2007 did not end well; 2008 may not begin well; but some things will be hot all the same. Which ones? Here are our predictions...
After banks made big losses by taking big risks which they failed to hedge adequately, it doesn't take a genius to see that risk specialists are likely to be popular going forward.
John Mack at Morgan Stanley is among those promising to elevate risk professionals to a new and exalted position. After a proprietary trading desk was single-handedly responsible (apparently) for a $9bn 4Q write down, chief exec John Mack promised to give risk management chiefs a direct line to the CFO instead of to heads of department.
Any risk professionals from Goldman Sachs who can claim a hand in steering the firm through the sub-prime minefield are liable to be particularly hotly pursued. In November, JPMorgan hired Barry Zubrow, a former co-chairman of Goldman's risk committee, as its new chief risk officer. And John Thain, ex-Goldmanite and new chief exec at Merrill, has promised to place particular focus on risk management as he attempts to take the thundering herd in hand.
Despite this, recruiters aren't predicting a gob-smackingly good year for risk professionals in 2008. "It's not going to be a phenomenal year," says Gail Connolly, managing director of PSD Group. "We won't see growth on the high levels of hiring in 2006 and 2007, but risk will hold its own. Most of the hiring is likely to be for replacement roles."
Large leveraged buyouts may have disappeared off the radar, but there are signs that infrastructure deals will rumble on. At the end of last year, CVC Capital Partners became the latest private equity group to plunge into the sector, promising to launch a $2bn fund in 2008. Macquarie Bank plans to raise $8bn to invest in infrastructure assets and Babcock & Brown has just raised a $3.2bn fund.
Infrastructure is strong because traditional infrastructure assets, such as roads, railways, airports, flood defences, ports, water-treatment plants and power plants are seen as relatively secure and are unlikely to be impacted by investor confidence, says the Wall Street Journal. However, less traditional infrastructure assets like waste disposal companies could find it harder to refinance.
Simon Stevenson, managing director of infrastructure recruitment specialist Stevenson James, says refinancing is liable to drive demand for infrastructure finance specialists.
The vultures have been circling for some time, and after years of famine 2008 could finally be the year in which they're treated to some carrion.
Distressed debt types are clearly excited at the prospect. Reuters quotes one anonymous distressed debt hedge fund manager as saying that 2008 will be "huge" and that "you ain't seen nothing yet".
Oaktree Capital Management, Blackstone and 3i are among those raising funds to help pick up toxic debts and headhunters say there are plenty more below the radar. "Between 18 and 20 distressed debt funds are being set up in London at the moment," says Lee Thacker, of search firm Silvermine Partners.
The good news is that these funds may provide a home for those turfed out elsewhere: "It's quite possible to move into distressed debt from leveraged finance or high yield," says Thacker.
The Middle East
As long as oil prices remain high, the Middle East will continue to lurch upwards. ADI, Abu Dhabi's main stock index, rose more than 35% in 2007 after falling 42% in 2006; the main Dubai index rose 27% over the same period and Schroders for one is predicting great things for next year.
With Europe and the US looking shaky, banks are predictably keen to get in on the game. Alex Cormack at Sheffield Haworth says demand is strong for investment bankers, private bankers, debt specialists, traders, salespeople, operations, risk management and asset management specialists (well, everyone really): "Most areas are in growth mode and banks have needs from MDs and heads of teams right down to analysts," he says.
All things green
Have a carbon footprint the size of a plimsoll? Walk this way. Banks are already brushing up against all things green, 2008 is liable to be the year when they go for a full-bodied embrace.
Emissions trading grew 155% between 2005 and 2007 and is tipped to rise further next year; wind energy is predicted to be the next thing to be securitized; Watson Wyatt has set up a new green investing group (a sure sign of things to come); and hedge fund Man Group has gone carbon neutral and invested in a private equity fund that recovers methane from Chinese coal mines.
Gail McManus at recruitment firm Private Equity Recruitment says renewables are one of the only areas venture capital funds are hiring for: "They ideally want people with a good commercial understanding of these businesses and some exposure to environmental issues." Ex-strategy consultants are apparently a popular choice.
Ok, Goldman CFO David Viniar has described his attitude to next year as "cautious" given the firm's navigation of "arguably the most challenging mortgage and credit markets in a decade", but there is one big reason to think that next year should be more manageable for Goldman than for its rivals, and that's the rosy hue created by the firm's recent paychecks.
In 2007 Goldman's average employee took home $661k (333k), around twice as much as his or her counterpart at Morgan Stanley and Lehman Brothers, and verging on three times as much as rivals at Bear Stearns (before some apparently generous stock allocations are taken into account).
Goldman's ability to generate gargantuan payouts in a difficult year is liable to make it bankers' destination of choice in 2008, regardless of whether it manages to carry on pulling rabbits out of its hat in the months to come.
The eFinancialCareers editorial team is taking a protracted Christmas break. We will be back in full force on January 8th. Happy New Year!