Morning Coffee: Citadel’s new non-competes could have been a lot worse. Another domino falls for remote working

One of the biggest problems for all financial firms, but one which multistrategy hedge funds face more than most, is that the most valuable assets leave the building every evening. Hedge funds are a human capital business, and you can’t own humans.  The most you can do is to get them to sign a non-compete agreement; than at least you don’t have to put up with the maddening experience of seeing someone build up a franchise while on your payroll, then take it to one of your competitors.

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Hedge fund Citadel appears to have taken action to prevent this. Bloomberg reports that Citadel is imposing two year non-competes, "even on some analysts," and the more they earn, the longer the non-compete will be. The shortest it will be is one year.   

As several recruiters have pointed out, such a long notice period is a real obstacle.  While employers have got used to one-year non-competes, anything longer basically takes you off radar.  This is particularly the case for more junior employees who don’t necessarily have the proven track record which might persuade someone to wait. These are the junior employees that Bloomberg says are being hit with Citadel's two year non-competes. Citadel declined to comment to Bloomberg. 

It could have been worse, though (and indeed, as everyone means when they say that, it might get worse in future). There are suggestions of non-competes for interns at unnamed other firms. Last year, Florida passed a law allowing for four-year non-competes. That law permitted the four year non-competes to be imposed on employees in other states, if the company had a “significant nexus” in Florida.  At the time, it was widely speculated that this could mean that even New York employees of Miami-headquartered multistrat giants, like Citadel, might be affected.  So it could be argued that Citadel staff are getting off lightly.

It could also be argued that this is the ultimate champagne problem.  Long term employment stability is not exactly one of the things that one associates with a career in multistrategy hedge funds.  If you don’t like your job at Citadel and want to leave it, just lose of a bit of money and you’ll be out the door soon enough. Unlike a long non-compete, being fired for a nine-figure blow-up might even be considered a career positive.

Elsewhere, Barclays will be requiring nearly all staff to be in the office three days a week, from October.  (This is after a previous announcement that Managing Directors would be expected to be physically present four days out of five).  The banking unions are apparently “engaging constructively” after receiving “significant feedback”, but it’s hard to see this changing.

Two days a week remote working is actually still a pretty good deal by the standards of the industry.  The evidence as to whether in-person collaboration is actually any more efficient is still surprisingly mixed, and this kind of announcement is likely to be quite frustrating to anyone who has made plans around the previous regime. But really, if anyone had told you in 2016 that in ten years’ time bankers would be allowed to work from home on Fridays and Mondays, you would have said that they would be ecstatic at the perk.

Meanwhile …

There’s a carousel spinning in European equity syndicate – having lost Shameer Patel to BNP Paribas in June, JP Morgan have now hired Karim Malek from Kepler Cheuvreux (Financial News)

Few employment situations are as lonely or as unpleasant as being a management consultant who’s “on the bench” without a client engagement.  After trying to write a PowerPoint deck entitled “Will Write Slides For Food”, Jonathan Chan began to realise that it’s a better idea to use that time to build skills and internal relationships rather than appearing desperate. (Business Insider)

A version of Murphy’s Law is applicable to the fund management industry, which states that the moment when most attention is on you – after a big fund launch or an IPO of the management company – is always the moment when you happen to have a period of underperformance.  Bill Ackman of Pershing Square is robustly defending his process and the “frankly absurd” discount on his closed-end fund. (WSJ)

Someone is trying to use the Kalshi prediction market for hedging.  A Californian employer is working with Susquehanna to place a big bet on an “event contract” that pays out if an expected change in the labour laws applicable to goat herders doesn’t happen.  (CNBC)

What does your out of office reply say about you? “I will be checking emails intermittently”, for example, suggests that you’re easily bored with the people accompanying you on the holiday.  (FT)

One reason why some employers are reluctant to allow fully remote working is that there is a surprisingly large, efficient and well-funded operation of the North Korean state to get their operatives to use fake identifies, land programming jobs in America and channel much-needed hard currency to the regime.  And quite possibly to introduce all sorts of nasty things to the computer systems in the meantime. (WSJ)

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