in the form of convertible convinced he was right but as Keynes said “markets short-sellers, and journalists (notably at the bonds. These are now almost certainly worthless. can stay irrational longer than you can stay solvent”. Financial Times) who pursued the story over the years Not looking too clever either is Moody’s, The saga is another reminder that it is much more despite a campaign of intimidation by the company which gave Wirecard a first-time investment grade comfortable trying to persuade investors that a stock aided and abetted by the German financial regulators. credit rating less than a year ago. is massively undervalued, as Hiley’s firm did with One of the astonishing things about the grim Perhaps most shocking of all is the behaviour Ocado, than that another is overhyped or even a con. saga is for how long critics have been warning that of BaFin, the German financial regulator, which This asymmetry highlights a fundamental problem the company was a house of cards. Doubts about its consistently took the company’s side against its with the financial industry. Firms that were wrong accounts first surfaced as far back as 2008. about Wirecard, or simply didn’t care, made a lot The Analyst, a London-based independent “The collapse of the German payments more money out of it than those that were right. research house, started looking at Wirecard and business has revealed a pattern of So it is hard to be confident that the lessons advising clients to short the stock in 2014, according will be learned. Will there be more such disasters? to founder Mark Hiley. “Since then we have written negligence (or worse) among leading banks, Perhaps the most we can hope for is that they won’t 43 notes, presented at multiple conferences and auditors, rating agencies, investors and be quite so blatant. done over 200 client meetings,” he says. Another remarkable aspect of the Wirecard regulators that is simply breathtaking” David Wighton is a columnist at Financial News 29 June 2020 Comment 5 UK’s fintech firms prepare Insolvency shows flaw in Germany’s for life after Wirecard financial markets said it had been in the process of a phased migration Ryan Weeks from Wirecard to diversify its suppliers since late 2019, and only ever used the company in certain Pierre Briançon Digital banks are distancing locations to enable customer card top-ups. When it learned of Wirecard’s problems, Revolut migrated Wirecard benefited from themselves, but not all can the remaining customers to alternative providers worldwide to avoid any potential service disruption. BaFin’s hands-off approach escape the fallout Digital bank Curve was not so fortunate. On 26 June it warned customers to expect “disruption” to A few days ago, when even German UK fintech firms were preparing for their service after the FCA stopped Wirecard’s UK politicians and regulators could no life after Wirecard months before arm from operating. A spokesperson said this would longer ignore the size of the Wirecard the German payments business filed last only for “a limited period of time”. The company debacle (€1.9bn or $2.1bn for now, for insolvency on 25 June. Revolut became a “principal member” of Mastercard in April, and still counting …) the country’s and Curve, two of the UK’s largest allowing it to bring services such as card issuing and economy minister Peter Altmaier, digital banks, claim they have been e-money in-house, rather than relying on Wirecard. while expressing shock (shock ...) at the scandal, transitioning away from using Wirecard’s services, But despite efforts to proceed with business as also voiced his fears about the “reputation of Germany while others in the sector say events at the company usual, there is no getting away from the fact that yet as a banking centre”. are not specific to fintech. another large, publicly-traded fintech firm has flopped. A reasonable reply would be: What reputation? “You never want to see a fintech firm go pop That cannot be good news for the sector. The fintech that was once a wonder of the German like that, but I don’t think it’s a fintech problem. In July 2019, Financial News reported that a stock exchange became on 25 June the first company I think it’s a regulatory problem and an audit collapse in peer-to-peer lender Funding Circle’s included in the DAX to file for insolvency. problem,” said Matt Cockayne, chief commercial share price had dented fintech firms’ IPO ambitions. That came a few days after its management board officer at the open banking startup Yapily. US fintech firms Lending Club and OnDeck Capital admitted that nearly €2bn mysteriously declared to be The trouble at Wirecard came to a head earlier similarly disappointed investors before that. “missing” from the company’s accounts, in fact, didn’t this month when lenders alleged that some €1.9bn John Salmon, a partner at the law firm Hogan exist. Things happen, and Wirecard is likely to be in cash missing from its balance sheet didn’t exist. Lovells, said there are “scandals in all sectors” but mentioned in future business management classes as Its chief executive Markus Braun was arrested on fears this one could damage prospects for fintech IPOs. an example of both the promises and dangers lurking 23 June, and the company’s shares collapsed to “In tech as well as fintech, it’s a long term play isn’t in what is now called the fintech industry. But the close to zero. it? And it can be quite bumpy. I suspect companies immediate lesson of the scandal should first be taught But UK-based fintech firms say they have been may look at this and be put off or delay going public in German universities and business schools. preparing to operate without Wirecard for some time. because it gives them more control,” he said. It would point out the benign approach, to say A person close to Revolut, the $5.5bn digital bank, Christian Faes, executive chair of the fintech the least, taken by regulators. An unconvincing firm LendInvest, said of events at Wirecard: “It’s not explanation has been provided, along the lines that “There is no getting away from the great, is it?” But he could not resist implying that German financial regulators considered Wirecard a fact that another large, publicly- Wirecard’s fate is not particularly germane to the tech company, and business watchdogs took it for a fintech sector as a whole. “To be honest, all financial bank. But the reality is that Wirecard benefited from traded fintech firm has flopped” services businesses are fintech to some extent.” the obvious hands-off approach of German regulatory authorities, which prompted the head of the banking watchdog BaFin, Felix Hufeld, to admit this week Markus that “a whole range of public and private entities Braun, the including [his] own” hadn’t been effective enough. former CEO When the Financial Times began, as far back as of Wirecard 2015, to raise questions about the company’s unusual accounting practices, its reporters were soon met with threats of lawsuits. Three years later, the reaction of BaFin to allegations by the same newspaper of financial improprieties in the company’s Asian office was to investigate the business daily for market manipulation. Not to be outdone, German regulators also seemed to blame investors for the company’s problems, when they banned short selling Wirecard’s stock for two months last year. Members of the German Parliament are beginning to lay the groundwork for a thorough investigation into what is already being called “the German Enron.” But the problem may be wider than one company. It has been an open secret for years that the banking system is the weakest part of the German economy. It is archaic, based on the retail side on a network of savings banks that support the infamous “Landesbanken”, the regional banks that act as corporate lenders, but are themselves often operating under rules dictated by the close relationship between local politicians and businesses. Meanwhile, the country’s two largest banks, Deutsche Bank and Commerzbank (as it happens, the company that Wirecard replaced in the DAX index two years ago), seem to be caught in a never-ending doom spiral of restructuring plans that only last until the next ones, job cuts, and share prices in free fall. They operate under chief executives who do what they can, but the legacy of years of complacency or failed outsize ambitions abroad is one that is hard to shake. So Altmaier can be reassured: In terms of banking reputation, there is not much that Germany has to fear. Ideally, Wirecard can now be used as an opportunity to think hard about the type of financial system Germany needs and wants for itself.

From Barron’s

FN Staff/Getty Images 6 News 29 June 2020

Garth Ritchie Two thirds of City executives do joins private equity firm not want to go back to the office Centricus

In an exclusive FN survey, the majority of finance staff said they want to work partly from home, writes Paul Clarke Paul Clarke

As lockdown eases and big financial The head of Deutsche Bank’s invest- firms roll out plans to get back to ment bank, who left last year amid normal, their employees say: a radical overhaul at the German No, thanks. lender, has re-emerged at a $27bn In an exclusive Financial News private equity firm staffed by former survey of over 100 senior City exec- bulge bracket deal-makers. utives, just 15% said they wanted Garth Ritchie, one of the high- to work in the office full time est-paid executives at Deutsche Bank once the Covid-19 lockdown lifts. until his departure in July 2019, has A large majority — around 66% — joined Centricus Asset Management, said that they want to continue to Centricus said in a statement. He will work from home part time, with be responsible for expanding its cap- two to three days in the office the ital markets and advisory business preferred option. and will be based at the firm’s head- After around three months work- quarters in London. ing from home, financial services “The current and foreseeable professionals have realised what they market dynamics and economic were missing. Survey respondents environment lends itself to signifi- pointed to reduced stress, increased cant capital markets issuance and productivity and a healthier work- strategic equity transactions. Cen- life balance that has enabled them to tricus and our investors intend to spend more time with their families. be an important provider of liquid- “We need to reduce office ity for these opportunities,” said space so would suggest compul- Josh Purvis, CEO of Centricus, in sory two days working from home the statement. for all, including executives,” said Centricus was founded in 2016 one respondent. and invests in a number of core sec- James Crask, who works at insur- tors including financial services, ance firm Marsh and advises firms on technology, infrastructure and fash- a return to the office, said that finan- ion. Purvis was previously chief oper- cial services organisations are set to ating officer at Goldman Sachs’ secu- overhaul the way they work in the rities business, and the firm counts a wake of the pandemic. number of former bankers and trad- He said that one large financial ers among its employees including firm “is expecting to move close co-founders Nizar Al-Bassam, who to 50% working from home on an worked at Deutsche Bank and Dalinc almost permanent basis, and others Ariburnu, who was co-head of fixed that are exploring rotation systems income, currency and commodity on a three or two days in the office sales at Goldman. per-week basis”. Ritchie spent over 20 years at “We are likely to see a range of Deutsche Bank, latterly as presi- approaches,” he added. dent and head of corporate and

Investment banks are already Getty Images investment banking. A straight- developing a hierarchy on who needs talking South African, Ritchie took to be in the office, with traders at the Social distancing childcare problems prevent many inal limits,” said one senior banker. sole charge of the unit at a time of front of the queue. At Citigroup, the Rules don’t apply in your from returning to the office and pub- There is limited appetite among upheaval at the German lender, over- majority of the 10% to 15% of staff to home bubble, but there will lic transport remains a safety con- financial services workers to remain seeing a period when it switched return to the office in the first week be restrictions in the office cern for a lot of employees, banking at home full time, however, with chief executives, cut thousands of June were traders. JPMorgan has executives said. most instead asking for increased of jobs and took a decision to pull separated its London workforce This strategy could save on real Then there are social distancing flexibility. Many survey respondents out of parts of its investment bank- into three tiers, with the first group estate costs for banks and UBS joins restrictions. JPMorgan has capped cited the need to connect with col- ing business including closing its those who can work more effectively Deutsche Bank and Barclays in con- the proportion of staff returning to leagues and preserve company cul- equities division. in the office — and again, traders are sidering semi-permanent home 50% for the “foreseeable future” ture as a reason for being in the office He received €7m in compensa- expected to return first. working roles. across its global offices, while HSBC at least some of the time. tion in 2018, putting him ahead of The focus has been on get- After months of working from is limiting the number of people Meanwhile, 55% of respond- Deutsche’s chief executive Chris- ting client-facing staff to return. At kitchens and spare bedrooms, senior using lifts at its Canary Wharf head- ents said that working during the tian Sewing during the period. This JPMorgan, around 75% of London investment banking traders say there quarters to two at any one time, pandemic had made their lives included a €250,000-a-month “func- employees are non client-facing, is a reluctance to return. “Pretty which will severely restrict how more stressful. tional allowance” due to be paid meaning that they could just as easily much all of us want a couple of days many employees can return. Gold- “Are you kidding me?” one from December 2017 until Novem- do their jobs at home. At UBS, up to a at home going forward,” said one man Sachs is also putting its UK staff respondent said of the stress ques- ber 2020 for managing the bank’s third of staff could continue to work head of equities at a large US invest- on two-week rotations as it brings tion. “Try home-schooling and work- Brexit policy. from home. ment bank. “Others are pushing to more employees back to its Plumtree ing, and juggling a household with Deutsche Bank announced Rit- stay at home full time.” Court headquarters in Holborn. hungry and messy kids.” chie’s departure on 5 July last year, Few investment banks have con- Despite plans unveiled by the UK One senior investment banker, just two days before it unveiled a ducted a firmwide survey of employ- government to reduce social distanc- who lives in the countryside, said sweeping overhaul that would split ees to ask if they would like working ing rules to one metre from two on that they had been staying in their its corporate and investment bank, from home arrangements to stick, 4 July, many banks are considering London apartment for a week to cut 18,000 jobs and see a retreat according to conversations with sen- keeping the two-metre rule in place. allow them to go into the office along from its underperforming equities ior dealmakers. Managers at HSBC, “There are so many caveats to the with a “trickle” of other dealmakers. sales and trading unit, the division he one of the few banks yet to ask any changes, it is safer to stick to the orig- “It has been great working from started his career in. more UK employees to return to home with three kids and four dogs Former Deutsche Bank execu- the office, have had informal dis- “Others are exploring who interrupt at the wrong time, tives described Ritchie as a steadying cussions with staff, many of whom but it is necessary and actually quite influence during a time of upheaval expressed a desire to remain at home rotation systems. nice to go back into the office without at the German lender, who had been longer term. We are likely to see a those distractions,” they added. instrumental in reinstating bonus Senior staff at Deutsche Bank Crask added that only a “small payments for investment banking have done the same, according to range of approaches” minority” of financial services firms staff after the bank cancelled them James Crask says firms are people familiar with the matter. are “expecting things will return to in 2017 — a move that dented morale building up staff numbers While schools remain closed, James Crask, Marsh the way they were pre-March”. and led to a slew of departures. 29 June 2020 News 7

