Morning Coffee: Ex-JPMorgan banker's awkward vision of Goldman Sachs' future. Hedge funds may not be doing so well now
Long before William Cohan was a writer and journalist, he was an M&A banker and managing director (MD) at JPMorgan, Lazard and Merrill Lynch. Cohan has been out of the M&A game for over a decade now, but like any good MD he has some deal ideas in mind. And one of them concerns Goldman Sachs.
"The perfect merger candidate for Goldman has long been Bank of New York Mellon," declared Cohan in the Financial Times on Saturday. Goldman is a complementary fit with BNY Mellon, suggested Cohan: BNY has $1.8tn of assets under management and another $44.3tn of assets under custody or administration, which would be a perfect source of the sort of cheap capital that Goldman was hoping for from its loss-making Marcus digital bank; BNY doesn't want to be an investment bank; it owns Pershing, a leading Wall Street clearing house; and its CEO, Robin Vince knows Goldman - he worked there for 26 year in a variety of roles, including treasurer, head of operations and chief risk officer.
BNY Mellon has a market cap of $40bn, and there's no sign that Goldman is planning an acquisition of this magnitude. Nor is one likely to emerge at the firm's coming investor day on February 28th. And nor is it guaranteed that the Federal Reserve would allow this kind of move anyway.
But if Goldman does eventually decide that merging with a large source of deposits is its best way forward, someone at the firm may want to cast an eye over the reminiscences of Rick Bookstaber, the former chief risk officer at Salomon Brothers.
Writing in his memoir, Bookstaber recalls the clash of cultures when the "intellectualism and collegiality" of Salomon Brothers was forcibly absorbed into the Smith Barney retail arm at the time of Travelers acquisition in 1997. The move created the insurance-trading-retail brokerage-commercial-banking-investment banking behemoth that evolved into Citigroup today, but was excruciating for Salomon Brothers employees at the time. The old Salomon collegiality disappeared and life became more politically charged. Bookstaber says progress at the new entity was suddenly all about proximity to CEO Sandy Weill; there was a lack of sophistication; there was a lack of understanding of risk; initially it wasn't even possible to make overseas calls without permissions.
No one is saying that Goldman will make this sort of acquisition, but Bookstaber's experience suggests it wouldn't be an easy way out. GS has long lauded its rarefied culture, which may not survive a merger with a more staid pool of assets. Nonetheless, Cohan's vision makes a sort of sense; if things don't improve, Goldman people may have to welcome a different sort of colleague.
Separately, 2022 may have been a great year for multistrategy hedge funds but 2023 is off to a less healthy start - particularly for some hedge fund strategies. The Financial Times notes that when technology stocks rose on Friday many funds were caught in a vicious short squeeze, with short covering at its highest since November 2015. Goldman estimates that some quant funds lost 1.3% during the day as a result.
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