Morning Coffee: UBS analysts complicit in their displacement by a simulacrum. JPMorgan's ominous hiring message
As a retiring equities analyst observed last week, equity research is not a job that's become any easier. It's a job that's become more grinding. Researchers in banks now compete against researchers in hedge funds, and there's limited enthusiasm for buying research as a separate product. Bookish types who enjoy writing long thematic reports on their sectors are out on the road touting their wares and marketing themselves to clients.
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But what if a robot could do the marketing bits for you? What if you could sit about writing reports and an ethereal version of yourself could pound digital pavements selling your stuff?
A version of this proposition seems to have been made to researchers at UBS, and they're all for it. The Financial Times reports that the Swiss bank has been "cloning" its analysts and using the clones to make deepfake style videos in which the clones talk about their research. The videos can be displayed to clients to dissipate the product. 36 UBS analysts have been digitally replicated so far. Functions including HR approved the replication process. All the analysts can sign off whatever their simulated selves are saying.
The progenitor of this research revolution seems to be Scott Solomon, head of global research technology at UBS’s investment bank. It's all about efficiency and clients, says Solomon. Clients want to watch videos. Analysts want to be efficient. AI simulations of analysts are the solution.
Sure, there have been teething problems. Voices can be "flat," particularly with "some accents." - "You might lose a little bit of what makes you, you”, admits Solomon. But who cares when efficient avatars are out there spraying research summaries across investor the equivalent of Tiktok?
Not UBS analysts, it seems. Whether they really had much choice in the matter while UBS is simultaneously cutting jobs is moot; recalcitrance in the face of efficiency is not a good look.
It seems a slippery path: once investors have become inured to the automated versions of their favourite grizzled researchers, they will be more receptive to artificially generated researchers of superior aesthetic appeal. Hey, AI can write the research too! And then researchers themselves can sit at home picking their noses and scratching their heads like human beings do, while selling their research recommendations on personal Substacks. It's happening already.
Separately, while JPMorgan's investor day yesterday suggested that the bank is still open to "targeted recruiting" amidst a "war for talent" with boutiques, less targeted recruiting is falling by the wayside.
Business Insider notes that JPMorgan CFO Jeremy Barnum said yesterday that as the bank uses AI, other hiring is being discouraged.
"At the margin, we're asking people to resist head count growth where possible and increase their focus on efficiency," declared Barnum. There's a theme here.
Meanwhile...
JPMorgan says investment banking revenues are down in the mid-teens year-on-year in the second quarer. Sales and trading revenues might rise in the mid-to-high single digits. (Bloomberg)
The next CEO of JPMorgan will probably be Marianne Lake, Doug Petno or Troy Rohrbaugh. (WSJ)
After downsizing its equities business in 2019, Deutsche Bank is back to winning German IPO mandates. "We have a very stable and dedicated team on the ground. Many seniors have worked together for decades.” (Bloomberg)
Justin Bull, a former Barclays banker, died of natural causes. “He was just a genuine person. His laugh would enter the room five minutes before him.” (Financial News)
The net capital held by electronic trading firms varies widely. As of 31 December 2024, Citadel Securities’ net capital was US$3.421bn. Jane Street reported as of the same date that it had net capital of US$1.22bn. Jane Street has a liquidity buffer of 15% of total traded capital. (Fi-Desk)
Are people who go into banking and consulting wasting their talent? "Many of these kids are spiritually a little bit lost. They don't really know what to do with their lives..... It's a way of postponing the real decisions, postponing actually becoming an adult, and that's very attractive if you are an insecure overachiever who has no idea what the hell to do with your life." (Business Insider)
Fridays became a busy work day for asset managers while everyone positions for what Trump might say at the weekend. (Bloomberg)
Brevan Howard, Rokos Capital Management and Discovery Capital Management had a good April. “No doubt there were unprecedented levels of market volatility last month, but senior traders at large macro hedge funds have played this game before. They have seen the pandemic, crashes and market rallies.” (Financial News)
If you want people to like you, reveal that you've remembered things about them. (BPS)
Elite selection mechanisms in banking include giving someone a temporary promotion (e.g. building and owning the financial model for a multi-billion dollar sell-side M&A transaction) and revoking it any time. Because banks expect high attrition in the first few years, it also doesn't matter if they burn a lot of people out. (The Diff)
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