Deutsche Bank to monitor employee messages on WhatsApp through Symphony

Lucy McNulty today, Symphony said Deutsche Bank to monitor employees’ exchanges Deutsche Bank was one of sev- employees could now “communicate with colleagues and clients, a person eral banks to ban staff from using Deutsche Bank has begun recording with clients anytime, anywhere via familiar with the matter told FN. WhatsApp because its use of end-to- and monitoring some of its employ- their preferred chat platform”. Stefan Hoops, head of the cor- end encryption makes it difficult to ees’ WhatsApp messages, five It added: “The ongoing Covid- porate bank at Deutsche Bank, said: monitor. However, a spike in the use weeks after Financial News revealed 19 pandemic has brought into sharp “The integration of WhatsApp with of the app during the coronavirus cri- some of the world’s biggest banks focus how important it is for banks Symphony means we, and other sis has forced many banks to rethink were testing new tech to track staff to stay in close contact with clients to businesses in the bank, can make their approach. Deutsche Bank has communication on the popular provide advice and expertise during interactions with our clients even now altered its rules to allow employ- messaging app. this challenging period.” easier when they need us most.” ees to use WhatsApp via the Sym- The technology has been devel- Symphony’s system provides a Many banks require the use of phony platform. oped by Symphony, the communi- version of WhatsApp on its platform compliance-approved company Symphony, which is backed cations provider for banks set up for its clients. WhatsApp conversa- devices for communication, driven by financial services giants includ- to rival Bloomberg, to help compli- tions held on the platform can then by rules that mandate the monitor- ing Goldman Sachs, counts the US ance teams better monitor employ- Christian Sewing, chief executive be recorded so that lenders’ com- ing of phone calls, emails and texts lender as well as JP Morgan, Citi-

Getty Images ees’ communication. In a statement of the German banking giant pliance teams can analyse the data among their frontline workers. group, Morgan Stanley as clients.

Getty Images Traders must Newcastle sale be accountable for algorithms, dragged into says watchdog Staveley case Bérengère Sim Banks and finance firms should make named individuals answerable for Barclays’ attorney Jeffery Onions QC was trying to the behaviour of trading algorithms, according to a trade group responsi- determine whether Ali Jassim and Amanda Staveley ble for standards in the industry. are still working together, writes Ryan Weeks In its draft proposal on algorith- mic trading in fixed income, curren- The potential £300m sale of New- day of testimony on 19 June when cies and commodities markets, the castle United Football Club was Onions accused her of playing a role FICC Markets Standards Board sets dragged into Amanda Staveley’s that amounted to a “hustle”. out 10 “good practice statements” to lawsuit against Barclays bank on 24 On 24 June, Onions asked Jas- tighten up the industry’s procedures. June, as Barclays’ lawyers questioned sim, who helped arrange a meet- Members of the FICC Markets whether Staveley was still working ing between Staveley and Sheikh Standards Board include $6.5tn asset with one of her key witnesses. Mansour at a Majlis in November manager BlackRock, US investment The sale of Newcastle to a 2008, whether it was correct that bank Goldman Sachs and £1.2tn asset Saudi-led consortium, which he had worked with Staveley on the manager Legal & General Investment includes Staveley’s PCP Capital ongoing Newcastle takeover. Jassim Management. Partners, was agreed in April but said it was correct, and that “ini- The proposals, published on 24 has yet to be approved by the UK’s tially” he wanted to “see how I can June, come as the Covid-19 pandemic Premier League. get involved”. and subsequent emptying of trading Jeffery Onions QC, acting on But he noted he was no longer floors has spurred the rise of elec- behalf of Barclays, homed in on the involved because Staveley had since tronic trading through speedy algo- Newcastle deal when questioning Ali become “a principal in the deal”. Jas- rithms, further eclipsing the tradi- Jassim on 24 June. Jassim acted as an sim did not want to be a principal, he tional practice of voice trading. adviser to Sheikh Mansour bin Zayed said, because he didn’t want to own “The use of computer algo- Al-Nahyan of Abu Dhabi in 2008 shares in a football club. rithms, which are capable of auto- and agreed to testify in support of PCP’s attorney Joe Smouha matically determining individual Staveley’s claim. QC later asked Jassim to confirm parameters of orders, quotes or Onions referred in his question- whether he had any role in the cur- transactions to facilitate trading ing to a recent article by The New rent transaction – Jassim said he did in FICC markets, has significantly York Times that suggests that Jassim not and also denied having any finan- increased in recent years,” the doc- worked with Staveley to help facili- cial interest in the transaction. ument says. “Such activity has the tate the Newcastle takeover. Earlier in the day, Richard Chal- potential to impact market and firm “Are you still working with Ms houb, who brokered introductions to stability adversely and to harm cli- Staveley, Mr Jassim?” said Onions. members of the Abu Dhabi royal fam- ents, and accordingly it is increas- Jassim replied that he was not, ily, was quizzed by Barclays’ lawyer ingly the subject of regulatory scru- but added, “If a business opportu- Alexander Polley over his involve- tiny and intervention.” nity does come up, I would”. ment with Staveley around the time The FICC Markets Standards The line of questioning is the of the fundraising. Chalhoub was Board, which issues guidance latest twist in the £1.5bn High Court paid a £250,000 retainer fee by PCP, designed to improve conduct and case, which centres on Staveley’s in part for introducing the company raise standards in the wholesale fixed claim that she got a substantially to Abu Dhabi’s Sheikh Mansour via income, currencies and commodities worse deal than Barclays’ Qatari third parties, according to an invoice markets, has invited comments on investors in the bank’s emergency cited in court. the draft by 21 August this year. cash call in 2008, at the height of the Polley asked Chalhoub whether It wants finance firms to ensure financial crisis. the point of this introduction was to “algorithms have assigned owners, The private equity financier was allow Staveley to go over the head who are accountable for the algo- reduced to tears at the end of her last of Khadem Al-Qubaisi, a former rithm’s use” and recommends that managing director of Abu Dhabi’s market participants put in place “If a business International Petroleum Investment “adequate and effective arrange- Company, with whom Staveley had ments and processes to provide for opportunity does “a tense relationship”, according appropriate oversight, supervision come up, I would to Chalhoub. and control” in relation to algorith- Chalhoub replied that Staveley mic trading. Other recommenda- work with Staveley” had “wanted to have a relationship — tions include keeping an inventory of access to His Highness”. Newcastle hope they will be playing in front of fans again, if and when algorithms and the risk and controls Ali Jassim The case continues. the £300m sale of the football club is approved by the Premier League related to using them.

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In partnership with In partnership with 29 June 2020 News 9 Which finance firms are reopening their offices to staff — and when?

With the City slowly coming out of hibernation after lockdown, banks, fund managers and others announce what they are planning. By FN Staff

As the UK government continues London-based staff to return to the to relax lockdown restrictions, office between July and September. finance firms are setting the stage for the slow and gradual re-opening JPMorgan End of July of the City. An increasing number of firms JPMorgan has split its UK workforce either have partially re-opened into three tiers and the first group their offices since the beginning of of employees — largely within its June, or are planning to welcome sales and trading unit — is expected limited numbers of staff back in the to start returning to its Bank Street next few weeks. Nevertheless, with headquarters at the end of July. few at full capacity as yet, the City (See page 17) is still much quieter than most of its workers are accustomed to. EY Giving out kits as staff return to Below is FN’s firm-by-firm Brussels office round up of the banks, fund managers, accounting firms and In May, EY launched its strategy to others who are beginning to get its 700 offices around the world reopen their office doors, and the up and running again, known dates by which they plan to do so. as “Physical Return and Work discussion. Reimagined”. As part of its strategy in Goldman Sachs Reopened from Belgium the Big Four accountant the beginning of June has stockpiled 2,500 prevention kits for staff, which includes masks, The US banking giant told UK staff hand gel, cleaning wipes. that they could begin returning Offices in China and Australia to its glitzy new office at Plumtree have reopened to “varying Court from the first week of June, degrees”, an EY spokesman said. with around 25% of staff expected to start in the first wave. Schroders Stayed open, staff free There have been around 200 to return people working at its London headquarters for the past two Staff at its London headquarters months, but those returning in are free to come back to work, the first phase will have to do so providing they adhere to social on two-week rotations. Coming distancing guidelines. A spokesman back into the office is entirely said: “Schroders decided not to voluntary at this stage. close its headquarters in London, but allowed its employees the Citigroup Reopened from the freedom to choose where they beginning of June work from.”

Getty Images Citi has tentatively opened its Standard Life Aberdeen Early Canary Wharf headquarters Back to the City “staggered, flexible approach” finding it difficult... to continue next year to staff, with around 10% of its Banks and others are preparing a to reopening buildings, starting to work remotely,” a spokesman 9,000 or so employees returning slow and gradual reopening with 20% of staff returning to its from the firm said. Most workers The £545bn asset manager has told in the first week of June. Those London office on a voluntary basis will continue to work from home. its 4,900 UK workforce that the in its sales and trading business also be open to workers whose by mid-June. majority of them should continue are the first to return, although “home setup is not conducive to The asset manager, which has Jupiter Asset Management to work from home for the rest of senior bankers have also spent working from home” or to help roughly 400 people in London, Reopened on 22 June 2020. In a memo to staff, the asset some time in the office throughout support staff from a mental health has already implemented a similar manager said it is planning for a this month, according to people perspective. approach at its offices in Munich Jupiter chose to reopen its office “small number” of staff to return to familiar with the matter. and Frankfurt. in a limited and Covid-proofed its offices over the coming months, PwC Reopened six offices with fashion to accommodate requests but said the remainder should stay FreshfieldsLondon offices “reduced occupancy” from 8 June Barclays Small scale reopening from some staff to return “for at home “until the end of the year”. reopened from early June from mid-June personal or work-related reasons”, PwC reopened its offices in the fund manager told FN. The vast Aviva No fixed date for return Freshfields Bruckhaus Deringer London, Birmingham, Manchester, Barclays sent a memo to employees majority of its staff are still working reopened its London office at the Leeds, Reading and Bristol on 8 saying that it would be asking a from home. A spokeswoman for the insurance beginning of June, allowing a small June. The Big Four accounting firm small proportion of employees to firm said that the blue-chip number of staff who struggled to said in a statement on 3 June that it return to the office by mid-June, Deloitte Reopening offices on 6 July company is in “no hurry” to move work from home to return to its would reopen these six UK offices a figure that works out as around people back into its offices and that Fleet Street base. with “reduced occupancy” from 700 people globally. A further 200 The accountancy firm’s chief the majority of its employees will However, the law firm is still that date. staff are expected to come back to executive Richard Houston told its remain working from home. operating a remote-first policy. Kevin Ellis, PwC’s UK its London offices in the coming 20,000 staff on 14 June that the firm The law firm’s office in Germany chair, said the group can safely weeks. However, the majority of will reopen six offices and start the Zurich Insurance No fixed date reopened to staff on a voluntary accommodate 15% of its employees staff in the UK have been told not return to client sites from 6 July. for return basis on 8 June. in its offices. In theory, this would to expect to come back to the office “Allowing some people to amount to around 3,300 of its until the end of September. return to the workplace is an Steve Collinson, the head of the Bain & Company Reopened from 22,000 staff in the UK. important part of supporting their people team at the insurer, said 8 June Linklaters Silk Street office opened well-being,” Houston said. in an emailed statement that the Allianz Global Investors Reopened on 18 June firm is “not committing to any Consultancy Bain & Co reopened its from mid-June Amundi Staff returning mid-July levels of occupancy at any set offices for critical client meetings The Magic Circle law firm reopened timescales, but ensuring we are on 8 June. A spokeswoman for the The €510bn fund manager told its Silk Street office on 18 June, to Europe’s largest asset manager aligning to government guidelines consultancy said its office would Financial News it is taking a “anyone who has said they are says it expects close to half of its and industry best practice.” 10 News 29 June 2020

