SPEAKER_02 0:03

The OneSearch Podcast. Insights and opinions on the subjects that matter. In global infrastructure, financing and investment. With the OneSearch Credit Practice.

SPEAKER_00 0:22

Okay, so this is podcast four in the series. The OneSearch Credit Practice podcasts being recorded on Friday, the 19th of March. I'm here, joined by Microsoft Teams by the most diverse credit practice in infrastructure recruitment, that's for sure. And we have a number of issues to wrap up. We've talked about in the initial three podcasts, some more interesting than others. I think you'll agree. Certainly the last one was a bit dull. It is what it is. What can we do? Namisha Sharma has promised us some scandal uh and sensational new claims in in this fourth podcast. Do I recall correctly, Namisha?

SPEAKER_05 0:59

You do.

SPEAKER_00 1:00

You're gonna be dishing some some dirt?

SPEAKER_05 1:02

I'll be dishing some dirt for sure. Yeah, it's gonna be an interesting one, this one.

SPEAKER_00 1:05

Good, good to hear it. Mercedes, have you got any scandalous remarks to make or accusations? Uh sort of slurs that you might make around the industry?

SPEAKER_03 1:13

Never, never.

SPEAKER_00 1:15

Well, look, try and try and think, try and think some up. Say something about Asifka 4. And G, joining us in New York. How are you today?

SPEAKER_01 1:22

I'm good. It's a it's a good day in New York, no snow.

SPEAKER_00 1:26

You got anything to say? Uh anything that you think could just keep people interested? Bit of gossip?

SPEAKER_01 1:30

I always have gossip.

SPEAKER_00 1:32

Is it work-related?

SPEAKER_01 1:33

I have work-related, I have non-work-related. Whatever you want to hear.

SPEAKER_00 1:37

Oh, we'll just stick to we'll stick to the work-related stuff today, I think. So, look, we're gonna talk about issues of compensation between banks and debt funds, a huge topic. Let's look, let's get into that first. But just to cover the plan here, we're gonna talk about being a material risk taker versus not being a material risk taker. What are the effects of that on your compensation? We're gonna talk about COVID. I think that's where Namisha Sharma's got some. She's waiting to uh reveal her her views. Um, and then we're gonna talk about um attraction and retention, just broadly. What are the key mechanisms being used by by banks and uh uh and fund platforms as well? So let's get into it. Banks versus debt funds. Clearly, this infrastructure debt market, certainly as I've known it for all the years that I've been recruiting into it, for many, many years, it was just about banks. There were no debt funds. The oldest infrastructure debt fund was AMP Capital. They were around good old Jerry Jennings back in the day, started his first job in the in the same week that I was born in September 1978. Uh, good old Jerry uh used to run that team there for AMP Capital, and that was an infrastructure debt fund before there were even before there was even such a thing really as an infrastructure debt fund. Nowadays it's very different. Post 2012, Alliance was a big pathfinder. Uh, many others followed in senior debt. More recently, we're seeing a huge emergence of uh more, you know, more aggressive, uh risk-taking, equity-like uh credit investors in the sort of mes debt category. But how does this affect compensation? What is the rule of thumb when it comes to working for a bank or a debt fund? Namisha, where do candidates prefer to work? Do you have people working for debt funds clamoring to get to a bank?

SPEAKER_04 3:27

No, I don't. The general consensus, I would say, is that everyone wants to work for an infrastructure debt fund. What people perceive it to be is a better work-life balance and better compensation. Um, I think those are the two things that most candidates in the banks believe it to be. And I think in most cases it is true. Um, there are outliers that don't pay as well as you might think. Um, they are actually in line with the banks. Um, but I'd say general sort of overview in terms of compensation in the debt funds is that it's at the mid to high level of uh the banking brackets, I would say. So when we talked on it last week, we were saying sort of 120 at the at the lower end of a director up to 200. So I'd say roughly around 150 to 200 is normally where it comes in at at the debt funds.

SPEAKER_00 4:20

And bonus to pound sterling, of course, in London. Yeah.

