It has not been an easy few years for the super-brained investment bankers that used to work on prop desks or create those products that now live on only in infamy, such as the CPDO squared.
A lot of them have gone off to work for the hedge fund industry and quickly realized that without the support of their bank’s trading machines and concurrent information flows they are as much a punter as any other market trader – producing great returns in some markets and terrible losses in others.
Some have stayed within the investment banking industry, not always to great effect. Take the team running JPMorgan’s chief investment office: they were a bunch of former prop traders, some of them the prime movers in the creation of the credit default swap market, who proceeded to lose billions of dollars through bets on that very same CDS market.
It doesn’t have to be like this. And in some banks, it isn’t. Increasingly, leading investment banks are getting their smartest minds to work on highly complex structured deals that actually deliver value to their clients.
Two examples stand out over the past few months.