PwC, EY to be investigated over London Capital audits

Bérengère Sim

The Financial Reporting Council has launched three investigations into the audits of the now collapsed mini- bond investment firm London Capi- tal & Finance. Big Four audit firms, PwC and EY, will be investigated for their audits of the financial years ending in April 2016 and April 2017 respec- tively. Auditors Oliver Clive & Co. will be scrutinised for their audit of a one- month period ending in April 2015. The investigations will be con- ducted by the watchdog’s enforce- ment division under the audit enforcement procedure, the FRC

Getty Images said in a 24 June statement. London Capital & Finance went Glitterbugs: As central banks pour liquidity into the markets, well-known investors are concluding gold is one of the few viable inflation hedges into administration in January 2019 after the Financial Conduct Author- ity asked it to withdraw its “mislead- ing, not fair and unclear” promotion for its mini-bonds, a form of illiquid Hedge funds increase holdings debt security. The promotion of these types of investments has since been banned. Around 11,600 investors pur- as ‘only way gold can go is up’ chased 16,700 bonds worth £237m through the firm, according to a 9 January statement by the Financial Stone Mountain Capital is among hedge funds piling in, sending prices to multi-year highs, writes Tom Teodorczuk Services Compensation Scheme, an industry-funded body that recom- Oliver Fochler, CEO and manag- prospect of a surge in inflation due to ment, has been building up positions Management, who wrote in a recent penses customers when regulated ing partner of hedge fund adviser central bank increased money sup- in his flagship fund, Odey European. letter to clients, as first revealed by financial companies fail. Stone Mountain Capital, said he ply. Gold is typically a hedge against According to a source close to the sit- Reuters, “This is a perfect environ- EY said it will be fully cooperat- had increased his holding of gold inflation. uation, holdings of gold futures now ment for gold to take centre stage.” ing with the FRC during their enquir- by nearly 50% since the beginning Hedge funds have been central comprise nearly half the fund’s net But other hedge fund manag- ies. “It would be inappropriate to of last year, driven by bets that an to the demand for gold, according asset value, with Odey holding posi- ers urged caution, saying the clam- comment further at this time,” the expansion in quantitative easing to the latest data from the Commod- tions in gold and copper mining com- our towards buying gold will cease firm said in an emailed statement on would diminish the value of curren- ity Futures Trading Commission panies including Barrick Gold and if inflation does not rise sharply, 24 June. cies and push inflation higher. (CFTC). The CFTC’s Commitments Kinross Gold. as happened after the 2008 global PwC and Oliver Clive & Co. were It was a winning strategy, and he of Traders Report for the week end- Last month Odey, a notorious financial crisis.“Quite apart from contacted for comment. says there are more gains to come. ing 16 June showed financiers had critic of central bank monetary pol- anything else, gold hardly constitutes On 2 June, the independent “With major currencies being increased their gross long positions icy, warned that governments might a risk asset,” said a hedge fund man- inquiry into London Capital & diluted by government and central in Comex gold futures to 135,945, up in future seek to make it illegal to ager speaking on condition of ano- Finance by the FCA was delayed. bank fiscal and monetary stimulus, 9,538 contracts from 126,407 the pre- own gold. “It is no surprise that peo- nymity. “You shouldn’t be running a Dame Elizabeth Gloster, the for- the best way presently that you can vious week. ple are buying gold,” Odey wrote hedge fund if you are dependent on mer Appeal Court judge who was store value, compared with paper Several high-profile hedge fund in his April letter to investors, first investing heavily in gold.” appointed to lead the investigation, money, is by buying gold,” he told managers have recently reaffirmed reported by Bloomberg. “But the Alpesh Patel, chief executive of had asked to extend the deadline of Financial News. “If the whole eco- their commitment to gold. Crispin authorities may attempt at some Praefinium Partners, a hedge fund 10 July to 30 September following nomic system were to fail, gold Odey, who runs Odey Asset Manage- point to demonetise gold, making that expanded into private equity, delays by the FCA and the pandemic. would still have exchange value. In it illegal to own as a private individ- said he thought the rush towards In a statement on 18 June, the the near future, the only way gold “If the whole economic ual. They will only do this if they feel gold would be far from permanent. FCA said that the permanent ban on can go is up.” the need to create a stable unit of “The renewed interest that promoting “speculative mini-bonds” Gold prices have surged some system were to fail, account for world trade.” hedge funds have in gold seems to will take effect from January 2021. 20% since a low in March and on gold would still have Other hedge fund managers who be speculative rather than being in Alongside the permanent ban, 23 June hit a more than seven-year have backed gold in recently include for the long haul,” he said. “It is a bit the FCA is also proposing to extend high. While the Covid-19 pandemic exchange value” veteran macro hedge fund manager late for hedge funds to be converted it to cover listed bonds that have sim- is a deflationary shock to the econ- Paul Tudor Jones and Paul Singer, to the benefits of gold as a relatively ilar features, and are also not regu- omy, traders may be looking to the Oliver Fochler, SMC founder of activist hedge fund Elliott uncorrelated portfolio diversifier.” larly traded.

Companies could face stress testing after the pandemic, CEO of Man Group says

Bérengère Sim funds company. Man Group man- time manufacturing” would have to minimal resilience,” Ellis said during approved more than £10.5bn of ages $104.2bn as of 31 March. Ellis be rethought: “It started as a good the webinar, which was focused on loans through its Coronavirus Busi- Man Group chief executive Luke Ellis was speaking at the Bloomberg Invest idea, reducing inventories, but got how funds, such as those managed ness Interruption Loan Scheme for said that corporates could face stress Global online forum. to a place where major manufactur- by Man Group, can outperform in the SMEs. The scheme for larger busi- testing after the Covid-19 pandemic, When asked what regulation ers had one hour of spare parts and age of Covid-19. nesses, which can be drawn on for similar to those imposed on banks might emerge from the current cri- supplies, which meant they couldn’t “The reality is a large number up to £200m, has approved £2.1bn, after the 2008 financial crisis. sis, Ellis said that it would be “simi- withstand any sort of shock at all. of companies, both public and pri- according to the UK government’s “There will be a drive to some lar to what banks have, but not just “In the 10 years since the last cri- vate, couldn’t withstand even a latest statistics released on 21 June. form of stress testing of businesses, around financial constraints”. sis, an awful lot of the corporate com- one-month shock to their business, The 100% guaranteed Bounce to make sure they have less opera- Businesses could be required munity has moved to the maximum so governments and central banks Back Loan scheme for small firms, tional gearing so that they are able to limit the amounts of financial lev- leverage that they can possibly get have been forced to throw enormous has approved more than £28bn to withstand things,” said the CEO erage — or debt — they can have, for onto their balance sheet — but also amounts of money at the problem.” worth of loans to over 900,000 of the world’s largest listed hedge instance. He also said that “just-in- maximum operational gearing and The UK Treasury has so far enterprises. 29 June 2020 News 11 Risks and rewards of fundraising during Covid’s economic disaster

Funds that do get off the ground now could benefit in the long run if they are able to deploy money on undervalued assets, writes Selin Bucak

This could be the best time for private equity firms to raise funds. Or it could be the worst. There have been 497 funds raised globally this year through 15 June, down 27% from the same period last year, according to Preqin. The economic downturn caused by the coronavirus pandemic means raising money isn’t easy. But funds that do get off the ground right now could benefit in the long run if they are able to deploy money on undervalued assets. “What limited partners are trying to figure out right now is where they should put money moving forward,” said Antoine Dréan, founder of placement agent Triago. “Many LPs are taking a step back and also are taking more time to understand what they have already, before they put more money to work.” Mark Nicolson, head of primary investments at Aberdeen Standard Investments, said that fundraising processes that were near completion prior to the crisis have been successful. But those that “were mid-process or kicking off will be difficult”. Nicolson said even the biggest GPs are looking at an elongated fundraising process, as large pension funds in the US and investors in Asia are “hitting the pause button”. Others in the industry also say that fund launches right now are running on longer timelines than usual. In April, Swedish buyout group EQT, which is raising a €15bn fund, said that the fundraising for its flagship strategy is expected to take longer because of the pandemic, for instance. Mads Ryum Larsen, a managing partner and head of investor relations at IK Investment Partners, said the pandemic stretched out the timeline for the final closing of the firm’s €2.85bn fund, its largest to date, which it had started marketing in spring 2019. Just over €1bn of commitments came from new investors, though these relationships were established before lockdown, Larsen said. He added that the pandemic lockdown had revealed virtual meetings can work for general updates for existing investors, but “physical meetings will still be important for fundraising going forward”. Fiona Balch, founder of FB Advisers, who just helped Swiss buyout group Evoco hold a €93m first close, agrees. She said that while due diligence calls over platforms such as Zoom will become more common, “given it is such a long-term business and personalities play such an important role” there is only

so much that can be done without being able to travel. Olivia Harris/Getty Images On the LP side, Aberdeen’s Nicolson said he is having fewer but longer conversations with GPs because of remote working. Despite the challenges, of the crisis, allowing GPs to take advantage of low Delays and capitalise on growth opportunities that they would many funds appear to be pushing ahead. prices and the subsequent economic recovery, the warning signs: not be able to finance themselves,” he said. Investec’s annual GP Trends survey of more report’s authors said. many private Of course, not everyone agrees that the than 400 private equity professionals published Many businesses, are struggling to survive the equity firms performance of private equity is worth betting on this month found that while a third expect to or acute economic downturn. For deep-pocketed buyers say fundraising right now. A recent paper by Oxford University Saïd have suspended raising their next fund the rest are with a long-term time horizon, there may be bargains is taking longer Business School professor Ludovic Phalippou found continuing with their plans. According to data from among the rubble. Michel Galeazzi, partner and co- than usual due that the performance of private equity funds, net of Preqin, globally there are 3,709 funds on the road founder at Evoco, which is targeting a €150m final to Covid-19 fees, matched that of public markets since at least currently, looking to raise $878bn. close for its third fund, said: “It is a great time, because 2006. The paper also examined five of the largest For investors with the appetite to invest in private times of dislocation or transformation are always pension schemes that publish net multiples of money equity funds, this could be an ideal time, according to good times to invest for private equity. That is when data for all the funds they invested in between 2006 Florin Vasvari, an expert in private equity and chair the tools of a hands-on PE investor really bear fruit.” and 2015 and found that they earned about $1.50 per of the Accounting Faculty at London Business School. He added that valuations in this crisis have come $1 invested, the same as public equity has returned. “If we look at history and what happened after down much quicker than in past crises as well, which Nevertheless, one consequence of the current the previous crisis, we know that funds raised [then] has created more attractive opportunities: “Everyone economic environment could be an increase in did very well. If you follow that history, potentially came to a very realistic level more quickly, because the appeal of larger funds. Just under a third of funds that are raised this year will do well. They will the crisis was so severe, and included everybody.” respondents to Investec’s survey expect to see the operate in an environment that is not as bubbly as Cathay Capital closed its largest and first global total number of fund managers operating in private last year. Valuations came down to earth and are private equity fund at $850m in May. Mark Woods, equity to fall over the next decade. more reasonable. So my guess is that it is a good time.” head of North American private equity at the firm, “The distinction between asset gatherers and Several studies support Vasvari’s view that told PEN this is a very good time to have fresh capital. single strategy funds will continue in favour of funds that start investing at the height of crises have “It allows us to take full advantage of the market asset gatherers,” Markus Golser, managing partner performed well. The two top-performing vintages dislocations and invest in companies with strong at Graphite Capital, said in the survey. “The sheer following the global financial crisis were 2008 and fundamentals and growth prospects, but which might scale and leverage that they can get by dealing with 2009, according to research group eFront. The experience a temporarily weak balance sheet that we investors across all of the asset classes will allow them funds benefited from investing during the depths can help strengthen, or with companies looking to to absorb the fee pressures well.” 12 The long read 29 June 2020

Continued from page 1 Why financial services is still playing catch up on race

disclosed data for their overall workforce. They instead pointed to existing diversity programmes, executive messages of support for Black Lives Matter, links to the diversity and inclusion segments of their websites or already publicly available information on the ethnic make-up of their US operations. The banks were Bank of America, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley and UBS. The fund managers contacted were Jupiter, Schroders, Standard Life Aberdeen, BlackRock and AllianzGI. “They will know how many black fund managers or investment bankers they have,” said Helena Morrissey, former head of personal investing at LGIM and chair of the Diversity Project. “I am sure those numbers are very small. It’s a societal reality at the moment.” “If there is data then it’s buried under a mountain of bureaucracy,” said one London-based diversity campaigner who declined to be named because he works with big investment banks. “It’s not flattering and banks are not in the business of making themselves look bad.” US banks are required to break out their diversity statistics in their home country by the Equal Employment Opportunities Commission.

