Conflicted about whether you want to work on the sell-side or the buy-side? Get a job at Goldman Sachs and you can do both, apparently. The firm has reportedly given its investment bankers the keys to a venture capital portfolio worth several hundred million dollars that enables them to invest in startup companies.
The unique arrangement allows Goldman bankers to double-dip through their relationship with startups. They can do their traditional job – advising on potential M&A deals and underwriting IPOs – while simultaneously taking a financial stake in a company they know well using the firm's money. Conversely, bankers can leverage the firm's investment in a startup to create relationships with an eye on future deal-making.
For Goldman bankers, their part-time gig has sometimes been more lucrative than their full-time one. The firm made around $15 million advising Spotify on its IPO, according to the Wall Street Journal. Meanwhile, Goldman made $350 million in paper gains from its initial investment in the company, representing a seven-fold return.
The banker-led fund, distinct from those run by strategy and asset management groups at Goldman, appears to be doing fairly well based on some of the names included in the report. Goldman bankers got in early at Uber, Dropbox and Square, and have made more recent investments in lesser-known Ripple Foods and credit card startup Marqueta, according to the report.
The arrangement provides ancillary benefits to Goldman bankers outside of the opportunity for bigger commissions and better leads, if those weren’t enough. Investment bankers can also claim experience moonlighting as a VC, further padding their resume if they ever wanted to make the actual leap to the buy-side.
The revelation about Goldman bankers' supplementary role prompts one clear question: why don’t more banks follow suit? There’s money to be lost, of course, but there’s also the issue of potential conflicts of interest, something executives at Goldman and Spotify played down in comments to the Journal. Plus, there is the possibility that other firms prefer to keep their investment bankers focused on their chief responsibilities. Either way, this appears on the surface to be a big win for bankers at Goldman Sachs.
Elsewhere, the FT just announced its latest ranking of the best master’s in finance programs. The top spot on the list went to HEC Paris, where you can earn you degree for just around $35k. In comparison, tuition for the program at MIT’s Sloan School of Management, ranked seventh on the list, will cost you north of $100k. Both programs provide similar salary expectations. The average graduate from each earns around $140k three years after getting their degree.
Citigroup takes bigger trading risks than any other bank. They put around $93 million at risk every day, around 20% more than Goldman Sachs. (Bloomberg)
RBC plans to double its headcount in Frankfurt as part of the Canadian bank’s post-Brexit plans. (Handlesblatt)
Credit Suisse is scaling back plans for aggressive expansion into Ireland, instead focusing its post-Brexit plans on Madrid and Frankfurt. (Independent)
It’s not a good year to be working at a hedge fund that concentrates on cryptocurrencies. Crypto funds are down around 35% on the year. (FT)
Out-of-work traders may want to take a look at startups. Their experience is good preparation for startup culture. (Cue Macro)
Merrill Lynch is considering lifting a ban on commission-based retirement accounts, returning another source of compensation for brokers. (WSJ)
Banks’ efforts to increase racial diversity don't seem to be working. The number of black employees at banks like J.P. Morgan and Citigroup keeps falling. (Bloomberg)
New mothers typically experience a dip in earnings. New fathers, on the hand, tend to see an increase in pay, known as the “daddy bonus.” (NY Times)
Uber has developed AI-based technology that can tell drivers if passengers are drunk before choosing to pick them up. (Metro)
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