Standard Chartered’s move to shut down the bulk of its equity business is unlikely to result in a mass switch of the affected individuals to the buy-side, argued a Hong Kong-based recruiter.
Nor do investors expect it to have a big effect on the market, apart from the big swathe of people entering the talent pool.
The UK bank closed its global institutional cash equity, equity research and equity capital markets businesses yesterday as part of a broad restructuring that has seen it exit non-core operations, as reported by FinanceAsia.
The emerging markets-focused firm said the resulting 200 job cuts would fall mostly in Hong Kong, Singapore, Korea, India and Indonesia, with minimal reductions in the UK and US. The cuts should deliver about $100 million in savings in 2016, said StanChart.
“We’ve placed very few people from the sell-side into buy-side roles in the past few years," said the recruiter, who asked not to be named. “The preference [among fund management firms] is to hire people from competitors who have a track record and will hit the ground running.”
This is particularly the case for fund houses creating equity teams. “If you’re setting up a brand new equities desk, you will more likely want to poach an existing team with market credibility and a track record. So I’m not sure [the closure] will provide a big pool of accessible candidates,” he noted.
This goes for both investment and sales executives. The main clients of cash equity salespeople will be fund houses, which will want individuals with a book of institutional investor contacts, said the headhunter.
Of course, “good sales traders and salespeople will find a home”, he added. “And they had good people – from what I heard they were at least breaking even. Given they were at the build-out stage, that’s pretty impressive.”
And since Asian equities is a fiercely competitive – perhaps "overbroked" – it would be an attractive career step to move to the buy-side, where there is clear potential for strong growth, he added.
StanChart’s move came as a surprise to many, including those on the equity team itself, with sources suggesting the bank had kept its cards very close to its chest. Indeed, the hire of Stewart Callaghan from Nomura as head of equity research in December 2 shows how recently the decision must have been made.
One insider told AsianInvestor that the internal announcement yesterday was the first they had heard of it. “It was quite a shock – I didn’t see this coming.
“At the end of day we are not a bulge-bracket bank," added the individual. "We were just providing additional services to existing clients, and we felt we were doing okay.”
StanChart’s model for the equities business was to approach existing clients of the bank, rather than cold-calling. Equity salespeople were introduced by relationship managers from other areas of the firm.
The closure came in addition to the group’s plan to generate $400 million in cost savings this year. The announcement marks the end of an ambitious push into equities, which saw the bank splurge on acquisitions and hires in an effort to compete with larger rivals.
StanChart said it will continue to develop its capabilities in convertible bonds, equity derivatives and macroeconomic and fixed income research, and to provide strategic advice on equity financing.