At Goldman Sachs, 6.6% of its workforce in the Grundy Peter country are black, while this figure is 13% at JPMorgan and Bank of America. At Citi, 3.9% of its male US workforce are black or African American ‘Lip service’ said that coming into 2020, the financial sector and 6.9% of women. was beginning to really focus on racial diversity. Investment banks do not yet need to disclose While financial services giants have come out in “There was a tailwind, but when Covid-19 came, it these figures in Europe or other parts of the world, support of racial diversity, their employees remain was like being hit by a hurricane head on,” he said. and declined to do so when asked by FN. sceptical that they are really committed to change. The recent Black Lives Matter protests have “Deeds not words are what count now,” said In an exclusive survey of around 100 senior reignited these initiatives, he added. “My phone has Bev Shah, chief executive of City Hive, a network City professionals by FN, 55% said that they did not been ringing off its metaphorical hook,” he added. for City workers that promotes diversity. “Boards think their employer was doing enough to increase need to prioritise the lack of all diversity as a huge racial diversity. Starting from the bottom critical risk to their business. This means diverse “We are only paying lip service because leadership, not just the lower ranks.” it is currently fashionable to do so,” said one Fund managers and investment banks have The proportion of the workforce who are female respondent. “I have seen no evidence of serious rolled out various schemes in recent years — and the gender pay gap at financial services planning for long term change.” to target more entry-level black and ethnic firms — only started to become public in 2018 as “There is no initiative in place to promote this, minority employees. These include working companies signed up to the UK government’s nor is there an action plan to address this,” said with talented school students, special graduate Women in Finance Charter. Around a dozen another. “I do not believe that they recognise this recruitment programmes, fast-track promotions investment banks and most fund managers have yet to be an issue.” or even outreach into black communities. But to sign up to a UK Race at Work charter launched Investment banks and fund managers are diversity campaigners say that few have really two years ago aimed at increasing racial diversity. undoubtedly playing catch up, and some ethnic moved the needle. Asset management firms have been under minority City workers told FN that there needs Goldman Sachs is among the few investment pressure to increase racial diversity since a damning to be a significant cultural shift on the issue of race. banks in the City to put a target on recruitment report last year by the Investment Association “At one diversity roundtable people were of ethnic minorities, and is aiming for 9% of its found that less than 1% of fund managers are black. debating what needs to change, or whether UK graduate intake to comprise black professionals. Morrissey said that just 13 fund managers in the City their existing schemes were working,” said one This compares to a 50% recruitment target are black. ethnic minority banker at a large bank in the for women at the same level. BlackRock has BlackRock also pointed to its US report, where City. “I pointed out that there were more white pledged to increase the number of black employees 5% of its staff are black or African American, managing directors called David in our department by 30% by 2024. while Standard Life Aberdeen and Schroders both than people from ethnic backgrounds in senior Justin Onuekwusi, a multi-asset fund manager disclosed their proportion of black, Asian and roles by a factor of four.” at Legal & General Investment Management, is one minority ethnic staff, at 10% and 13% respectively. Andrew Fairbairn, chief executive of charity of the handful of black fund managers in the City. Jupiter Asset Management said 4% of its UK SEO London, which works with banks and fund “The challenges some of the junior people employees were black and 18% ethnic minorities. managers to help hire more people from ethnic have been through is deeply oppressing, he told Gavin Lewis, a managing director at minority or lower socio-economic backgrounds, FN. “Overt racism is very unlikely. But there are BlackRock who is black, told Financial News: definitely micro-aggressions that mentally impact “This is such a multi-dimensional issue, one “Overt racism is very unlikely. some of these junior people in the industry. initiative will not fix it. The first is introspection “It’s a huge challenge for someone who might and a realisation that there is a problem. But there are definitely micro- already feel like an outsider in an organisation Typically when these discussions have been had, aggressions that impact juniors” where their identity is so different from everyone there has been a denial there is a problem or else,” added Onuekwusi, who also mentors worse a denial that racism exists.” Justin Onuekwusi, Legal & General junior asset management professionals via the 12 The long read 29 June 2020 29 June 2020 The long read 13

Step it up #TalkAboutBlack campaign. Finance firms “Candidates coming through the graduate are being recruitment process often feel there’s an element challenged of tokenism,” said Dr Louise Ashley, a lecturer at to increase Royal Holloway, University of London who has their efforts to done extensive research on social mobility in promote racial investment banking and financial services. “If they diversity see another black person in the room, they know that they are the competition, because it’s very unlikely that the bank will hire both of them.” “We’ve placed a handful of black and ethnic minority candidates into senior roles over the course of the past two years,” said a headhunter who works with big banks. “The focus has been almost exclusively on gender diversity — we’ve placed more women than men over the same period.” Intersecting race and class in the UK

Investment banking and asset management are still careers that are largely closed to those from lower socio-economic backgrounds, and diversity experts point out that — in the UK at least — it can be harder to separate the issues of race and class. John Craven, chief executive of charity UpReach, which works with banks and fund managers to increase socio-economic diversity, said that 72% of the 1,600 students the organisation has helped are BAME. “A key challenge for students from lower socio- economic backgrounds, including those who are BAME, is that they often don’t have the professional networks or prior work experience that can be critical in securing top internships and graduate roles,” he said. Meanwhile, Ashley, who is currently looking into racial diversity in the investment industry, said that her research found entry-level black recruits in banking and fund management often had to adjust their behaviour to fit into the culture. “Black people in banking often tell me that in order to navigate the workplace they have to place acceptable limits on ‘blackness’ in order to fit in,” she said. “It’s exhausting — having to second guess every interaction to monitor your behaviour in a way that would ‘fit’ your working environment. It’s a conjuring trick that is very difficult to sustain.” Investment banks in particular have been accused of failing to look beyond ‘polish’ or ‘fit’ Continued from page 1 in Finance shows that we will make now signed up to the Women in Fi- Poll question in the graduates they take on, meaning that those progress only when organisations nance charter, which requires disclo- Do you believe from working class backgrounds are often excluded. and individuals are held accountable sure of the proportion of female staff that the Black One ethnic minority banker said that his quest City wants in a fully transparent way.” and targets for increasing the num- Lives Matter for his first job was a “tough slog”. “I’ve been Companies cannot legally com- ber of women employed. movement through lots of interviews with posh white men charter to boost pel their employees to reveal their The result has been a focus on will prompt where it went really badly, because I didn’t go to ethnicity, which makes it harder for improving gender diversity in a bid your company the right schools or speak the right way. I think it’s BAME staff firms in the UK to compile the data. to show progress when the numbers to hire more a systematic issue,” he said. Inga Beale, the ex-Lloyd’s of Lon- are revealed annually. people from The Black Lives Matter movement is at least managers — have yet to sign up and don CEO, told FN: “I think data and Sharon Bowles, a Liberal Demo- minority ethnic prompting financial services firms to think more the programme does not yet ask for transparency is a great first step. crat peer and former chair of the Eu- backgrounds? deeply about the issue. disclosure on ethnic minority em- However... it’s very difficult for firms ropean Parliament’s influential Econ A BNP Paribas spokeswoman said there had ployment numbers. to collect it fully enough to publish. committee, said there “absolutely” been “significant discussion across our UK business What numbers do exist paint a “If it is made mandatory to re- should be mandatory disclosure. She around racism in the workplace and what it means damning picture. Just 1% of Britain’s port then you need to be able to added: “Experience with how long No Yes to be a truly inclusive business”, while a Deutsche fund managers are black, according gather the data which I think would it took to move forward for women, 43 % 55 Bank spokeswoman said that the bank was “actively to the Investment Association, while be a good thing,” added Beale, who with further still to go, shows that un- looking at ways to expand and extend” its existing dealmakers contacted by FN pointed was the first woman to become chief less there is disclosure and targets, ethnic diversity programmes. to a “handful” of senior black bank- executive in the insurance market’s not enough happens. As with wom- An HSBC spokeswoman said the bank launched ers among the top investment banks. 326-year history. en it will also be relevant how many an Ethnicity Inclusion Programme in May to Abbott, the Labour MP for Hack- “I certainly favour a more ac- reach senior positions.” improve its data and reporting, while Morgan ney North and Stoke Newington, tive monitoring and target-setting of “Currently many firms just don’t Poll question Stanley has started a new Institute of Inclusion, added: “Unfortunately, legislation at- ethnic representation in the City,” have the processes in place to gath- Is your employer which looks to improve diversity, in response to tempting to mitigate racial inequality added Vince Cable, former busi- er this data,” added Bev Shah, chief doing enough Black Lives Matter. in Britain lags way behind even the ness secretary and ex-leader of the executive of City Hive, a network for to retain black JPMorgan investment banking boss Daniel US. So, we see enormous disparities Liberal Democrats. City workers that promotes diversity. employees? Pinto and other executives have held numerous in employment levels for black peo- When asked whether there “Many firms who have signed townhalls addressing racism and how the firm can ple in many better paid industries should be a race charter specifically [the Women in Finance charter] just bolster its diversity in recent weeks, according to and professions.” for finance firms, he said the answer don’t see the lack of diversity as a risk a person familiar with the matter, as have Citigroup, Jayne-Anne Gadhia, the former was “yes”. He added: “Transparency to their business,” added Shah. No Yes Goldman Sachs and Morgan Stanley, which also Virgin Money chief executive who and numbers is a start.” John Glen, the City minister, 47 % 50 accelerated the appointment of Carol Green- helped set up the government’s Most UK-based finance firms are said: “We want to see financial ser- Vincent, its head of internal audit who is black, Women in Finance charter in 2017 to vices leading the way on this issue… to its operating committee. increase the number of women at the “We will make but there is clearly more to do.” Over 53% of respondents to FN’s survey said top of UK financial services, said she progress only when He encouraged firms to sign that they expected the Black Lives Matter movement feels “passionately” about improving up to the government’s existing Race Note If percentages to prompt their company to hire more people racial diversity and backed the idea organisations and at Work charter. do not add to 100%, from ethnic minority backgrounds, although 44% of a race charter. the remainder are believe it will make no difference. individuals are ‘don’t know’ “We must address this issue,” Additional reporting by Lucy “Saying they support #IAM, isn’t the same as she told FN. “The work on Women held accountable” McNulty and David Ricketts Source: FN Poll seeing something tangible,” said one respondent.

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Financial News Custom Studio 29 June 2020 News/Fintech 15

Ryan Weeks The Fintech Files

How is the ‘new’ high-tech Bank of England shaping up for the digital age?

