Morning Coffee: 30-something ex-Credit Suisse traders now bitcoin billionaires. The boutique bank that cares about your marriage
In the world of crypto investments, some stories seem like they might be a little bit too amazing to be true. Then you check them out a little bit, and it turns out that they’re significantly more astonishing than you initially thought. For example, Kyle Davies and Su Zhu of Three Arrows Capital. They’re described in the latest profile as “former Credit Suisse traders” who have known each other since high school and set up a hedge fund which now owns several billion dollars’ worth of crypto assets, with a strong suspicion (which the principals will neither confirm or deny) that a very significant proportion of the fund’s assets under management is their own personal wealth.
If you didn’t see the incredibly youthful-looking photos, you might think that this a banking tale like that of Mike Novogratz – seasoned market veteran spots an opportunity and makes his fortune. In fact, it’s much stranger. According to their respective LinkedIn profiles, only Kyle Davies was actually a “trader at Credit Suisse”, spending a bit less than three years there from 2009 to 2012. Su Zhu, on the other hand, did two years at ETF specialists Flow Traders and nine months at Deutsche (according to his Twitter, he interned at CS in Tokyo in 2007, so he may have worked there too, but not for long). Given that both men are aged 34 now, they would have been 21 in 2008, so there’s just no space for them to have had many jobs before the ones listed.
In other words, both of the Three Arrows principals went through an analyst program and then left investment banking; they worked on trade desks, but it seems unlikely that they would have been given risk limits much larger than a dozen lattes. But on the other hand, the hedge fund they formed in 2012 (at the age of 25) has a consistent internet footprint; here it is being profiled in 2014, as an emerging markets specialist with a staff of 24. Keeping a fund of that size going at all for nearly a decade is a definite achievement; executing such a successful pivot in styles even more so.
Eagle eyes might detect that the “high school” where the Three Arrows founders met was in fact Phillips Academy, a very very elite boarding school in the USA. This suggests that one or both of them has a very rich family, although it’s impossible to say for sure as both surnames are very common. If so, it makes the story a little bit more comprehensible to presume that the main investor is family money; without that, we’d be struggling to understand how two twenty five year olds with only a few years’ sell side experience were able to raise a fund big enough to cover its operating costs at that kind of scale.
Davies and Zhu have apparently “resisted talking about their fortune and recommended on social media that crypto billionaires do the same”, but are happy to appear on podcasts, interviews and conferences talking about favourite trades and assets. However rich they were, they are presumably somewhat less so than at the beginning of the week, but it’s pretty likely that they’re doing better than anyone else in the 2007 intern class at Credit Suisse. Certainly, as Su Zhu points out, if he had taken CS stock options at $70, they would have underperformed Bitcoin.
Elsewhere, Eos Deal Advisory was out ahead of the curve when it came to noticing that the investment banking industry’s working practices were more than a little bit unhealthy. They had something of a head start; founding partners Maggie Brereton and Ina Kjaer set up the business after resigning from KPMG in protest of its handling of a bullying scandal in 2019 with a mission to avoid creating “So much burnout, so many divorces, so much alcohol abuse”. Despite the pandemic, they’ve now managed to generate enough business to put their principles to the test when it comes to making people work long hours.
And they’ve been … partially successful. Apparently late nights are “periodic and deal-led, rather than the norm” and Ms Kjaer says “I used to work every single weekend. Now, it's not that I work no weekends, but it's the exception”. Employees aren’t filling in time sheets and apparently there are no bonuses based on individual performance. Even more nerve-wrackingly, they are giving clients short reports focused on the information that’s actually important, rather than churning out big and impressive-looking page counts of Powerpoint. Unsurprisingly, quite a few corporate financiers cannot stand the stress of looking at thin pitchbooks and haven’t been to cope with working there.
Are there really that many anti-vaxxers in banking? Just in case there are a few, lawyers have been looking into the difficult privacy and human rights issues relating to whether firms can demand proof of vaccination before people return to the office. (Financial News)
“I’ve always felt that litigation isn’t an on/off switch – it’s a balance”. Lawyers have such an understated way of sounding threatening. London hedge funders can feel nervous that Seamus Andrew, founding partner of Ontier, has set up a boutique aiming to address the growing “hedge fund dispute” market. (Global Legal Post)
Another bank sets a date – Credit Suisse New York has told people to get ready to be back in the office from 14 June. (Business Insider)
In West Africa, the arrest of phony investment banker Dominic Joshua has forced the BBC to put out scam warnings on its pidgin English website. “Shine and chook dia eye well-well to investigate, see weda dat market operator dey genuine and proper” (BBC News Pidgin)
The state of Florida claims to be receiving thousands of New Yorkers every week fleeing the “financial train wreck”. It seems from the statistics that most of them are empty-nester retirees rather than bankers though. (Business Insider)
They always say that when there’s a question in the headline the answer is always “no”, and asking Wall Street Journal readers “Can You Pull Off a Shorts Suit Like Lebron James?” does not feel like it’s going to be the exception. (WSJ)
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