What was hot and what was not over the past twelve months? Here's our considered opinion.
Anyone claiming that the private equity industry had anything less than a ravishingly good 2006 can only have spent the past year somewhere in a small hut devoid of modern methods of communication. Figures from Private Equity Intelligence indicate that US$365bn (186bn) of funds were raised last year, compared to US$293bn in 2005.
Guy Townsend at Walker Hamill says funds have been hiring everything from partners to associates: "Doing deals is now more difficult and you need more resources to find and transact them."
All the same, Townsend says private equity isn't quite the career choice for junior bankers as it used to be: "It's now one of three options - the others being staying put and earning a big bonus or joining a hedge fund." Associates in PE can now earn a 60k base salary, plus a 100% bonus, he says.
Most derivative products did well in 2006, but equity derivatives were an area of particularly ample hiring. Lehman, BNP Paribas and JPMorgan were among the big buyers of staff. Soc Gen, Bank of America and Wachovia also made additions. And Macquarie is said to be in the process of staffing an equity structured products business globally.
Search firm Christian & Timbers predicts bonuses for top equity derivatives traders, structurers and salespeople will be up 30-40% on 2005. Andrew Littlestone of rival search firm Kinsey Allen says bonuses will be up a more modest 25-35% across the sector.
Corporate finance boutiques rode to riches on the coat tails of the 2006 M&A boom. Figures from US boutique Greenhill suggest smaller firms were advisors in 32% of 2006 M&A transactions; in 2005 they played a role in just 11%.
The biggest splash was made by Perella Weinberg, a boutique set up in June by Joseph Perella, the Morgan Stanley banker who went AWOL in 2005; Perella's London office now employs '26 people and growing.'
Perella may be expanding fast, but Logan Naidu, a consultant at recruitment firm Cornell Partnership, says boutiques haven't found hiring easy: "Everywhere has struggled to find good people." Pay in big name boutiques is now 25% higher than investment banks, according to Naidu. Second year associates can command a base salary of 65k to 75k, plus a 200-220% bonus.
Emerging markets (Russia)
Mysterious poisonings haven't dented banks' appetite for exposure in Russia. Citigroup forecasts that Russian companies will raise US$38bn (19bn) in share offerings in 2006 and 2007. Credit Suisse, Dresdner Kleinwort, Goldman Sachs, Merrill Lynch and Morgan Stanley are muscling in on the action.
Taru Oksman Ison, a director at Principal Search, says Russia offers incredible opportunities. "The IPO frenzy is nowhere near abating. M&A is strong, debt platforms are improving, the opportunities are tremendous."
But with Russian banks in the market too, Oksman Ison says Goldman Sachs will be lucky to find the 60 bankers it's said to be looking for in the country: "With the best will [and the biggest cheque book] in the world, there are only so many professionals to go around."
Russia wasn't the only emerging market country for which banks recruited in 2006. BRIC countries (Brazil, India and China), plus Turkey and the Middle East were equally exciting, despite hiccups in the second quarter.
Mention the name 'Macquarie' and bankers may become misty-eyed thinking of the Australian bank's head-start in Europe's infrastructure sector. Many are trying to catch up. BNP Paribas announced plans to start investing in infrastructure in December. Babcock & Brown, Morgan Stanley, GE, Credit Suisse and JPMorgan also joined the brigade.
There was a healthy appetite for M&A bankers with an infrastructure focus. "Demand has been phenomenal," says Gareth Townshend, a consultant at infrastructure recruiter Stevenson James.
With oceans of money sloshing about, 2006 was a good year for anyone with aspirations to become a private banker.
HSBC, Barclays Wealth, Citigroup and Dresdner Kleinwort were among those hiring. Thanks to a shortage of established private banking talent, Barclays opened its doors to the private banking equivalent of every man and his dog (subject to interview). Dresdner Kleinwort pushed its private banking presence into the badlands of Manchester, Birmingham and Newbury; HSBC opted for Birmingham, Cardiff and Leeds.
Christian Sulger Buel, managing director of search firm Sulger Buel & Co., says experienced private bankers (with a record of gathering assets) can now earn US$1m. Without naming names, he also advises private bankers to steer clear of any institutions for which private banking isn't the be all and end all (read all those above) of their business model: their commitment to the market may be tested when things turn down.
Agree or disagree with our 2006 'good year' guys? Add your comment and let us know what you think.
eFinancialCareers' editorial team will now be taking a festive break before returning in the New Year. A very Merry Christmas to all our readers.