Morning Coffee: Citi's unexpected elevation of Andy Sieg. Private equity professionals lament the lack of carried interest

Sometimes, investment bank bosses steadfastly stand by the staff they have confidence in. It happened when Matthew Koder publicly gave Gary Howe his "full support" at Bank of America last year. It happened again when Citi CEO Jane Fraser declared in September that she was "very comfortable" with the outcome of an investigation into Andy Sieg's alleged poor treatment of senior Citi colleagues. Now it's happening again as Fraser puts her support for Sieg into action.

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Bloomberg notes that Sieg is the winner of a reshuffle of Citi's business announced late yesterday. Previously just the head of Citi's wealth business, Sieg will now be the head of Citi's wealth business and its US retail bank. In the process, he's gone from being responsible for 9% to 33% of Citi's revenues so far this year, and from 7% to 17% of its profits. Sieg's is Citi's biggest revenue line by far.

Fraser clearly likes Sieg. She said in September that he was delivering upon his "clear mandate" and seeming wants him to deliver some more. 

However, his promotion comes despite ongoing rumblings about behaviour. In late October, the Financial Times reported that some of the Citi women who felt badly treated by Sieg claimed they hadn't been interviewed by the law firm investigating the allegations. They allegedly included Naz Vahid, an MD who spent 40 years at Citi but who left last October.

Sieg hasn't commented on the allegations. His elevation suggests Fraser thinks there's nothing to the objections of Vahid and others, and that either they were interviewed during the investigation or that she deems such interviews unnecessary. "We looked at the matter seriously," she said in September. A spokesman for the bank previously described Sieg as a "hard-charging leader," so maybe hurting a few feelings is fine. Fraser herself hired Sieg, and even visited him at home to persuade him to join from Merrill Lynch. She's going to make the most of him.

Separately, private equity professionals are feeling poor. The Wall Street Journal has spoken to some and they are saying things like: "Private-equity employees used to aspire to own their own jets, but now they just want to be able to afford their kids’ private-school tuition."

The problem is carried interest, which used to be a major part of pay at private equity firms but which has sadly become "a theoretical windfall that may never materialize.”

In these new circumstances, the WSJ says PE professionals are deciding they might be better off at smaller sector-focused firms that have higher returns. The Financial Times observed last month that big pension funds, particularly the Canadian ones, have also become popular resting places. 

Meanwhile...

Citi CFO Mark Mason is stepping down in March. One of the most high-profile Black men in finance, he joined Citigroup in 2001, reaching CFO in 2019 before Fraser became CEO. Fraser said he initiated his exit. (Bloomberg) 

Tower Research is offering a "Software Vendor Agreement," or SVA, to some quants. This allows them to keep control of their intellectual property and brand while using Tower's technology, connections, and capital — and sharing any profits they generate. (Business Insider) 

Earlier this year, Goldman Sachs sent candidates a letter instructing them to steer clear of any digital assistance during interviews. (Bloomberg) 

Visa-holders earning more than £125k may be able to apply for indefinite leave to remain. That compares with five years under current standards and a new 10-year threshold that the government has proposed as a baseline for visa-holders. (Bloomberg) 

HSBC's Group-of-10 rates trading unit will be combined with its foreign exchange, emerging markets rates and commodities desks to form a new global macro division. It's being led by Volkan Benihasim. (Bloomberg) 

Google sent its UK staff this an email offering them a voluntary exit package. (Business Insider) 

A portfolio manager receives a volatility budget of $40m, and is told that the he has a limit of $30m to lose since he starts trading on January, 1. Is it possible to obtain an estimate of the probability that the strategy will hit the drawdown limit in the course of a year? (ByFire) 

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