One year ago this week, on modernising payments for former governor of the Bank of the digital age, and their work England Mark Carney said, in a is bearing early fruit,” he told speech at Mansion House, that Fintech Files. technological changes in finance Van Steenis said the UK was and the economy demanded “a four to six years behind Sweden new Bank of England”. on digital payments at the time In the speech, Carney laid out his report was written, but that the findings of Huw van Steenis’s “the pandemic and lockdown Future of Finance report, and may have accelerated this shift set out a five-pronged strategy by two to three years”. for how the bank would respond. Contactless payments He said the bank would in the UK are up 44% during enhance the payments system for the lockdown, according to the digital age; build a platform Nationwide research. to boost access to finance for But such rapid change small businesses; assist with the can cause dislocation. Van transition to a carbon-neutral Steenis said “the Swedish economy; develop a “world experience shows that, without class” regtech and data strategy; a co-ordinated plan, the pace and lean on cloud systems to of change risks excluding some promote operational resiliency. groups in society, particularly One year on, two of the the elderly and vulnerable”. architects of the central bank’s “It also highlights [that] designs have reflected on its the cash infrastructure risks progress — and both agree that becoming uneconomic. The the Covid-19 crisis will force pandemic underscores the Sinead Daly, formerly head of Revolut’s diversity and inclusion initiatives it to pursue digitisation with need for a joined-up plan for greater urgency. payments, including broadband Lisa Quest, a partner a Oliver and mobile networks, that leaves Wyman, the consultancy, helped no one behind,” he added. craft the recommendations made All in all, van Steenis More senior execs quit in the Future of Finance report. thinks the Bank is making solid “The continued progress progress against its digitisation against some of the key initiatives goals, although he was more that were outlined is more critical enthusiastic about some areas Revolut’s people team than ever,” she said, adding that than others. the crisis would be a catalyst for He was, for instance, asked “further and faster change”. about the Bank’s progress Ryan Weeks Revolut’s people operations their PR support as they look to a Quest said that the need for a towards developing a “world department, charged with look- more proactive approach,” said an small business data repository to class” regtech and data strategy. Revolut, the $5.5bn digital ing after more than 2,000 staff at MHP spokesperson. better inform lending decisions “Last year we showed that bank, has lost two more execu- the company, has been struck by a Former Amazon public policy has become all the more some of the staff members who tives from its troubled “people string of senior departures in the past director Lesley Smith was hired as important in light of the billions supervise banks receive reading operations” department. few months. Revolut’s vice-president of corporate of pounds that are being lent out material that is the equivalent The start-up has been hit by In May, Financial News reported communications and public affairs in under the Treasury’s emergency of reading twice the complete at least 17 senior departures since that at least half a dozen executives January, according to LinkedIn. loan schemes. works of Shakespeare each March, based on Financial News’ had left the team, including head Later this year, Smith will be Huw van Steenis, now a week,” he said. reports, including nine in the people of culture and engagement Sukhi joined by former colleague, Jim Mac- managing director and senior While van Steenis is excited operations team. Ghataore and global rewards and Dougall, Amazon’s human resources adviser to the chief executive by the potential for tools such as Sinead Daly, who led Revolut’s benefits director Tatiana Collins. director, as head of the troubled peo- at UBS, agreed that the Bank’s machine learning to cut down diversity and inclusion initiatives, left Both had been at Revolut for just ple department. digital agenda has been given on supervisors’ paperwork, his the startup in the week beginning 15 a few months. He is expected to join the com- a Covid-19 kick. “The Bank praise of the Bank of England June, while former head of HR man- People familiar with the depart- pany in the third quarter of this year, laid out an ambitious agenda for implementing this kind of agement Neridah Jarrett has also ment said that its staff had struggled according to people familiar with measure was conspicuous by its departed in the past month, accord- to carry out planned projects because the matter. absence. “The virus has amplified ing to people familiar with the mat- they could not secure funding con- MacDougall has worked as a this need,” he said, instead. ter. Daly reported to Revolut’s head sistently, and that budget requests director in human resources at Ama- Sign up for Perhaps there is yet more of engagement. for projects had been “automati- zon since January 2014, according scope for the UK’s central bank Daly joined Revolut in Septem- cally rejected” since the beginning to his LinkedIn profile. Before this, The Fintech Files to avail itself of the latest tech ber 2019, having previously worked of this year. he held managerial roles at UBS and — and possibly provide a more at Tech Nation, the lobby group. Jar- Daly declined to comment. Deutsche Bank. meaningful boost to the sector’s rett had worked at the law firm Ever- Jarrett could not be reached for Andrius Biceika has held the role prospects than the Treasury’s sheds Sutherland until December comment. of interim head of people since March various bailout funds. 2019, according to LinkedIn. It is not Revolut has also cut ties with of last year, according to LinkedIn. Much has been written about clear when she joined Revolut. MHP Communications, which was The coronavirus crisis has put the prospect of the pandemic brought in to help repair its reputa- the digital bank under consider- triggering greater demand for tion in April 2019, following a barrage able pressure, despite the $500m fintech services among the of negative news stories focusing on that it banked from investors earlier public, as lockdown and social $500m the startup’s culture. this year. distancing encourage online “We were brought in to help FN reported that it had cut 62 Subscribe to FN’s weekly email banking, for example. The amount that Revolut raised Revolut with the reputational issues jobs in May, after various initiatives with the latest in financial On balance, it appears that from investors in February, valuing it faced last year. Rightly, Revolut aimed at cutting costs failed to pre- technology and innovation on the Bank of England, founded in the digital bank at $5.5bn are now looking at the structure of vent redundancies. tinyurl.com/fintechfiles 1694, is responding. 16 News 29 June 2020 Investors don’t ‘get’ bear markets, says King after betting on oil slump

RCMA Capital’s Merchant Commodity Fund is up 26% this year after shorting on crude. In 2014, it was up almost 60%, writes Tom Teodorczuk

The 20th of April is not a day that hedge fund oil trader already pretty negative on global GDP, and we Doug King will forget in a hurry. impacted various demand outlooks and where oil King, the chair of RCMA Group and head of RCMA prices should be into the balance sheet. Then you start Capital’s Merchant Commodity Fund, had been modelling more extreme scenarios, and when you get building up big bets that crude oil would fall. And extreme volatility and moves, that is where you can that day, they paid off. The price of futures contracts make outsize gains or losses.” for the May delivery of West Texas Intermediate King heads a team of seven out of a small office on dropped below zero for the first time ever — and WTI Kensington High Street. He is under no illusions about ending up plunging to -$37.63 a barrel. his fund’s priority to investors. The hedge fund manager says he made a killing. “We’re a specialist commodity hedge fund, of “I can’t recall how much,” he said in an interview which there aren’t many left,” he said. “The majority with Financial News two months later. “We certainly of the investors we have are invested in many different had a good day.” areas, mainly in assets, equities and bonds... I guess It is not his first win from a bearish bet on oil. they would prefer it to be more like 2009-15 and King said he profited handsomely from price slumps equity markets just go up rather than us helping them in 2008, 2014 and 2018 as well. out, because ultimately we are going to be a small He is one of a small band of oil hedge fund traders component of their overall portfolio.” to be significantly outperforming the market in In an era when algorithms can execute hundreds 2020. Others include Pierre Andurand and London- of trades in the blink of an eye, King says the Merchant based Westbeck Capital. The $170m RCMA Merchant Commodity Fund is able to differentiate. Commodity Fund is up 26% this year until May. He “You tend to get dominated by the electronic noise said his April returns would have been even greater, in markets and algos coming in to do what they want to had he not covered his short position at one point do in the marketplace, and that for us is not really very during the price collapse. interesting,” he said. In 2014, another particularly rocky year for oil “They [algorithmic machines] probably have no prices, returns were even more stellar — the fund clue even what oil is. Look at the amount of people ended up nearly 60% higher. who got caught out being long one day before the “Investors don’t really get bear markets,” he said. expiry and went negative. These are good markets, “They should get bear markets, but they don’t. They because they are very difficult for any machine to like to say, ‘Oh yeah this is a hot sector, we need to work on, comprehend and handle.” get money into this’ and so they reduce their natural The secret to being a successful oil hedge fund resource exposure.” trader, according to King, is not obsessing about the This suited RCMA: “Historically, the fund has price of oil, but understanding market dynamics and done very well in unpredictable situations.” the means of production. The Merchant Commodity Fund, which applies “We fully understand the economics of how oil a fundamental value supply-and-demand analysis refineries and cash markets work because that is to the commodities sector, is also unusual in its where we started our careers,” he said. “So they are structure. RCMA Capital, the investment manager of the things that now interest us, rather than what’s the the fund, was founded in 2004 out of Singapore by value of oil going to be. King and Mike Coleman. RCMA Capital is the majority “There are so many opportunities always in the shareholder of the RCMA Group, a commodities market and the way we work is we don’t care really trading and supply chain management company what they are. We just need to find the best ones and whose trading origins date back to selling rubber in deploy the right amount of capital.” the 19th century. King is certainly a discerning investor. When he King stressed he didn’t predict Covid-19. But he was a grains trader in the US in the 1990s, his brother said RCMA’s Asian roots helped him navigate the oil Will King, who founded the King of Shaves company, shocks arising from the pandemic, which originated tried to get him to invest in his fledgling toiletries in Wuhan, China, in December 2019. company. He declined at the time. “In general, when there are big disruptions “Doug thought I should go back to what I was good to normal markets, we tend to understand the at doing and at that time. He wasn’t up for investment fundamental impact of that pretty well,” he said. “We (he’s a major investor now),” Will King wrote in his are, I would say, more thoughtful when things start to 2009 memoir How to Build a Business in Tough Times. happen, especially something originating in China. Things are much calmer now on the oil front, “The swine flu-type of activity has always but the shocks have taken their toll. “When I look at been on the radar and bird flu when we were equity markets or even other commodities, they have trading agriculture. We were quite early onto what was not been damaged anywhere near how oil has been happening. damaged,” he said. “What struck us was the speed and what they Gasoline will outperform relative to crude oil in were doing in Wuhan. There was huge urgency, and the near future, he said, since “the US is really the then you got into a logic of ‘what if’ scenarios, such gasoline capital of the world” and Americans will as, ‘What’s going to happen to global demand?’” return to driving at pre-pandemic levels. But “we Though much is made about oil supply, it is have still got a massive issue with jet fuel, which is the the collapse in demand — accelerated by the Saudi- one nobody is really using”. Russia oil price war — that enabled the fund to profit King doesn’t anticipate any volatility substantially, King said. earthquakes for the rest of the year. “Oil today is “Once people started to lock down, the way we balanced, it won’t go close to going negative again modelled it was that demand losses were possibly unless there is a massive repeat Covid horrendous going to be unprecedented,” he said. “We were disaster in Q4,” he said. If that happens, history shows he is well-placed to “I can’t recall how much we take advantage. But even he says he was taken aback by that April day. made. We certainly had a good “When oil prices went negative, I took a snapshot day. The fund has done very well on my iPhone and sent it to all my non-oil guys because it was a historic, incredible moment of life,” in unpredictable situations” King recalled.

