Morning Coffee: Junior hedge fund analyst who worked 18 hour days wins $1.8k in court. There are more private equity funds than McDonald’s

There are some victories which feel almost worse than losing. It’s pretty axiomatic that almost no one ever walks out of an employment court feeling like they’ve had a good experience, but the case of Jacopo Moretti, decided this week in London, is one of the worst ones we’ve seen.  

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Moretti, a former hedge fund analyst, was awarded a mere £1,286 ($1.8k), in compensation for a few procedural inadequacies in his dismissal. In the hope of bolstering his case, he'd made covert recordings of his colleagues.  But because he entered these Italian-language recordings into evidence for a British tribunal, he was ordered to pay £39,141 ($52k) in translation costs.  So he’s fifty thousand dollars down on the day, even before considering legal bills and lost earnings. It rather puts one’s own troubles into perspective. 

Moretti had worked for the hedge fund Davide Leone & Partners since 2011, having previously been the junior analyst for its eponymous founder when he worked at Farallon Capital.  He was apparently in the habit of working from 12 to 18 hours a day, and this work ethic, combined with the fact that the two men’s mothers were apparently friends back in Italy, helped him progress to some form of partnership in the firm.  (This partnership was apparently also the subject of separate arbitration, which doesn’t appear to have gone well for Moretti either).

It seems that Leone’s language and tone in expressing his discontent over Moretti’s trading losses and health problems might have been, in retrospect, more appropriate to a long-term friendship gone sour than a workplace performance review.  But the court seems to have found that the covert recordings demonstrated emotional and at times vulgar colloquial Italian, rather than harassment, bullying or discrimination. 

The main moral of the film “Titanic” is, of course, “don’t hit an iceberg”.  And in the same way, there might not be much more lesson to take away from the sad case of Jacopo Moretti than “don’t lose eighty-six million dollars”.  If there’s a hole in your portfolio where roughly 5% of the firm’s assets under management are going to be, there is not necessarily anything you can do to preserve either your job, or your relationship with the person who’s about to fire you, even if you have been his “right hand man” for more than a decade. 

But employment courts are all too often places where a career setback turns into a personal tragedy. It’s hard to see Jacopo Moretti working in the industry again, he’s lost money, he hasn’t got any vindication, and he’s spent two years of his life on this case.  Sometimes there is no alternative but to lawyer up, but we've covered dozens of these cases and take it from us; the odds are bad.

Elsewhere, if every private equity fund in the USA decided to go out for a McMuffin at breakfast, there would be at least 5,000 restaurants with more than one private equity fund eating there.  There are apparently 14,000 McDonalds’ and 19,000 funds, according to Alisa Wood of KKR – we have not independently checked this, but she ought to know what she is talking about.

As Wood says, this feels wrong, particularly in a world in which the usual cycle of raising money, investing and realisation has been interrupted, with lots of PE firms struggling to raise their next fund or to cash out from their previous vintages. Other participants talking at a recent Bloomberg event were more optimistic about the industry, particularly about the role of private equity and credit in financing AI infrastructure.  But it’s hard to see how data centres alone might support such a wide and varied fund universe, and investors might complain if asked to pick up the costs of private equity salaries when the underlying business is a shed with some computers in it.  It might be a hard thing to consider for people who have built careers around it, but the era in which investment banking was dominated by “financial sponsors” groups might be coming gradually to an end.

Meanwhile …

“There are countless companies in the US that nobody ever has heard about in Europe. And there are countless companies in Europe that very few in the US have heard about”. Alex Hecker, the new vice-chairman of global M&A at Deutsche Bank, bemoans the fact that there are so many great deals that people could be paying Deutsche to do, if they only knew.  He also notes that 20% of SP500 CEOs today are not American by birth, suggesting that a new generation might be more receptive to international bankers. (Bloomberg)

Although bankers have done their best to take a positive view of political risk in the USA all year, their patience is being tested by the government shutdown, which means that the SEC will stop processing IPO paperwork for a while.  Here’s the detailed plan of action. (Reuters)

Five former Deutsche Bank employees are suing Deutsche over the internal investigation which led to them being fired and convicted of false accounting and market manipulation with respect to Monte Paschi dei Siena (the convictions were later quashed). Noticeably, although there had been some earlier suggestion that they might name Christian Sewing personally, they’ve decided not to. (FT)

Grit, concentration under pressure and an understanding of how to recover from a loss; these are some of the personal qualities which make Goldman Sachs keen to recruit elite college athletes.  They also might have more interesting things to talk about than many undergraduates, and some of them will be useful ringers for corporate leagues. (Business Insider)

TD Securities employees were hoping that their parent bank’s new strategic plan would involve allocating more capital to investment banking, but CEO Ray Chun seems to have disappointed them. (Globe and Mail)

A new problem for high-speed trading quants – Tower Research is under investigation by the Chinese authorities who suspect them of illegally importing and installing high-performance chips in their co-located servers at the Shanghai Futures Exchange. (FT)

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