While major media outlets were focused on financial markets setting new records in 2019, securities trading firms were steadily trimming staff members throughout last year.
Tighter margins, an ongoing low-interest rate environment, moves to passive investment strategies, and a stronger than expected push to join the Digital Age are taking their toll on staff rosters.
One of the latest players to shrink its staff is the quantitative firm, AQR Capital Management, which according to recent media reports will be laying off from five percent to 10 percent of its approximately 900 employees across the globe. Yet, even as some staff members will be let go due to underperforming funds, the firm will be hiring in other areas to meet the changing needs of its clients and new business conditions.
“This continues to be a challenging time for the asset management industry. After conducting our annual review, we made the difficult decision to reduce headcount to balance the size of our workforce with the current needs of our clients,” Suzanne Escousse, principal and chief marketing officer (CMO) at AQR, tells FTF News via an emailed prepared statement.
“We remain committed to our investment philosophy, process and strategies, and believe that today’s action contributes to the long-term health and strength of our business,” Escousse says.
Oddly enough, AQR, started by Cliff Asness, who is the founding and managing principal, was cited last month by Pensions & Investments as “one of Best Places to Work in Money Management for 2019,” and won its third award in a row for that distinction.
But AQR is hardly alone in having to review its headcount.
Early last month, FTF News and other media organizations reported that Morgan Stanley was moving to lay off 1,500 staff members http://bit.ly/35g2G37. The job cuts represent approximately two percent of the investment bank’s global workforce, and are impacting the IT and operations departments, according to multiple media reports.
Overall, the cost of the layoffs to the firm will range from $150 million to $200 million, according to the reports. Beyond IT and Ops, though, the elimination of staff positions will encompass managing directors and other executives overseeing sales, trading and research operations. When contacted a month ago, a Morgan Stanley spokesperson declined to provide more details to FTF News.
The layoffs constitute a key aspect of a bottom-line oriented efficiency push that appears to be a common theme for retail and institutional firms, including household names such as Charles Schwab Corp.
Schwab officials acknowledged last year that they are laying off about 600 staff members or approximately three percent of its entire staff. The chief reason for the layoffs appears to be the ongoing ripple effects of low interest rates.
By contrast, HSBC over the summer had a major executive shuffle and began a layoff of approximately 4,000 staff members as volatile market conditions compel the firm to rein in spending as it searches for a new way forward http://bit.ly/2KpyNoL .
In particular, Ewen Stevenson, the group chief financial officer (CFO), told industry analysts this past summer that the bank will eliminate more than 4,000 positions, a revelation that confirmed initial reports by the Bloomberg news service. In addition. Stevenson told The Wall Street Journal that as many as two percent of the firm’s 237,685 staff members, or 4,754 positions, could be eliminated via layoffs or attrition.
Like Morgan Stanley, senior executives were apparently among the first to be let go.
At the time, FTF News reached out to HSBC public relations for clarification on the actual number of staff to be let to, and the reasons for the staff reductions. But there was no response from HSBC.
Also, this past August, Citigroup began laying off hundreds of its equity and fixed-income operations staff due to shrinking revenues from trading http://bit.ly/3059Ghv.
The bank also began consolidating its equities and prime, futures and securities Services (PFSS) businesses into a new division, the Equities and Securities Services (ESS) group that will offer more integrated services to Citi clients. Throughout the rest of 2019, the bank cut trading and back-office staff positions that were supporting its stock- and bond-trading groups.
The staff cuts were slated to encompass 100 job losses in the equities area, an amount that is nearly 10 percent of the staff for that division. There were approximately 80 jobs lost at Citigroup’s London operations, according to a Bloomberg report. Citigroup’s revenue from both stocks and bonds trading shrank by 5 percent, which preceded the layoffs.
Citi officials declined to comment upon the media reports.
Industry observers note that Citi’s layoffs reflect the overall drop in revenue from trading, a trend impacting other global banks such as Deutsche Bank, which took a dramatic step this past July by severely cutting back its investment banking activities.
The German banking giant has been cutting 18,000 staff members in phases, shaking up its executive roster, and implementing aggregate charges totaling €3 billion ($3.4 billion) that began during the second quarter of 2019.
Despite the layoffs underway elsewhere (and to come), there may be a few rays of hope.
For instance, Citibank is apparently preparing to hire 2,500 software programmers in 2020 — also known as coders — to support the investment banking and securities trading groups within the bank, according to a recent Bloomberg report.
FTF News reached out to Citi media representatives for confirmation, clarification and more details, but there was no response by deadline.
At first glance, though, these layoffs among major players and Citi’s outreach to coders could be seen as evidence that trading firms large and small are moving fast toward a more digital future.
These developments could also mean that IT and Ops staffs and their managers will have to move faster to stay ahead of this shift.