Jon Michel Reflects on Current Conversations Across Corporate Advisory, Funds and Beyond
So what are the hot topics being talked about behind closed doors, or more likely in the cafes and foyers of our Sydney CBD office blocks at the moment?
We recently caught up with a highly regarded senior investment banker (career in global IB, founded a successful boutique then helped established a funds business to cap it off) and whilst shooting the breeze there were a few things in particular that he raised:
• The high fixed cost of junior & mid-level staff for Corporate Advisory businesses:
Global investment banks are currently paying well in excess of six figure starting salaries (plus bonus) for graduate hires alone, and this is putting pressure on labour costs - particularly for start-up boutique firms. This also includes mid-tier law firms, who are paying AUD$100k base salaries for their graduate intake
• Continuing trend of consolidation in the funds management industry as firms look to scale up their funds under management (FUM) targets:
We’ve seen some fund managers that have grown from $600m to $1.5bn of FUM now target figures as high as $5bn. However, we sense the more ambitious of these have longer term ambitions to scale up and reach $20bn. To do this organically is simply not an option, therefore the default tactic is to acquire other managers – i.e. buy up FUM – something we have seen and are likely to see much more of as part of this cycle.
• What the future holds for the ever-growing world of Private Credit:
With continued deployment (a constant challenge) if some of these investments start to sour/default, do these investors/loan providers have the capability to apply the workout/reconstruction skills that the banks have traditionally harboured to ensure value is not lost on these deals? And in lieu of a liquid distressed market, do these investors even have these teams/capability either locally or offshore? If not, is this an area of opportunity for specialist firms to step in? Or is it a competence that these funds would have to build out themselves?
This represents just a sample of some of the many hot topic points that are getting bounced around in the coffee conversations in the CBD. We’re keen to hear about any others you might be having.
