FEATURE: INVESTMENT BANKING
“Renaissance Capital, one of Russia’s largest
management and restructuring fi nancial
advice. Kohlberg Kravis Roberts was
investment banks, has recruited senior
originally a leveraged buyout fi rm, but now
off ers fund management and has a
broker-dealer arm. Th e multi-product
bankers from Goldman Sachs, Morgan
shops may take over much of the work of
the traditional investment bank.
Stanley and Deutsche Bank”
THE OUTLOOK
Th e next two to three years will be tough:
Standard and Poor’s predicts that
the hedge fund industry will be reduced Moelis & Co. and Perella Weinberg investment banking revenues for 2008 will
in size by anywhere between half and Partners are taking business away from the be down by between 50% and 60% from
two thirds,” he said. Morgan Stanley full-service banks. Moelis started in July 2007 levels. It also believes that sales and
estimates that hedge fund assets will 2007 and advised Hilton Hotels on its $26 trading revenues for will be down by 30%
shrink from $1.9 trillion in June 2008 to billion acquisition by Th e Blackstone to 40% and that 2009 will be little better.
between $1.3 trillion and $1.4 trillion in Group. Anheuser-Busch retained Moelis, When the dust settles, the services
December, and could shrink to $1 along with Goldman and Citigroup, to investment banks used to provide will be
trillion in 2009. advise on its $52 billion acquisition by divided between large universal banks,
In prime brokerage, European hedge InBev, which is expected to complete large private equity fi rms off ering
funds transferred assets from US before the end of 2008. investment and advisory services, smaller
investment banks to commercial banks M&A boutiques and, possibly, new
after the Lehman collapse, especially NEW ENTRANTS investment banks in emerging countries.
European universal banks such as Th e disappearance of the large US
Deutsche Bank and Credit Suisse. Hedge investment banks has opened up
funds are re-deploying their assets to opportunities for other fi rms to attract
PROFILE – FACT BOX
avoid over-dependence on a single clients and talent. Renaissance Capital,
provider and are reviewing their prime one of Russia’s largest investment banks,
brokers’ balance sheets and legal has recruited senior bankers from
structures. Even providers that have Goldman Sachs, Morgan Stanley and
gained clients are suff ering from lower Deutsche Bank. India’s Reliance Equity
leverage and lower spreads, which are and Russia’s VTB have aggressive plans
based on notional values. Huw van to build investment banking operations.
Steenis, who used to lead Morgan
Stanley’s coverage of brokerage, asset PRIVATE EQUITY
management and diversifi ed fi nancials in In the near term, fundraising and deals
Europe, predicted that investment will fall. “Th ere will be a decline in
banking revenues from hedge fund fundraising over the next two to three
businesses will drop by between 45% years and a shake-out of general partners
and 55% in 2009. Investment banks are by an order of magnitude and a 30% to
switching their sales eff orts to long-only 40% reduction in funds raised can
fund managers. However, long-only defi nitely be envisioned over the next
managers trade less often and less fi ve to seven years,” says Walid Sarkis,
profi tably than plain vanilla products. Bain Capital’s managing director. In the
longer term, the industry will split
MERGERS AND ACQUISITIONS between the traditional single-function
Suzanne Hsu, CFA
Career highlights:
Th ird-quarter M&A deals and revenues private equity boutiques, such as
Suzanne Hsu, CFA has worked in equity
remained strong, buoyed by bailouts and Charterhouse Capital Partners, and the
derivatives at Goldman Sachs and
emergency banking mergers, but bankers multi-product one-stop shops, such as
Bloomberg and was most recently a vice
expect a dearth of deals when the recession Th e Blackstone Group and Kohlberg
president in equities at Lehman Brothers.
hits. Th ey are targeting their stronger Kravis Roberts. Blackstone off ers
She can be reached at suzanne.hsu@
clients and building up their restructuring corporate private equity, real estate
googlemail.com
businesses. Advisory boutiques such as funds, marketable alternative asset
WWW.CFAUK.ORG PROFESSIONAL INVESTOR 21
19-20 investment banking.indd 21 27/11/08 15:52:04
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