Tom Pennington/Getty Images “What we saw I don’t think will ever get repeated. Doug King, RCMA Capital An oil tanker off the coast of Texas It was one of those ‘I was there’ moments.” 29 June 2020 News 17 JPMorgan prepares London office for a phased return in July

Paul Clarke

JPMorgan is preparing to move em- ployees back into its Canary Wharf headquarters by the end of July, shifting staff into the office in three groups, with up to 75% of people like- ly to remain working from home over the next few months. The US banking giant has been preparing its UK headquarters over the past few weeks for the return of

employees, who have largely been Getty Images working from home since March, by placing over 31,000 stickers to direct JPMorgan is planning a gradual staff around the building and ensure reopening of its Canary Wharf HQ that adequate social distancing rules remain in place. Like most investment banks with The bank on 20 May sent a headquarters in large skyscrapers, memo to staff saying it would limit JPMorgan’s London headquarters the number of people in its offices on Bank Street in Canary Wharf will to 50% for “the foreseeable future”. be restricted by social distancing, in- Now, JPMorgan plans to separate its cluding a limit of around five people European employees into three tiers, using an elevator at a time. Canary with the first group of staff in London Wharf neighbour HSBC is restricting likely to return by the end of July. its lifts to two people, according to a These include traders, as well as sup- person familiar with the matter, port staff in the securities business. JPMorgan has capped the pro- However, around 75% of the portion of employees in all of its bank’s UK staff are non-client facing, global offices at around 50% for now, meaning they can work from home but is starting to open up across Eu-

Richard Baker/GettyRichard Images just as efficiently. While these make rope. Milan, Warsaw, Zurich, Ge- up the third group of employees, a neva and Paris are set to open on As City firms review their office space requirements, property funds may find recovery difficult proportion of these teams are likely 29 June, while its Frankfurt office is to return to the office in the first wave scheduled for 6 July. Any offices will and not all traders will return initial- be filled on an incremental basis. In ly. Any return is entirely voluntary. Warsaw, for example, 10% of staff Final numbers for the first wave will return initially, followed by 25% Property values under of London employees set to return and eventually 50%. next month, have yet to be decided, Like most investment banks, JP- according to a person familiar with Morgan is following the guidance of the matter. In Bournemouth, where local health authorities when bring- threat as demand dips the bank employs around 4,000 peo- ing employees back to the office, ple largely in support functions, the and has also put in place additional office will open on 13 July, with 10% measures including more sanitation, Archie Mitchell, Rupert Steiner started to become more popular. a spectrum which before didn’t exist. of staff returning. It will be another increased cleaning of the offices and and David Ricketts That was the canary in the coal mine. “I think anyone holding or look- month before more staff are expect- restricted doors for entering and ex- Fast-forward 10 years and look where ing to sign a long-term lease is going ed to come back. iting the building. The value of commercial real estate we are, Covid-19 is the same canary to be very concerned about the liabil- in the UK is under threat, as employ- for the office market,” he added. ity of what that represents,” he said, ees become more accustomed to Various property funds are heav- adding that companies will move to working from home amid the corona- ily exposed to offices. Kames’ £442m hub-and-spoke models, where cor- virus outbreak. UK Property Income fund has more porate headquarters are supported A third of bank staff may stay Companies are reviewing their than half of its assets allocated to of- by smaller offices around London office space requirements, which fice property, while the sector is the and other regions of the UK. working from home, says UBS could hit prices and have a knock- largest holding in the £411m Aviva UK Meanwhile, in the US, invest- on effect for Britain’s pension funds, Property Fund at just over 35%. ment bank Morgan Stanley expects Bérengère Sim that she thinks the banking indus- many of which hold considerable The M&G Property Portfolio, 30% of people to work from home for try “would need less real estate” chunks of real estate. which has been suspended since De- the long term, according to a recent A third of the banking sector’s work- as a result of the pandemic-related “Arguably, the market is already cember, has its top holding in office research note. force may not go back to the office, work-from-home trend, and govern- anticipating a repricing in assets giv- property — just over 29% of the fund. One example of a company the group chief operating officer ment-enforced social distancing. en the net asset value discounts on Others including Janus Henderson looking to scale back its use of office of Swiss bank UBS said, as busi- “We will see less real estate re- the office landlords,” warned Mat- Property and Standard Life Invest- space is Savant Recruitment Experts, nesses around the world adapt to quirement, we will see more density thew Saperia, commercial real-estate ments Real Estate all invest in offices. a boutique finance headhunting firm the restrictions imposed by the for real estate for firms,” she said. analyst at stockbroker Peel Hunt. Up to half the UK workforce based in London and Reading. Covid-19 pandemic. During the webinar series on He told FN’s sister-publication could work remotely when lock- Managing director Mark Shel- “It could be that perhaps a third weathering market turbulence in the MarketWatch that Covid-19 will short- downs end, according to a report don said the firm had been planning could work from home, if I’m looking age of Covid-19, Keller-Busse also dis- en leases and tenants will demand commissioned by Instant Offices, the to sign a new lease right before the at how our people are spread. It is cussed the impact the pandemic will more flexibility. “Some of our clients world’s largest flexible office-space pandemic struck, but those plans too early to do the exact maths, but it have on travel. will say, look what happened in re- broker. It said 70% of finance direc- were put on hold now staff are used would be significant,” Sabine Keller- “You will have some client set- tail 10 years ago when the internet tors are planning to move part of to working remotely. He expects the Busse said, speaking during Bloomb- tings where it is important that their on-site workforce into remote firm will reduce its overall property erg’s Invest Global webinar. “We are people are in the same room and “The greatest social roles after coronavirus, to cut costs. cost by between 40% and 50%. still in the process of assessing exact- working with each other on trans- John Duckworth, managing di- “Many businesses were one or ly which roles would stay onsite and actions,” she said, adding that there working experiment rector UK & EMEA of Instant Offices, the other before — either fully flex- which not. At the moment, it is too will be a further acceleration of dig- ever is just about to told MarketWatch: “The greatest so- ible or all in the office. I think there early to call out a number.” itisation in general. “However, what cial working experiment ever is just will be much more of a hybrid in the Keller-Busse, who has been UBS we do see as well is a lot of people be completed” about to be completed, and it has future,” he said. Group’s COO since 2018 and is also asking themselves: ‘Do I really need kind of worked. There is a choice fun- the president of the executive board to travel? Do I really have to have John Duckworth, Instant Offices damentally for people to work across From MarketWatch of UBS Business Solutions, added physical meetings?’” 18 View 29 June 2020 View Setting the agenda for the City

Stephen S. Roach Credit

America’s pandemic current-account deficit and an outsize plunge in the value on extremely attractive terms, largely absent any inter- of the dollar. est-rate or exchange-rate concessions that might other- response is storing up a No country can afford to squander its saving poten- wise be needed to compensate foreign investors for risk. tial — ultimately, the seed-corn of long-term economic That was then. In Covid time, there is no conven- shock for the US dollar growth. That’s true even of the United States, where the tional wisdom. Congress has moved with uncharacteris- laws of economics have often been ignored under the tic speed to provide relief amid a record-setting economic US policymakers have long believed that guise of “American exceptionalism”. free-fall. The Congressional Budget Office expects unprec- Alas, nothing is forever. The Covid-19 crisis is an espe- edented federal budget deficits averaging 14% of GDP American exceptionalism applies to the cially tough blow for a country that has long been operat- over 2020-21. And, notwithstanding contentious political laws of economics, but perhaps no longer ing on a razor-thin margin of subpar saving. debate, additional fiscal measures are quite likely. Heading into the pandemic, America’s net domestic As a result, the net domestic saving rate should be Pandemic time runs at warp speed. saving rate — the combined depreciation-adjusted saving pushed deep into negative territory. This has happened That’s true of the Covid-19 infection rate, of households, businesses, and the government sector — only once before: during and immediately after the 2008- as well as the unprecedented scientific stood at just 1.4% of national income, falling back to the 09 global financial crisis, when net national saving aver- efforts under way to find a vaccine. It is post-crisis low of late 2011. No need to worry, goes the aged -1.8% of national income from the second quarter of also true of transformational develop- conventional excuse — America never saves. 2008 to the second quarter of 2010, while federal budget ments currently playing out in pandem- Think again. The net national saving rate averaged 7% deficits averaged 10% of GDP. In the Covid-19 era, the ic-affected economies. over the 45-year period from 1960 to 2005. And during net national saving rate could well plunge as low as -5% Just as a lockdown-induced recession brought global the 1960s, long recognised as the strongest period of pro- to -10% over the next 2-3 years. That means today’s sav- economic activity to a virtual standstill in a mere two ductivity-led US economic growth in the post-World War ing-short US economy could well be headed for a signifi- months, hopes for a V-shaped recovery are premised on II era, the net saving rate actually averaged 11.5%. cant partial liquidation of net saving. an equally quick reopening of shuttered economies. Expressing these calculations in net terms is no triv- With unprecedented pressure on domestic saving It may not be so simple. A sudden stop — long associ- ial adjustment. Although gross domestic saving in the first likely to magnify America’s need for surplus foreign cap- ated with capital flight out of emerging markets — often quarter of 2020, at 17.8% of national income, was also ital, the current-account deficit should widen sharply. exposes deep-rooted structural problems that can impair well below its 45-year norm of 21% from 1960 to 2005, Since 1982, this broad measure of the external balance economic recovery. It can also spark abrupt asset-price the shortfall was not as severe as that captured by the net has recorded deficits averaging 2.7% of GDP; looking movements in response to the unmasking of long-sim- measure. That reflects another worrisome development: ahead, the previous record deficit of 6.3% of GDP in the mering imbalances. America’s rapidly ageing and increasingly obsolete stock fourth quarter of 2005 could be eclipsed. Such is the case for the pandemic-stricken US econ- of productive capital. This raises one of the biggest questions of all: Will omy. The aggressive fiscal response to Covid-19 is not That’s where the current account and the dollar foreign investors demand concessions to provide the without major consequences. Contrary to the widespread come into play. Lacking in saving and wanting to invest massive increment of foreign capital that America’s sav- belief that budget deficits don’t matter because near-zero and grow, the US typically borrows surplus saving from ing-short economy is about to require? interest rates temper any increases in debt-servicing abroad, and runs chronic current-account deficits in The answer depends critically on whether the US costs, in the end there is no “magic money” or free lunch. order to attract the foreign capital. Thanks to the US deserves to retain its exorbitant privilege. That is not a Domestic saving, already depressed, is headed deep dollar’s “exorbitant privilege” as the world’s dominant new debate. What is new is the Covid time warp: the ver- into negative territory. This is likely to lead to a record reserve currency, this borrowing is normally funded dict may be rendered sooner rather than later. America is leading the charge into protectionism, deglobalisation, and decoupling. Its share of world for- eign-exchange reserves has fallen from a little over 70% in 2000 to a little less than 60% today. Its Covid-19 con- Dilbert By Scott Adams tainment has been an abysmal failure. And its history of systemic racism and police violence has sparked a trans- formative wave of civil unrest. Against this background, especially when compared with other major economies, it seems reasonable to con- clude that hyperextended saving and current-account imbalances will finally have actionable consequences for the dollar and/or US interest rates. To the extent that the inflation response lags, and the Federal Reserve maintains its extraordinarily accommo- dative monetary-policy stance, the bulk of the concession should occur through the currency rather than interest rates. Hence, I foresee a 35% drop in the broad dollar index over the next 2-3 years. Shocking as that sounds, such a seemingly outsize drop in the dollar is not without historical precedent. The dollar’s real effective exchange rate fell by 33% between 1970 and 1978, by 33% from 1985 to 1988, and by 28% over the 2002-11 interval. Covid-19 may have spread from China, but the Covid currency shock looks like it will be made in America.

Stephen S. Roach is a faculty member at Yale University and former chair of Morgan Stanley Asia Copyright Project Syndicate, 2020 18 View 29 June 2020 29 June 2020 View 19

Marisa Hall How Michael Jordan can help City firms to #TalkAboutBlack I have been proud to work with leaders in the investment industry on the campaign to improve racial equality

There is much investment organisations can learn from sport about building more inclusive cultures. In the recent Netflix docuseries, The Last Dance, we saw the challenges faced by the Chicago Bulls bas- ketball team as they navigated the 1997/1998 NBA Championship season. Despite disagree- ments and personality clashes, Michael Jordan led his team to its 6th title in eight years, sealing the Bulls’ place in history as arguably the greatest basketball team ever. Their success was summed up by the then Chi- cago Bulls general manager, Jerry Krause: “Players and coaches don’t win championships, organisations win championships.” Though controversial to the players at the time, this statement neatly encapsulates two lessons. First, the power of effective organisational culture when focused, top to bottom, on achieving a well-defined and articu- lated common purpose. And second, how this common purpose provides leadership with an inclusive platform to confront differences between individuals. Michael Jordan was a dominant leader, but there is no doubt he needed a team united in a relentless pursuit of victory. This was a team diverse in talent, age and inter- ests that became singularly united around an inclusive purpose — and the rest is history. The investment industry needs to do more to break the taboo around race. As a black senior female working in the industry, I believe one of the starting points is to engage and share experiences. By doing this we promote understanding, gain allies and advocates and engage people in a dialogue that has been largely missing in our industry. This was one of the motivations for us creating the #TalkAboutBlack #IAM campaign. I can only hope that the solidarity shown in many protests around the UK, following the killing of George Floyd, shows our society is more open to having a con- structive dialogue around race. For the first time, many black people feel as if they are being heard. It was heart- ening to see so many people approach the issue with intellectual curiosity, authenticity and compassion. So how do investment organisations best address this issue? Through effective organisational culture. At the Thinking Ahead Institute, we work with asset managers and asset owners to create a shared language around cul- ture through measurement, and building roadmaps that synchronise with organisational purpose and strategy. Many organisations, in our industry and outside, have recently communicated clear responses to racial injustice and have placed a high value on the impor- tance of diversity and inclusion. It will be a big test of the strength of culture at these organisations whether these changes in language, policies and structures will be rein- forced by transformations in core values and attitudes. Rigorous data is critical. Clear organisational lead- ership that invests in racial equality and seeks to under- stand the context provides a signal that this is an import- ant priority. Measuring progress can be achieved, in part, through the current proposals in the UK to introduce eth- nicity pay gap reporting, in a similar way to the current gender pay gap reporting requirements. At the time of writing, a related petition submitted to the UK government and parliament website has exceeded 125,000 signatures, surpassing the required threshold for parliamentary debate. In a report last year, the Invest- ment Association also supported the ambition behind this government-proposed initiative. The #IAM campaign has been powerful and I am proud to work with so many other investment leaders on it. Our singular purpose is equality. I have faith that one day, we may finally break the taboo around race so that my children don’t need to talk about black, just about being human.

