In this issue, we do a deep dive into deciphering job titles at alternative investment firms particularly as 2024 hiring plans continue to be solidified. As we settle into Q1, here are some other topics we’ve been following:

Banking Analysts Embrace On-Cycle 2.0: A Holiday Gift of Private Equity Opportunities

Over the holidays, some lucky investment banking Analysts didn’t just unwrap Stanley Cups and AirPod Maxes; they also found themselves on the brink of securing offers from private equity firms. This opportunity became tangible with the advent of a second wave of on-cycle recruitment, dubbed ‘on-cycle 2.0,’ which kicked off at the tail end of December and is still ongoing. On-cycle, the intense period when private equity firms recruit investment banking Analysts for Associate PE positions, had its first wave in July 2023 before many bankers finished training. In our Q3 2023 newsletter, we predicted that another wave of on-cycle was coming for this year’s Analyst class as had happened in the prior class, given the process commenced extremely early this year. Our forecast proved accurate. However, many other investment firms remain on the sidelines, waiting to get a sense of Q1 markets and fundraising as the Fed has opted to keep interest rates flat, and are planning for more immediate, “off-cycle” hires in 2024.

 

 Non-Compete Legislation Update

In our Q3 2023 newsletter, we reported on upcoming proposed non-compete legislation and how it may affect the broader finance industry.¹ We’re closely monitoring the topic, and wanted to share the latest developments. In June 2023, the New York State Legislature proposed a bill that, if it was passed, would have banned the enforcement of non-competes within the state. Governor Kathy Hochul vetoed the bill on December 22, 2023, stating her aim is to “[allow] New York’s businesses to retain highly compensated talent” in a “highly competitive economic climate.”² Furthermore, the Federal Trade Commission has proposed a nationwide ban on non-compete agreements, although this measure has not yet been ratified. For the moment, non-compete lengths continue to be a major factor in hiring investment professionals from peer firms.

 

Diminished Rewards: The Wall Street Bonus Downturn

Bonuses for Wall Street professionals seem to have taken a hit. Despite overall record profits at the big banks, investment banking divisions have seen a decrease in revenue, bonuses that are flat or down, and layoffs. Some bonuses have fallen as much as 25% for investment bankers,³ with some calling the numbers “straight-up disrespectful.”⁴ This downturn can likely be attributed to a recent decline in investment banking revenue, exacerbated by elevated interest rates and the sluggish deal flow resulting from ongoing economic and political crises such as the conflict in Ukraine. Alternatively, these diminished bonuses may be interpreted as a return to normalcy, with the exceptionally high bonuses of 2021 reflecting an unusually prosperous year with limited costs, as explained by Richard Handler, CEO of Jefferies: “[in 2021] it was COVID, stimulus, free money, no cost because no one was traveling.”⁵

Anecdotally, we’re hearing from the buyside that it was a “good but not great” year. We’re in the midst of surveying large numbers of investment professionals within credit and public equities and will have data-driven insights in a few weeks. As one HR manager at a top credit fund explained, “We tried to look after ‘key talent,’ but we’re aware many will be disappointed and we expect some turnover” while other strategies such as secondaries, which achieved the second-highest annual tally for the market,⁶ likely continued to pay investment professionals competitively. Meanwhile, firms remain dynamic and adaptable. Some private equity firms are adjusting their strategy at the beginning of 2024, focusing on a “sell-now-buy-later” approach. This involves capitalizing on market conditions to sell assets at attractive prices while exercising caution in deploying new capital and waiting for better opportunities. Despite these uncertainties, there seems to be a renewed sense of confidence in the long-term, evidenced by many firms hosting luxurious offsites at Aspen and the Bahamas.

We’re wishing you a fantastic 2024!

The Odyssey Team

¹ Odyssey is not an employment law firm, and our reporting on this topic is not legal advice.

² Cardin, Kelly and Diane Saunders. “New York Governor Vetoes Noncompete Ban Bill.” Ogletree Deakins, 26 Dec. 2023.

3 Bauer, Justin. “Banker Bonuses Are Down Again—but It Stings This Time.” The Wall Street Journal, Dow Jones & Company, 28 Jan. 2024.

4 Moynihan, Lydia. “Wall Street bonuses fall short of already-low expectations: ‘Absolute s–t.’” New York Post, 25 Jan. 2024.

⁵ Ibid.

⁶ Lazard 2023 Secondary Market Report, Lazard, 1 Feb. 2024.