Two moves don’t make a trend, but they might make the start of a trend. Six months after Dave Brodsky left Citadel for Balyasny after making a ~$50m loss at Citadel, Bloomberg reports that Ricky Mewani, a fresh-faced healthcare analyst in New York who began his career at JPMorgan, has done the same thing.
Get Morning Coffee ☕ in your inbox. Sign up here.
Despite their losses (Brodsky’s was allegedly circa $60m, Mewani’s allegedly circa $50m), Citadel wanted to keep both men. When Brodsky – a fundamental equities portfolio manager, left for Balyasny in March, Citadel professed that it had offered him “support to work through the draw.” Now that Brodsky’s left for Balyasny too, Citadel told Bloomberg: “We’re extremely disappointed that Ricky walked away in the midst of a drawdown.”
Drawdown is hedge fund parlance for losing some of the capital you’ve been given to invest. At hedge funds like Millennium, drawdowns are treated formulaically: lose more than 5% and your capital is cut; more than 7.5% and you’re out. “That’s the game. The rules are very, very clear,” one Millennium portfolio manager told us yesterday.
At Citadel, it’s different. There’s an attempt to work with hedge fund managers during a drawdown. At Balyasny too. – Founder Dmitry Balyasny has been going around explaining how homely it is there. In fact, it’s so homely at Balyasny, that Dmitry says people will work there for less money.
It’s not clear whether Mewani has taken a pay cut to join friendly Dmitry, but if you simply leave JPMorgan for Citadel and make a quick $50m loss, you’re unlikely to be as feted. Mewani joined Citadel in 2016 after nearly two years at JPMorgan and another year in a lesser hedge fund. He began at Citadel as an associate before becoming an analyst and finally a portfolio manager there in 2022. Citadel trained him up. Balyasny likes him because, it says, that Mewani, “has been a strongly performing PM for many years.” This might be an exaggeration given that Mewani had only been a PM at Citadel for three years, but the sentiment is clear.
Citadel, meanwhile, is now faced with giving someone else Mewani’s portfolio in an attempt to redeem the $50m loss. Mewani himself gets to work at Balyasny after a six-month holiday and to start with a clean slate. There may be plenty more of this to come.
Separately, Bank of America’s M&A bankers haven’t had the best time of late. In the first quarter, they underperformed peers. In the second quarter, they didn’t do so well either.
Now, though, the moment of redemption. The Wall Street Journal reports that Bank of America is working on a $71.5bn deal between two rail operators (Union Pacific and Norfolk Southern) which should generate $130m in fees and that this is the largest fee ever disclosed on a deal.
Bank of America is not the only bank involved. Wells Fargo and Morgan Stanley are also involved, but having advised Norfolk Southern on its sale, BofA will seemingly get $130m itself.
At some point, Bank of America’s bonuses should benefit from this chunk. However, that point may not be the coming bonus round. BofA isn’t expected to receive the full fee until 2027, pending the deal’s success. In the meantime, it’s received $7.5m upfront.
Meanwhile…
Bank of America appointed Geoff Iles and Lukas Poensgen as co-heads of mergers and acquisitions in Europe, the Middle East and Africa. Poensgen was the bank’s head of M&A in Germany. Armin von Falkenhayn, country executive for Germany at BofA coincidentally disappeared. (Bloomberg)
How it is that hedge funds can pay portfolio managers (PMs) $100m. First, the PMs get 20% of their profits after expenses. If they make 5% on $5bn and there are $14m of expenses, that’s 20% of $236m=$47m. In some cases, though, the expenses are deducted directly from the PM’s profits, meaning the PM would ‘only’ get $36m. Then, they’re given budget to hire a team, payouts for lost income at previous employers, and additional incentives. So-called “accelerators” can be negotiated to boost the cut of profits that go to the portfolio manager too; these might apply to the first $1bn of profits. (FT)
JPMorgan hired Rohan Juneja, Ryan Lake, and Lauren Vitale for mid-market banking and says things are going really great. John Richert, who runs the business, said he plans to keep hiring until the end of the year. (Bloomberg)
Michael Roberts at HSBC says visa issues at the bank are manageable. “We don’t have a huge amount of visa holders.” (Bloomberg)
Mia Drennan set up debt administration company Global Loan Agency Services (Glas) in 2011. It now has £440m of assets under administration and ‘works on all types of debt transactions, including bond administration and project finance.’ Glas started out in recruitment working for Office Angels before moving to Citi and Bank of New York. (The Times)
There’s a new trend for firing people and then rehiring them a while later on lower pay. (Quartz)
Citi’s new building in Canary Wharf might include a rooftop entertainment area. (Bloomberg)
City of London grandee who died liked to race carriages. (Telegraph)
Have a confidential story, tip, or comment you’d like to share? Contact: +44 7537 182250 (SMS, Whatsapp or voicemail). Telegram: @SarahButcher. Signal: sarahbutcher.22 Click here to fill in our anonymous form, or email [email protected].
Bear with us if you leave a comment at the bottom of this article: comments are moderated intermittently by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. You must take sole responsibility for comments you post on this site. We will take reasonable steps to weed out anything that we consider to be offensive or inappropriate.