Marisa Hall is co-head of the Thinking Ahead Institute, a

Getty Images global not-for-profit research network 20 International 29 June 2020 ‘Massive’ forgery hid $3bn hole in Singapore trading firm’s accounts The two-month investigation found the group overstated assets and pointed to a $2.23bn shortfall in payments due from customers, while inventory stockpiles were apparently inflated by $812m. By Chong Koh Ping

A distressed energy-trading com- bled the company to mislead banks Lim and his two children own pany overstated its assets by more into extending financing to the com- Hin Leong. Though an earlier fil- than $3bn using “routine and perva- pany and also acted as supporting ing by Lim said the company hadn’t sive” forgery, while its founder over- documentation for the fictitious made profits in the past few years, saw years of disastrous bets on oil gains or profits,” they said. The the administrators found that share- derivatives, a report filed with a Sin- Wall Street Journal viewed a copy holders had taken out $90m in divi- gapore court said. of the report. dends in the two financial years end- The study by interim judicial Fabrication was so widespread, ing October 2018. managers, or court-appointed inde- the administrators said, that “every Given the gulf between assets pendent administrators, offers the document had to be scrutinised in and liabilities, the administrators first detailed account of the implo- order to check and verify whether it said Hin Leong has “no reason- sion of Hin Leong Trading, a closely was genuine”. able prospect of being restruc- held Singapore company that owes The company, a major player in tured or rehabilitated” as a $3.5bn — mostly to banks, including shipping fuel, sold and bought back stand-alone company. HSBC Holdings. cargo at a loss so it could obtain Instead, any restructuring The administrators, from Price- bank financing. for the benefit of creditors would waterhouseCoopers Advisory Ser- “Some of these schemes also require a merger with other compa- vices, estimated Hin Leong’s true involved the use of forged docu- nies in the wider Hin Leong Group — assets at just $257m, or about 7% of ments, nonexistent inventory or the also fully or partially owned by Lim liabilities, raising the prospect of sale of the same inventory to multi- and his children — to create an inte- steep losses for creditors. They rec- ple parties. This has led to compet- grated petroleum-trading platform. ommended a merger with other ing legal claims being asserted by the The administrators said they companies owned by the con- implicated parties,” said the report. have spoken with potential investors trolling Lim family. PwC said it had no immediate to assess their interest in Hin Leong The two-month investigation comment. Hin Leong didn’t respond and its subsidiaries, Ocean Bunker- found serious irregularities and to emails seeking comment. The Lim ing Services and Hin Leong Marine convoluted accounting. It found family’s lawyers and its financial International. the group overstated assets by an advisers, Davinder Singh Chambers Potential investors include pri- “astonishing amount”, pointing to a and nTan Corporate Advisory, also vate and state-owned Chinese energy $2.23bn shortfall in accounts receiv- didn’t respond. companies, as well as international ables—payments due from customers Hin Leong was placed under oil and gas traders. — and inventory stockpiles appar- judicial management in April. The PwC accountants will con- ently inflated by $812m. Singapore police have opened tinue investigating. They have until The higher asset values helped an investigation. July 20 to file a supplemental report. paper over years of losses, the report The report said Lim hadn’t Lim migrated to Singapore from said. The $1.35bn in profits Hin answered their queries, and the Lim a small town in southern China. He Leong reported since 2010 from trad- family’s lawyers said his deteriorat- set up Hin Leong in 1963, starting ing energy futures and swaps was, in ing health meant he was “unfit to be with a one-man operation delivering reality, a loss of about $808m. questioned for prolonged periods diesel to small fishing boats. Before Founder Lim Oon Kuin, also of time”. the collapse, Forbes had estimated known as OK Lim, had said in an Lim’s net worth at $1.3bn. earlier court filing that the com- Hin Leong’s implosion is the lat- pany had hidden about $800m in est problem to beset Singapore’s size- futures losses. $257m able commodity-trading industry in The administrators told Singa- recent years. These have included pore’s high court this week that Hin Assets held by Hin Leong Trading, the 2018 restructuring of Noble Leong “fabricated documents on a according to administrators Group and a $320m rogue-trading massive scale”, including bank state- PwC, representing just 7% of its loss last year at a local unit of Japan’s

Edgar Su/ReutersEdgar ments, sales contracts, invoices, and $3.5bn financial liabilities - raising Mitsubishi Corporation. bills of lading for ships. the prospect of steep loses for Hin Leong’s Pu Tuo San VLCC supertanker off the coast of Singapore “These forged documents ena- creditors, including HSBC From The Wall Street Journal

SoftBank CEO Masayoshi Son to resign from Alibaba

Phred Dvorak The pair of resignations brings close relationship by serving as direc- $20m in Alibaba in 2000, after recorded the worst results in its to an end around a decade and a tors of each others’ companies. Son a five-minute chat with Ma. That nearly four-decade history, as huge SoftBank chief executive Masayoshi half during which the two power- has been on Alibaba’s board since investment has become SoftBank’s, losses at its $100bn Vision Fund and Son said on 25 June that he is step- ful entrepreneurs — Son from Japan 2005, five years after SoftBank took a and Son’s, most successful, and its other investments threw into ques- ping down from the board of Chinese and Ma from China — cemented their major stake in the then-small online large holding in Alibaba currently tion its aggressive strategy of funding e-commerce giant Alibaba Group, retailer. Ma came on SoftBank’s supports much of the Japanese com- digitally driven startups. effective the same day. “Sometimes I get board a few years later, in 2007. pany’s credit rating, share price and Presenting the group’s earnings, Son’s announcement, which Son said he was stepping down funding activities. Son said he had given up for now he made at the end of SoftBank’s asked if the funding at his own request, and that he was SoftBank has at times sold some on the idea of bringing in fresh cash annual shareholder meeting, follows for Vision Fund 2 “matching” the day of his resignation of that stake to raise money, most from outside investors. “Sometimes the resignation — also effective on 25 with Ma’s. He said that the parting of recently this year, when it entered I get asked if the funding for Vision June but announced last month — of is OK. It’s not.” ways was smooth, and that he hadn’t into derivative transactions to sell Fund 2 is OK,” he said. “It’s not.” Alibaba co-founder Jack Ma from had a fight with Alibaba. $11.5bn worth of Alibaba shares. SoftBank’s board. Masayoshi Son, SoftBank Son famously decided to invest On 18 May, SoftBank Group From The Wall Street Journal 29 June 2020 International 21 Blackstone to hire fewer junior bankers Decision to sit out Wall Street talent scramble is aimed at reforming a firm whose leaders are still mostly white and male, writes Miriam Gottfried

Blackstone Group, one of the most black colleges and universities and top two leaders. But officials at Black- new junior talent: campuses and banks — for roles that wouldn’t start coveted employers on Wall Street, women’s colleges. stone, which doesn’t disclose overall investment banks, which have their until summer 2021. That has forced is throwing out a key section of Blackstone, which has been diversity figures, acknowledge they own hotly competitive entry-level buyout firms to predict how candi- its recruiting playbook in a bid working for years to extend its cam- have a lot of work to do to transform hiring operations. dates with barely any relevant expe- to improve its hiring process and pus reach, says it will directly recruit a business that is still overwhelm- In the case of the latter, recruit- rience will perform nearly two years increase diversity. from 44 schools this academic year, ingly white and male, especially in its ment used to happen during the ahead of their start date and has The investing giant and its pri- up from just nine in 2015. uppermost ranks — as is the case with summer after applicants’ first year put pressure on applicants to make vate-equity peers have long engaged The change has been in the most of its main rivals. on the job, but it has steadily crept decisions about their futures before in a yearly race to pluck junior invest- works since last year, but Blackstone Given its heft and prestige, Black- forward as private-equity firms jump many are ready. ment bankers already trained in is implementing it at a moment when stone’s decision to sit out the bank-re- the starting gun in hopes of securing Blackstone executives say that spreadsheet and PowerPoint wiz- companies are grappling with how to cruitment rush has the potential to the best candidates. their reliance on investment banks, ardry from firms such as Goldman address racial inequality following influence how other firms find talent In 2019, recruiting took place which have their own diversity chal- Sachs and Morgan Stanley. The prize the killing of George Floyd, an Afri- in an industry in which only 11.5% in September, just a couple months lenges, also has the effect of narrow- for those lucky enough to make the can-American man, while in custody of senior executives are women, after candidates began working at ing the funnel of applicants and ham- jump: entry-level jobs that can pay as of Minneapolis police. according to a February report by pering the firm’s effort to draw from much as $300,000 a year. Globally, 40% of Blackstone’s Preqin, and an even smaller percent- “We can widen our a more varied talent base. Now Blackstone officials say current incoming class of analysts age are black or Hispanic. “We can widen our aperture of the firm plans to sit out that con- are women, up from less than 20% Blackstone, the largest buyout aperture of applicants applicants to include a much more test in favour of on-campus recruit- in 2015. Nearly half of the members firm with $538bn of assets, received to include a much diverse group of people,” says Paige ing, already its main source of tal- of its incoming US analyst class are nearly 15,000 applications for Ross, Blackstone’s global head of ent and one that it is expanding to women or minorities, and the firm just 90 full-time analyst roles that more diverse group” human resources. bring in more candidates directly says half of its major businesses have started last year. from schools, including historically a woman or minority as one of the It has two main sources of Paige Ross, Blackstone From The Wall Street Journal Getty Images

Man in the mirror: private equity titan Blackstone is expanding its talent pool to historically black colleges and universities, and women’s colleges, in a bid to change its ways

Ackman’s record raise would confirm surge in SPACs

Nicholas Jasinski fund Pershing Square filed with the ing a traditional IPO. They have since Nine more SPACs are on deck to list competition for deals. But there is Securities and Exchange Commis- inspired cult followings, with their soon. As a result, at least 96 SPACs evidence that the universe of compa- Special-purpose acquisition compa- sion to raise the largest-ever SPAC. stocks multiplying several times over. are searching for acquisition tar- nies willing to sell to a SPAC is greater nies, or SPACs, are having a moment. The initial public offering seeks to Not every SPAC can boast that gets, with a combined $25bn in their now than ever before. Led by some of 2020’s buzziest raise $3bn for Pershing Square Ton- kind of success. But it’s clearly a trusts, per SPACInsider. Recent combinations have been new stocks, a stampede of SPAC ini- tine Holdings, which will identify an model that has won acceptance from Because special-purpose acqui- successful, such as Vertiv Holdings, tial public offerings has hit the US acquisition target and buy it within investors. Last year, 59 SPAC IPOs sition companies tend to do trans- a digital-infrastructure company. Its market over the past six weeks. 24 months or else return the money raised $13.6bn. actions with a market value of three stock recently traded at $14, up about Also referred to as “blank to shareholders. That record is set to be smashed or four times their trust, as much as 30% since its deal was announced cheque” companies, SPACs raise Electric and fuel-cell startup in 2020, with 32 SPACs already hav- $100bn worth of companies could in December. Its sponsor, Goldman money from investors in an IPO, then Nikola, online sports-betting site ing gone public, raising $10.4bn go public in the next two years, just Sachs, has filed to raise a new SPAC: use the proceeds to acquire a busi- DraftKings, and spaceflight company — nearly half of all IPO dollars gen- from existing SPACs. GS Acquisition Holdings II. ness, typically within two years. Virgin Galactic Holdings all went erated in 2020 — according to The record number of SPACs On 22 June, Bill Ackman’s hedge public by merging with SPACs, forgo- SPACInsider, an industry website. looking for targets could mean more From Barron’s 22 People 29 June 2020