SPEAKER_04 4:24

Yeah. Um, and then bonuses again are at that top end, um, between sort of 60 to 100% um within the funds. Uh, as I say, there are outliers to this. Um, so not every debt fund uh pays sort of extremely well or at the top end of the market. But I do think that kind of work-life balance thing also is quite a factor for a lot of people, uh, particularly those banks that do a mixture of lending and advisory. Um, their hours tend to be a lot worse than the infra debt funds out there.

SPEAKER_00 4:57

Can it can anyone else come up with any uh any sort of the reasons that people uh are keen to get out of banks into debt funds other than compensation?

SPEAKER_03 5:06

Uh yeah, I mean, not at the I mean, generally, I mean, I don't know if you guys have been hearing about Goldman Sachs um in the in the last 24 hours that their analysts have basically um you know complained about working 95 to 100 hours per week. So going back to what Nami was saying, it's just uh the it's not that it's just the work-life balance, and a lot of them are plotting to leave if things don't change. So um, you know, the the work-life balance is is a big factor now.

SPEAKER_00 5:43

And is it realistic? The um, you know, people who think, oh, if I leave a bank, I might have a better work-life balance in a in a debt fund. Is that realistic?

SPEAKER_03 5:52

I I think so. I mean, I don't think that they want to work less than 70 hours a week. You know, I think that that's what people might think is is decent, and um maybe a bit more of it's um, you know, if if there's a lot of deals going on. But um I we've we've worked with um a couple of funds who have shown to to be flexible. So I think that things are changing now. So I think that the the particularly the young people are are looking for that flexibility.

SPEAKER_00 6:29

Look, I will say this. I've got a lot of experience now, nine, nine or ten years experience of of placing people into into infrastructure debt funds. I can't remember anyone ever saying, you know what, I've made a bad move, I'd I'd rather be back in a bank. I I do have lots of examples, and um, I'll give you a good one. Jorge Caminha, good friend of mine at Alliance, who and but but this same story is true of many. But after after um helping Jorge make that move, met up with him for lunch six months later, and I didn't recognize him, and genuinely look 10 years younger, and I see that in people who make that move quite a bit. Uh, because you know, why is that? It's not just because they I mean, clearly having a better work-life balance, perhaps, but frankly, within banks at the senior level, I see people who become a victim of their own success. The more senior they get, the more bureaucracy they get tied into. They're not at the coal face doing the deals that they want to be doing. Uh, they're kind of managing people, getting involved in admin and bureaucracy. In terms of the regulation that also applies to uh institutional investors and debt funds, but not in quite the same way that it does to the banks. It's stifling, it's frankly depressing in terms of the deferrals on bonuses, which again are far more, especially if you're a material risk taker, which we'll come on to, far more onerous within a bank than than in debt funds. And if you're an independent debt fund, frankly, you can pretty much do what you want in that sense. And people who get away from that and go back to the coal face, as it were, in a um, you know, a much smaller team, often a completely independent business, doing what they love, doing what being great at doing deals got them there in the first place, and going back to doing that. I just see people that are happier people. I genuinely do. And um, you know, um banks, HR departments won't want to hear this, but that is, I think that's a uh a real a real problem. And and and I think that direction of travel is set to continue, and we just see year on year that erosion of the banking project finance market, that balance between the banking and the that sort of the buy side, if you will, uh continuing to shift. And I think in the long-term future, if it if that uh direction continues, we'll actually see more money collectively deployed by buy-side institutions than banks.

SPEAKER_04 9:02

Yeah, no, I I definitely agree. I think your point about um sort of that the more senior you get in a bank, the less you do with what you love. You move away from the deals is is sort of exactly where I think the issue kind of occurs and why you see people moving away from it because why why are they in it? Why are they sat on an origination team in a bank? Because they love doing deals, they love originating business, and um, the more senior you get, you just end up with this admin pile. Um, and and as you say, so so much kind of internal politics, which when you move to a sort of a more of a buy-side institution, uh you still have it, but it's it's far less um than than some of these sort of big, big banking institutions, particularly those of certain certain nationalities, um, are probably worse than others.

