Morning Coffee: Junior bankers at Moelis & Co should relish returning to the office. Citadel’s loss-making trader gets $50m to go to Balyasny

Misery loves company, they say.  And unless the M&A market turns back up by May, bankers at Moelis & Co will be getting a bit more of both; the super-boutique bank is going from four days a week to five. Normally, the joke would be that junior analysts will still be allowed to work from home on Saturdays and Sundays, but in the current environment for deals, that might seem a little tasteless. At least the London staff will be able to enjoy that new-office smell, and check out the somewhat better lunch options in Marylebone.

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This might, however, be considered a bit of a disappointment for any Moelis & Co. bankers who remember the days when their founder declared “I want to attract, I want to motivate and I want to retain the greatest talent in the world … If that talent wants to do it in Florida, that's where we'll support them”.  But, of course, many people have changed their minds on a lot of things since then.

At the same time, if artificial intelligence is going to lead to a “world without juniors” across many previously lucrative white-collar jobs, as many experts are apparently predicting, maybe the Moelis & Co. bankers should be pleased that anyone cares about them enough to want their physical presence.  It’s notable, after all, that one of the key reasons that many banks have given for requiring a return to the office is that it’s necessary in order to sustain the “apprenticeship” model, which is exactly the thing that might be under threat from AI.

Of course, banking isn’t really like other professional services industries.  For one thing, they don’t bill by the hour.  Lawyers bill by the hour and senior lawyers are saying it's problematic, because clients often refuse to pay junior lawyer fees for work they expect to have been done by AI, while the juniors themselves often refuse to use AI tools productively because they don’t want to lose their billable hours targets. Since much of the work given to young bankers involves checking microscopic details of fonts, logos and spreadsheets, something like an LLM which introduces small but noticeable random errors all the time sounds more like a full-employment in-office guarantee than a replacement.

In fact, the real risk to banker jobs might be in the middle ranks.  At the top end of banking, you’re expected to come up with new solutions and react to things that can’t be in any dataset because they’ve never happened before. At the bottom of the heap, you’re doing difficult grunt-work, but you’re very cheap.  In between, though, come the staffers and structurers, the keepers of the deal calendars and writers of pitchbooks.  These look like the jobs that might have most to fear. And these are the jobs where you can benefit from being in the office, ingratiating yourself to MDs.

So the Moelis juniors ought to head back into the office with a spring in their step.  Not only are they not so likely to be made technologically redundant, they might be the last generation to be trained in the methods of investment banking, before “pls fix” becomes a lost art.

Elsewhere, “pod shops” and multistrategy hedge funds are pretty notorious for their ruthless “risk management”.  Typically, the rule is that if you lose a bit of money, you get your portfolio “downsized” and are put under a lot of pressure, then if you lose a bit more you’re fired.  But this apparently isn’t always how it works if you’ve got a good enough track record.

David Brodsky at Citadel, for example, has been a top-performing healthcare stock trader for long enough that they “offered him support to work through” a $60m drawdown that he had sustained in the first few months of this year.  But instead (and apparently thanks to a bit of persuasion from Dmitry Balyasny himself), he’s decided to take a massive 21 months of gardening leave and then join Balyasny’s rival multistrat fund with a pay package that could total as much as $50m if targets are reached. 

The long sit-out period seems to be likely to coincide with a period of political and economic instability that might be a great time to not be trading US healthcare stocks.  It’s good to be popular.

Meanwhile …

Shell’s commodity trading business hasn’t had a single money-losing quarter in the last decade. With risk management habits like this, it’s not wholly surprising that this operation is regularly raided by both pod shops and the proprietary trading firms.  (Bloomberg)

Apparently Bill Chisholm’s announcement that he was going to buy the Boston Celtics for $6bn caused a bit of consternation among partners at his private equity firm, which only has a total of $10bn under management.  But it seems that he’s only doing it as part of a consortium of other rich guys. ( NY Post)

A flurry of significant post-bonus-season-and-vesting-moves – Dominic Ashcroft has gone from Goldman Sachs to Blackstone’s private credit unit … (Bloomberg)

… but Brendan Sproules has joined Goldman’s equity research team in Australia from Citi…(Capital Brief)

… and Rafa Lopez has gone from Point72 to be chief operating officer of Citadel’s global equities business. (Financial News)

After 19 years on the sell side at Goldman Sachs, Katsunori Tanaka decided to set up a hedge fund doing the painstaking work of “friendly activist” investment in tiny little regional Japanese savings banks that most people have never heard of.  He’s up 300% so far. (Bloomberg)

Ray Dalio is not exactly “back in the game”, but he’s signed up as a special advisor to a sovereign wealth fund, reporting directly to the President of Indonesia.  His colleagues will be the controversial economist Jeffrey Sachs, and former Thai prime minister Thaksin Shinawatra. No word yet on whether the Principles will be applied. (Business Insider)

They’re no longer going on strike, the bonus protests are over and the bathroom floors are relatively clean – apparently the regulators at the UK’s Financial Conduct Authority are more content with their jobs than they have been for years. (Financial News)

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