BlackRock pledges to increase black employee numbers by 30% within four years

David Ricketts executive, was among high-profile tinue to learn and adapt.” BlackRock and its employees have business leaders who spoke out to In addition to increasing the donated $1.9m to organisations fight- BlackRock has pledged to bolster the denounce racism following the fatal number of black employees, Fink ing racial inequality. number of black employees by 30% arrest of George Floyd on 25 May. said BlackRock will focus on racial BlackRock said it has doubled over the next three-and-a-half years In a memo to BlackRock’s 16,000 equity and social justice in its invest- the annual cap on the amount it will as pressure grows on the world’s larg- staff on 22 June, Fink said: “Black- ment and stewardship activities. match in philanthropic giving per est companies to take meaningful Rock should reflect the rich diversity This will include increasing partner- employee to $10,000. action on tackling racial inequality. of our clients. So, change must start ships with minority brokers, external Fink said: “The process of build- The world’s largest asset man- here at BlackRock, and we know we managers and third-party vendors, ing a more just and equitable society ager has also said it will double the have a great deal of work to do. as well as launching new funds that will not be easy or quick. Driving real number of senior leaders who are “Progress will require a long- focus on racial equality. change requires long-term commit- black to 6% over the same period. term effort with sustained focus and The firm said it will create a new ment and that all of us push beyond Only 3% of BlackRock’s current sen- persistence. We don’t have all the $5m fund to support black and Latinx comfortable boundaries. We must ior leaders — those in director roles answers today, but we are moving entrepreneurs. It will also increase begin the journey examining our and above — are black. Larry Fink, CEO of BlackRock, forward with a strong sense of pur- the amount it matches in employee own culture and talent practices, but

Larry Fink, BlackRock’s chief spoke out to denounce racism pose and resolve, and we will con- donations. Over the past three weeks we cannot be content to stop there.” Getty Images

Getty Images Black-owned Deutsche Bank investment firm sues US pension veteran gets over racial bias big HSBC role Dawn Lim A Black-owned investment firm sued New Jersey for racial bias on 23 June, Adam Bagshaw has spent the past 14 years at Deutsche saying officials told it that the state’s pension was averse to hiring minori- Bank and his exit has prompted a reorganisation at ty-owned fund managers. the German lender, writes Paul Clarke Blueprint Capital Advisors is one of the few US investment firms HSBC has taken on Deutsche Bank’s ership of Greg Guyett. Guyett told founded by African-Americans. The Adam Bagshaw as global co-head of Financial News previously that the Newark firm said in court documents advisory and investment banking lender was looking to hire “better that New Jersey’s pension office coverage, according to an internal bankers” to help secure more lucra- “usurped” its ideas and hired Black- memo seen by Financial News. tive advisory deals. Rock to run Blueprint’s strategy. This is the latest key appoint- Bagshaw’s appointment comes Blueprint alleges pension staff ment made despite the lender’s over- as HSBC has resumed its cost-cut- made efforts to block it from invest- all hiring freeze, and makes him one ting initiative, unveiled in February, ing state money and turned against of the most senior investment bank- which is set to result in 35,000 job the firm after it spoke up about ers globally. Bagshaw was latterly cuts. Noel Quinn, it’s chief executive, being treated unfairly. Blueprint was co-head of corporate finance for told employees last week that redun- eventually hired to run money for Europe, the Middle East and Africa at dancies would resume after a three- New Jersey, but under terms that it Deutsche Bank. month hiatus and that a hiring freeze describes as “punitive”. He will co-head the unit along- would remain in place. It is rare for an asset manager side Peter Enns, who is based in Asia, The memo from Guyett said that to sue an investor. Blueprint said it and is set to join HSBC in September, Bagshaw would focus on increas- oversees about $175m for New Jersey. the memo said. Bagshaw has spent ing ties between HSBC’s investment The firm also sued BlackRock and the past 14 years at Deutsche Bank banking and commercial banking Cliffwater, a firm that assisted the and also headed up its financial spon- clients. The bank stopped short of a state pension with investment deci- sors business in Europe. wholesale merger between the two sions, alleging they profited at Blue- In the wake of his departure, units in February but is looking for print’s expense. Deutsche has reorganised upper ways to forge closer ties between “We would like to see people ranks of its European corporate the divisions. in C-suites and bureaucracies held finance business. Hugo Heath has been co-head accountable for the things they do The German lender has named of advisory and investment banking when no one is watching,” Jacob Patrick Frowein and Berthold Fuerst coverage on an interim basis follow- Walthour, Jr., Blueprint’s chief execu- as co-head of investment banking ing the abrupt departure of Matthew tive, said in an interview. He was pre- coverage for Europe, the Middle Wallace earlier this year. Heath will viously a vice chair at Cowen & Co. East and Africa. resume his former role as vice-chair and held roles at Cliffwater and Cit- The reorganisation means of banking. HSBC also hired Mac- adel in a Wall Street career that has that the leadership of the unit has quarie banker Jacques Callaghan to spanned over 30 years. shifted to Deutsche’s home mar- lead its new mid-market M&A team While Blueprint was trying to ket. Bagshaw is based in London, in May. The unit will eventually com- get New Jersey to invest, a top invest- but Frowein was previously head prise 20 investment bankers. ment staffer told Walthour in 2016 of Deutsche’s investment bank Meanwhile, at Deutsche, where that Blueprint stood higher chances for German-speaking countries, Bagshaw was also global co-head of of getting state money if references while Fuerst was head of German financial sponsors, this unit will now to being minority-owned were corporate finance. solely be run by Michael Walsh from scrubbed from pension memos, Bagshaw is the latest example New York. Tim Wiedelmann contin- according to the lawsuit. of HSBC hiring well-regarded invest- ues to lead the business in Emea. A New Jersey Treasury spokes- ment bankers in a bid to bolster its Bagshaw is the latest senior woman referred a request for com- advisory business under the lead- Deutsche investment banker to ment to New Jersey’s Office of the depart for HSBC over the past year. Attorney General, which declined to His exit follows the departure of comment. Spokespeople for Black- “Pullquote 3 or 5 decks its European equity capital mar- Rock and Cliffwater said their firms 35,000 kets boss, Edward Sankey, who left had found no evidence of any wrong- for features with for the UK lender in June last year, doing on their part. hanging quote marks Expected job cuts under HSBC’s while Philip Lee joined as South- restructuring plans, which are east Asia vice chairman of global HSBC has recruited Adam Bagshaw to fill one of its most senior From The Wall Street Journal. Amara for features with” being resumed after a pause banking in September. investment banking roles, despite its overall hiring freeze Omeokwe contributed to this article 22 People 29 June 2020 29 June 2020 People 23 Bailey pledges ‘action’ as Bank Funds firm Fidelity of England misses diversity goal becomes latest with Emily Horton At the central bank, women that have apologised for their his- equal parental leave hold 32% of senior roles, which is toric links to the slave trade on 18 It is looking likely that the Bank of 3% off the bank’s 35% year-end goal, June, following widespread anti-rac- England will fall short of its 2020 gen- according to its annual review pub- ism protests in the UK. Mark Cobley der diversity target, despite pledging lished 18 June. “We’re a public institution, we to place diversity at the heart of the The bank has also struggled to serve the people of this country. We Fidelity International, the fund man- central bank’s cultural agenda. increase the percentage of black, can only do that effectively if we bear ager, has become the latest finan- At the virtual launch of the Asian and minority ethnic employees sufficient resemblance to the people cial-services firm to introduce a Women in Finance Charter’s annual into top positions. Representation is we serve,” Bailey said. new policy of equal parental leave review on 23 June, the governor of currently at 7%, up 2% from last year The governor said that the — meaning men and women are enti- the BoE Andrew Bailey said he was but still well below the target of 13% Women in Finance Charter, which tled to the same amount of time off disappointed by where the bank and only 1% above 2016 levels. How- was set up in 2016 as the govern- after becoming parents. stood with regards to diversity and ever, the bank has reached its 2020 ment’s flagship initiative for tackling In a 23 June announcement, inclusion metrics. “I wish we had goal of 20% BAME staff representa- the lack of gender diversity within Fidelity said its new policy will mean achieved our target,” he said. But tion in junior roles. the City, provides the perfect exam- that “fathers and secondary carers

added that the bank would “keep on The central bank joined the ple of how to “turn the words and the will now be able to take the same Getty Images striving to achieve our set target”. growing list of financial institutions talk into action.” amount of paid leave as mothers and primary carers within each of their Helping hand: Fidelity offers Getty Images 27 operating locations”. male employees more time off The amount of leave will depend on the country where employees (including via surrogacy) or placed are based. In the UK, one of Fidel- for adoption on or after 1 Septem- ity International’s principal loca- ber 2020. The new entitlements tions, women and primary carers will apply to each parent employed are currently entitled to 26 weeks’ by the company, within the first 12 paid parental leave, while men and months of the child’s arrival. secondary carers are entitled to six The new arrangements at Fidel- weeks as an allowance of shared ity, which manages $380.9bn, follow parental leave. Under the new policy, in the wake of moves by firms such fathers will receive 26 weeks’ paid as Invesco, Standard Life Aberdeen leave, in line with women. and Goldman Sachs to equalise and Fidelity’s new policy will enhance parental-leave arrange- increase fathers’ leave by more else- ments in recent months. where. In the majority of its 12 offices Financial services firms have worldwide – including Shanghai, historically been more generous Hong Kong, India and Germany – with leave than companies in other men and secondary caregivers are sectors. However, entitlements are currently entitled to 10 days’ paid uneven across the sector. parental leave. Aviva, the UK insurer, was one of The new policy, to equalise leave the first large employers in the City with what is on offer to women in to offer equal paid parental leave in the same territory, will mean an 2017. Professional services firms, increase of 20 weeks in Shanghai; led by the Big Four, have also been 16 weeks in Hong Kong, 24 weeks in regarded as forward-thinking in this India and 12 weeks in Germany, the area, while investment bank JPMor- company said. gan also has a policy of 26 weeks’ Anne Richards, the chief exec- fully paid paternity leave for UK utive of Fidelity International, said employees. the company was “especially proud Sally Nelson, chief people offi- to be offering this globally to all our cer at Fidelity International, said the employees”. company “has diversity and inclu- She added: “We want to be a sion at its heart, and treating parents market leader and offer an inclusive equally and creating a level play- culture where all our people may ing field for all genders is incredibly spend time caring for their children important to us. and thrive in their careers.” “This family-friendly policy will Fidelity International’s offer the flexibility to support child- enhanced parental leave policy will care needs and will transform par- come into effect for children born enthood for many families.”

Andrew Bailey, who became Governor of the Bank of England earlier this year Sudoku 168 23467 Barclays Private Bank CEO joins Ontario Teachers Fill all empty squares so that 62 Selin Bucak With a portfolio including more head of equities Jane Rowe, who the numbers than 60 private companies, the will take on the role of vice-chair, 1 to 9 appear 21 Ontario Teachers’ Pension Plan equities team managed $47bn in net investments, at the pension plan exactly once in Board has hired the CEO of Barclays assets as at 31 December, 2019. from 1 October. each row, column 547 Private Bank, Karen Frank, to lead its Frank has been CEO of Barclays “Equities is an integral part of and 3x3 box equities department. Private Bank since 2016. Prior to that, Ontario Teachers’ asset mix, con- Based in the Canadian pension she was co-head of the European tributing significantly to our ability 31546 fund’s London office, Frank will Sponsors Group at the British bank. to deliver on the pension promise to take on the role of senior managing She has more than 25 years’ experi- our members,” Hindo said. 6197 director, equities, in the autumn. ence in investment banking and pri- “Karen brings to the role signifi- Reporting to chief investment officer vate equity, which has included stints cant leadership skills, diverse think- 79 5 Ziad Hindo, she will oversee the pri- at Goldman Sachs, AEA Investors ing and in-depth knowledge of global Sudoku is vate capital and high conviction and Compass Partners International. markets that will help us continue to compiled for FN equities teams. Frank will succeed current scale our business.” by Puzzler Media 49 3

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