There are plenty of reasons why banks' prime brokerages, which service hedge funds, should not be hot. They include the fact that banks' appetite for dealing with hedge fund clients has dwindled. Or that prime broking is balance sheet intensive. And that MiFID II threatens to hit services like capital introduction and consulting, which will likely need to be charged separately under the new rules. Together, they mean prime hiring isn't exactly on fire, especially in Europe and especially among top tier banks. On Wall Street, however, there is activity: the Canadian banks are making some moves.
In the most recent of these, CIBC Capital Markets is understood to have recruited Mike Ginelli, former head of prime services for the Americas at Scotia Bank. Ginelli left Scotia seven years after joining from Deutsche, where he was global head of prime brokerage product development. Ginelli didn't respond to a request to confirm the move.
RBC is also hiring. Last month it poached Bank of America’s head of U.S. prime brokerage, Jonathan Yalmokas. Yalmokas will reportedly have a mandate to expand the RBC business when he arrives in September.
TD Securities has also been building its U.S. prime business after acquiring the prime brokerage platform of U.S. broking firm Albert Freed late last year. Led by David Santina, a former Goldman Sachs partner and Vincent Avena, a former managing director specializing in stock loans at Bank of America, TD’s prime business is expected to do big things.
“The Canadian banks all have balance sheet,” says one Wall Street headhunter, speaking on condition of anonymity. “They’re in a good position to expand and this is a great time to pick people up – there are a lot of disgruntled people sitting at the big firms.”
Canadians’ enthusiasm for building prime businesses comes after BNP Paribas, Credit Suisse, Citi and J.P. Morgan all praised the strength of equities prime businesses when they announced their results for the second quarter. Only Deutsche Bank, where equities revenues declined 27% year-on-year in Q2, complained of a pained three months in prime broking, and this was partly a hangover of hedge funds’ withdrawal from the German bank during its troubled period late last year.
Longer term, the Canadians may not be alone in bolstering U.S. prime broking. HSBC, whose business is based in London, recently parted company with Paul Hamill, its global head of prime finance since 2011. That business is now run by Karl von Buren, the bank’s former head of equity finance and delta one. There’s speculation that von Buren will expand HSBC’s European and Asia-centric prime business into the U.S.
BNP Paribas is also being eyed for expansion, but in the opposite direction. The French bank bought Bank of America Merrill Lynch's prime business in 2008, but the business is largely based in the U.S. and could be expanded in Europe and Asia.
One London prime services headhunter, also speaking on condition of anonymity, said BNP is expected to hire, along with other "tier two and tier three" banks which are trying to seize market share. Overall, however, he said prime broking hiring in London is, "very quiet." Among the big banks, the most active recruiter in the space has been Citi, which hired heavily after bringing in Adam Hermann from UBS as head of prime services in 2015, including most recently Matthew Bax from J.P. Morgan as head of sales for custody and fund services in June. "Prime broking hiring in Europe will come back," says the headhunter, "but right now there's really not much going on."