SPEAKER_00 9:53

Absolutely. To name to name no names, cast no aspersions on any uh uh of the fine uh banking nationalities in in project finance. On that point, then uh you know the material risk takers, you know, has be has has become a thing in recent years. I think a theme that we're going to come on to on the on the next point when we get to COVID is how certain banks perhaps use uh situations or uh rules or regulators to uh you know selectively and interpret these things selectively for their own ends. But and and I think that's also true in my view when it comes to this concept of material risk takers, because really this is something that um has an impact on the compensation of senior project financiers. Different banks seem to interpret it differently, who within their business is a material risk taker. But once you are categorized as a material risk taker, the bank uh then is obliged to show that they are effectively forcing you to take a longer-term perspective, reducing your ability to take, you know, to gamble for short-term personal gain. So they can say to you, hey, really sorry, your bonus, which was deferred over, you know, maybe you would get, let's say, half of your bonus in cash, the other half deferred over three years. Now we're going to be deferring the vast majority of your bonus over five years or even seven years in some in some cases. And that is becoming rife across the infrastructure debt space without any doubt. For me, it's another reason for people to leave banks and go to debt funds where deferrals are not in the main anywhere near as long. That said, one side effect of becoming a material risk taker has been that material risk takers have been able to get their base salaries drastically improved. I've seen some instances of material risk takers being bumped up, MD level material risk takers having their basis doubled from 300 pounds sterling up to 600 pounds sterling, for example, to counteract the weight of the long tail on their deferred bonus. It can be a double-edged sword, but one thing I notice is that banks, the way they present that information to the to the material risk taker is look, sorry, governor, my hands are tied, the regulator has made me do this. Uh, what a shame. We're now going to have to pay you your bonus over several more years. You know, so that's one thing I notice. The other thing I notice is the inconsistency of the way this rule is is applied across banks. You you see people that are taking absolutely no less risk than their counterpart in another bank over the road, yet that put one of them is a material risk taker and the other one isn't. So that's my little sermon on that. Uh, I don't know if if you guys have got any any comments or what do you hear from people in the market about about the the concept of being an MRT. Does anyone ever want to be?

SPEAKER_01 13:20

Um I was gonna ask you that. Actually, I want your opinion on this, Dan. I guess.

SPEAKER_00 13:25

Come on, I've spoken enough, G. You you tell us.

SPEAKER_01 13:27

No, I mean look, listen, clearly there's pros and cons, but you told us sure, they double your base salary, but then you have to wait years to get your bonus, which means these people are basically golden handcuffs. If they ever want to leave where they're at, they're pretty much stuck. I mean, I don't know. I don't know about you guys. I don't I wouldn't aspire to be that. I mean, yeah, it's great for compensation, but you're kind of like a trapped bird with all the food that you can have for the next couple of years. But like, I can't leave the cage. I don't know. I don't I don't get the appeal.

SPEAKER_04 13:58

Makes it pretty, pretty difficult to leave. I guess it's it's kind of a good retention tactic, but then at the same time, I think for infrared funds that want someone, they'd likely pay out on a proportion of the bonus anyway. I think it almost just makes them unmarketable though, if they're on this massive base salary. What what who's going to be able to compete with that um in the market if it's completely over? So I yeah, I don't really see it as a massive advantage, to be honest, because you're basically stuck where you are for the foreseeable.

