Two big pending bids to start: Offers for two of the UK’s biggest corporate names face a key deadline this week. Royal Mail’s owner and Anglo American are both edging closer to being sold, as overseas bidders vie for relatively cheap British companies.
And a US law firm conquering London to start: US-headquartered law firms have been steadily growing their footprints in London over the past 15 years, a trend that has accelerated post-Brexit. And Los Angeles-founded Latham & Watkins has come a long way in its push to dominate in the City.
In today’s newsletter:
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Readers weigh in on junior lawyers’ pay
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David Rubenstein’s daughter has an Alaska problem
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Hedge funds suffer from private equity’s backlog
What our readers think about junior lawyers making £150,000
We wrote last week about how junior lawyers’ salaries in the UK have jumped, with “magic circle” firms competing with one another — and their deep-pocketed US rivals — for talent.
We asked readers to send us their thoughts on the pay: we got everything from sweeping critiques of the UK legal system to virtual shrugs.
But one point that rose to the surface is how young lawyers’ pay in the UK compares to those in the US.
“The interesting thing about this story really is how well it points to the divergence between salaries in the US and Europe (including the UK),” wrote one former “magic circle” partner who asked to remain anonymous.
He added: “People in the UK are not really alive to quite how poor they have become compared with the US, even on a pre-tax income basis, let alone post-tax.”
Others were far more biting of the UK legal system in their responses. “Personally, I think this reflects the immorality of London law firms, their partners and their employees,” another reader wrote.
He pointed to the lack of commercial pressures for lawyers to keep their fees competitive, and the potentially questionable sources from which their wealth comes from in the City.
He added: “At a time when the importance of and need for good corporate governance is being emphasised and of increased interest in ESG, shouldn’t the competition (or other) authorities be looking at how London lawyers make their money and can afford to pay their new juniors £150,000 (when the current average salary is just under £30,000)?”
The US system is a different beast entirely, with associates often grappling with hundreds of thousands of dollars in debt from law school — potentially on top of a similar debt load from undergraduate studies.
Take Columbia University, one of the country’s top law programmes. For this most recent academic year, the school estimated students would pay about $118,000 for tuition and living expenses.
Multiply that by three years, and you’re potentially dealing with more than $350,000 in loans. Add on debt from undergrad, and you could easily be looking at half-a-million dollars.
Big Law salaries can soften that blow. First-year associates can expect to make $225,000 at top US law firms such as Cravath, Skadden and Kirkland. And that’s before bonuses.
“Debt is certainly in mind for students when it comes to selecting an employer,” said a career services adviser at one US law school, who asked to remain anonymous.
But those kinds of pay cheques don’t come easily, of course: “To be fair, the biggest firms are asking an awful lot from their attorneys,” the adviser added. “You’re on call 24/7.”
David Rubenstein’s daughter accused of improperly steering US pension fund
A kin of Wall Street royalty has found herself in an unenviable position.
The daughter of one of the most powerful figures in US finance, David Rubenstein, is at the centre of a governance dispute at Alaska’s $80bn sovereign wealth fund.
The fallout’s been bleak: there’s been a staff revolt, a political backlash and accusations of undue influence.
Gabrielle Rubenstein, whose billionaire father co-founded Carlyle, was appointed to the board of trustees of the Alaska Permanent Fund Corporation two years ago.
Managers there suspect that she’s tried to steer state assets to friends and family members.
She also allegedly sought the dismissal of a junior employee who left her father “unimpressed”, according to internal emails seen by the FT and interviews with people with direct knowledge of the fund’s operations.
Chris Ullman, a spokesperson for Rubenstein, acknowledged she had made about 20 referrals of external asset managers, but said she had followed the rules and had not exerted improper pressure. She also denied seeking to have anyone fired.
The clash between the US pension fund and Rubenstein has prompted concerns about the direction of the APFC, which manages assets amassed from Alaska’s oil resources. It also provides most of the state’s funding for roads, schools and police.
The leaked messages were first aired in local news outlet The Alaska Landmine, and reflect concerns among some fund executives that Rubenstein set up meetings between staff and her father and other asset managers connected to her.
Following her father, Rubenstein started her own private equity firm, called Manna Tree, which is based in Colorado.
Read the full story for more details on how she allegedly tried to push the fund towards alternative investments, concerns over who’s monitoring the money now and the political backlash brewing in the state.
Hedge funds reel from a lack of private equity exits
Institutional investors aren’t the only ones feeling the sting from private equity’s struggle to return cash: it’s also having a knock-on effect for hedge funds.
Pension plans, foundations and endowments don’t have enough cash to pile into the hedge funds, at least in part because of private equity’s slowdown in distributions, the FT’s Harriet Agnew and DD’s Will Louch and Costas Mourselas report.
Private equity’s sitting on a record backlog of 28,000 companies worth more than $3tn, with buyout-backed exits falling to $345bn last year — their lowest level in a decade, according to a Bain & Co report.
Part of the problem is hedge funds and private equity firms both fall into institutional investors’ so-called “alternatives” bucket, meaning they’re both competing for a slice of the same allocation.
“The lack of distributions out of private markets portfolios is going to impact the ability to make new commitments in other parts of the alternatives portfolio . . . that includes hedge funds,” said Sunaina Sinha Haldea, head of private capital advisory at wealth manager Raymond James.
A lack of exits for private equity has not only created a tough environment for existing hedge funds, but has also hit the momentum for new ones.
Former Millennium co-chief investment officer Bobby Jain has scaled back his day-one fundraising ambitions for his new hedge fund, Jain Global. It’s set to launch in July.
Sam Diedrich, a managing director at Partners Capital, said it’s emerged as a “real issue” for hedge funds.
“What you are seeing is a failure to exit on the private equities, and it’s kind of having this follow-on-effect where it’s leading to a lower velocity of capital flowing throughout all alternatives,” he said.
Job moves
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Abrdn chief executive Stephen Bird has stepped down after four years. A rebranding failed to restore the UK asset manager’s fortunes. He joined from Citigroup.
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Global Counsel and the Bernstein Group are partnering to launch a Berlin office, called Global Counsel Germany. In addition to his role at Bernstein Group as managing partner, Mohamed Hamzé will lead the office as managing director. Tom White will provide strategic oversight of the team’s integration with wider Global Counsel operations.
Smart reads
Oil brawl The chiefs of ExxonMobil, Chevron and Hess are going head-to-head over a tremendous 11bn barrels of oil and gas in Guyana, the Wall Street Journal reports.
Hollywood scheme One middling actor took the mantra “fake it ‘til you make it” too far. The result: the greatest Ponzi scheme in Hollywood’s history, the New Yorker reveals.
Shaq’s Reebok The basketball superstar Shaquille O’Neal is going all-in on Reebok’s return to the sport, The New York Times reports.
News round-up
Guyana’s president welcomes Chevron’s bid to buy into $150bn oil project (FT)
UBS rules out external successor to chief Sergio Ermotti (FT)
Elon Musk closes $6bn financing for OpenAI challenger xAI (FT)
Abu Dhabi conglomerate embarks on flurry of mining deals (FT)
SoftBank targets $9bn a year in AI investments while hunting bigger deals (FT)
Read the full article here