Wall Street to Slash Bonuses, Eyeing More Sovereign Wealth Fund Opportunities
Posted on 12/18/2022
Some investment banks are slowing dealmaking activities due to weaker economic prospects and globally rising interest rates. Investment banks made record earnings after COVID-19 lockdown mandates were lifted. QE money facilitated growth in verticals such as SPACs, renewable energy deals within less-proven technologies, and cryptocurrencies. Increasingly, Wall Street investment banks continue targeting sovereign wealth funds, as well as cash-rich pensions. Together, these accounts create a steady source for direct investments within deal flow.
“At a faster clip, sovereign investors and colossal public pension plans are becoming a key source of revenue for global investment banks. We are witnessing an uptick in interest from investment bankers of our proprietary research.” says Michael Maduell, President of the Sovereign Wealth Fund Institute.
In a measure to contain a drop in profits, Goldman Sachs Group could remove up to 4,000 jobs, around 8% of the bank’s workforce. Goldman Sachs costly expansion into the consumer banking business, also known as Marcus, has financially burdened the firm. Furthermore, spending on technology and integrating operations has hindered Goldman Sachs. Joining its peers, Goldman Sachs sought to slash their bonus pool for 2022, with compensation leading the bank’s largest expense. Morgan Stanley, a rival of Goldman, made plans to cut investment bankers’ annual bonuses in Asia by as much as 50%. Not only are these cuts by Morgan Stanley felt throughout the U.S. and Europe, but they also encouraged the Bank of America Corporation and Citigroup Inc. to slash their bonus pools.
Goldman Sachs’ employee base grew past 49,000 people in the third quarter of 2022, up 34% from the end of 2018.