SPEAKER_00 14:32

Yeah, I don't I I I you know, I guess the answer to my own question is that I I I don't know anyone who says, I've never heard anyone say, Great news, Dan, they made me an MRT today. I think you know it is it is seen as a limiting factor. And I think even if you base even if in the extreme case, you know, the the the guys who've had their base salaries doubled, they don't expect then to move jobs and for for that to be, you know, for someone else to pay them that. They know that it's a unique situation and that fundamentally it's as as G said, you know, you are you're a bird trapped in the cage. I wouldn't even say you get all your food in advance. You're still waiting. It's one of those little machines when you're on holiday that feeds your birds, gives it a little sort of dribs and drabs. Uh, so it doesn't, you know, it's not greedy, it doesn't eat all its seed in one go. Uh, that's the that's the sort of bird cage mechanism we're talking about, G. Good. Okay. And so look, here we go. Namisha Sharma, COVID struck this time last year. A lot of banks, European banks, American banks, had already announced their bonuses, and and clearly they were paying bonuses based on the 2019 uh calendar year as their fiscal year, and you know, and they paid out their bonuses accordingly. But then we went into an incredibly uncertain period, didn't we, for a couple of months? And at the end of that period, there are a bunch of other banks that that that paid out their bonuses. Tell tell us more and tell us what you think about that.

SPEAKER_04 15:59

Yeah, so like like you quite rightly said, the December sort of March um banks and and funds that pay um in 2020 weren't impacted at all. Um, they they have very good bonuses. Um, and then those that came after that, so April, June, um are sort of the next flurry of of bonuses, were seriously impacted. Um, in in a lot of cases, it was sort of like 50% down on the previous year. So we're not talking about kind of a 5-10% cut. Um, a considerable cut was taken, which I think was just a sign of the times. I think a lot of institutions were panicking and that that was just a chance for them to have sort of COVID as a reason to cut those, which I think at that time people weren't necessarily opposed to. I think this year is going to be the real test for a lot of institutions as to whether they manage to keep their people happy or not, because chatting for the last 12 months, all of us across the infrastructure market, right? Um, we've seen how robust the sector is. I've not spoken to one bank or fund that has not hit budget and had an outstanding year with a lot of deal pipeline for this year coming up. Um, it's been one of the busiest starts to the year that that I've seen in the last four years from speaking to people. So I think the expectation and and last year as well. I mean, I think the start of the year was impacted a little bit. People looked at their portfolios, maybe concentrated on that um up until sort of May time. And then May onwards, I mean, we even saw it ourselves. Things were extremely busy from that point onwards. So I think this year is going to be interesting. Um, obviously, bonuses are being announced over the next couple of weeks for a lot of institutions. Um, I've heard of promises for those individuals that were paid last year in June, that this year things will be made up. And I think if that's not the case, we're gonna have a lot of unhappy people out there that are looking to move.

SPEAKER_00 18:07

Um, you say that like it's some sort of new thing.

SPEAKER_04 18:12

Well, let's say even more unhappy then.

SPEAKER_00 18:15

So yeah, businesses who we won't mention who pay their bonuses in May, June time uh each year, but perhaps what we're saying is, and this is a generous interpretation, perhaps they thought last year, and you could understand why. We're heading into a complete disaster. We need to cut back on the bonuses and see what happens. Those businesses went on to actually have a very good uh rest of calendar 2020. They're in good shape in 2021. There's a a focus within those businesses to say, well, look, I'm not just looking for a good bonus for the year, but I'm hoping you're gonna give me a bit of recognition for for that sort of you know defensive action you took last year as well.

SPEAKER_04 18:56

Yeah, exactly. And we've seen some bonuses be paid already, right? The December, December kind of bonuses. And it's on the whole, they have been down from what I've seen in London. Um, from chatting around, I think some have stayed the same. Um, some have been down. I think there's only going to be a few out there that that are up. Um, but I know G has a has a different view on this from what she's seen in in the US market. So um seems like there's a bit of contradiction between London and the US because you you've seen some institutions not actually impacting at all, haven't you?

SPEAKER_01 19:31

No, I think I can't name the client, but I know that one of our clients was over 100% on bonuses. Um, it was just given this December. Once again, can't say the name, but I don't know. I mean, I I understand why those banks that give bonuses in May and April may have gotten scared. I think a lot of people jumped the gun. I don't know about you guys. I think not even just our clients. I think a lot of businesses may have, whatever it's so be, even within recruitment, had thought, oh, it's gonna be a tough year, but this is the busiest I've ever been, ever been. And I we see that with renewables and digital infrastructure. And I think it's been really positive. So for those firms who were paying off of that 2019 year to have cut their employees short, now we're gonna go into this again. Probably wasn't fair. I know life's not fair. Um, but I think they took advantage of that. And you're right, Namisha, if they don't pay that up this coming year, listen, people already left those firms. Some of them already left. Um if they don't get paid this year, um, last year's and plus this year's, um, yeah, we're gonna see people leaving even more so over the summer.

SPEAKER_00 20:39

There's gonna be a mutiny. There's gonna be a mutiny in May and June's uh bonus paying project finance institutions. That's the prediction here.

SPEAKER_04 20:48

Yeah, yeah, definitely. I've I've seen quite a lot of promotions happen though, um, this year, which is quite interesting. Um, it seems I've seen more promotions happen over the last six months, I think, than than I have in previous years. And I think that could be a bit of a factor on what they're trying to do to keep people um, give them kind of a bump up in title to to ensure they retain um because they know they can't pay.

SPEAKER_01 21:14

I've seen that too here, Namisha. That's a good thing to point out. I've seen a ton of promotions. And we've been tracking those, right? Because we we do the people moves report, and we've also been tracking a lot of these promotions. Um, so we've seen definitely an uptick on that.

SPEAKER_00 21:28

But I mean, look, just to close this segment down, we've seen some. I mean, you know, we talk about this bullish market. I completely agree with it. I agree with everything G just said. It's it it you we had an unbelievable uh uh 2020 in terms of business levels, bearing in mind what our expectations were this time last year. And like everyone else, I think there was a period where we thought this is going to be really bad. It certainly wasn't. We've got lots of clients, as you rightly say, that have done loads of deals. We know they have, they hit their budgets. Why are we seeing some banks pay, frankly, not great bonuses, bonuses that are down on you know, March paying, February, March paying banks, uh, not to name any names, HSBC, paying terrible bonuses. And uh why why are we seeing that happening, guys?

SPEAKER_03 22:17

Um, from from speaking uh to candidates where the banks have a very large balance sheet, I think the story has been to them that look, um, we're just managing risks, and so they're we're expecting a lot of defaults, um, not only this year, but in future. So they're just trying to mitigate risks. So, you know, I think that uh a lot of candidates that we've spoken to think yes, it's reasonable, but unfortunately it happened to me. I was relying on that bonus because I still have a life, I have to pay bills and you know, live in expensive cities. But then on the flip side, we've seen clients like um today. We uh had a client who gave um a candidate a guaranteed or or uh a guaranteed side of the of the bonus. So um, you know, and at a very good percentage level. So I think it goes to show that some some clients are are confident that some people are getting paid or will be paid those bonuses based on what they're going to do. And um, so you have that that cluster as well. And then we've also had um candidates who've been um guaranteed bonuses as well at a very competitive level. So so then you know it's it's a very big contrast, I feel.

SPEAKER_00 23:44

Look, some good points there. Uh guys, my millennial uh buzzer has just gone off. Well, we've now gone past, according to recent research, the the attention span of the average millennial. And and we've got to remember that a vast majority these days of project financiers are millennials. So we're gonna have to leave it there. We're gonna pick up on the next podcast talking about uh, well, I still want to talk about what happens in sponsors and corporates, what happens in those kind of strategic platforms when it comes to compensation? What happens if you leave a bank or a debt fund uh and go and work for uh you know, a renewables developer, for example, or something like that? Want to talk about that. Also, really want to talk about attraction and retention. Maybe we'll even get uh you know a member of the fine HR community to come on and join us and talk to us about that. So um look, we will look forward to that. Thanks again, team. And uh again, any listener that wants to follow up on any of these points, ask any questions to any of the team, please do.

SPEAKER_02 24:43

For more information on any of today's topics, or to contact the one search team, please email the one search podcast at podcast at one-search dot community.