02/04/2008

No Bear-poaching, please

So apparently JPMorgan Chase & Co. Chief Executive Officer James Dimon wants to have his Federal Reserve-backed Bear Stearns cake and eat it too. 

Not tickled enough that he got buckled Bear Stearns for a song, Dimon has reportedly placed calls to chief executives at rival Wall Street firms including John Thain at Merrill Lynch, John Mack at Morgan Stanley and Anthony DeChellis, head of private banking Americas at Credit Suisse Group, asking them to hold off scooping up Bear Stearns’ financial advisors and other talent including analysts, traders and investment bankers. 

The reason, according to reports, is that JPMorgan is trying to create retention incentives to lure Bear Stearns’ employees from leaving as it seeks to complete its now-$10-ashare takeover. 

But Deborah Markus-Malone, founding partner of the Gerson Group, said employees must realise that even if they were a suitable fit at Bear Stearns, they might not be apt for the JPMorgan culture. 

“We are seeing many firms fishing around for talent,” said Markus- Malone, who worked at JPMorgan from 1997-2004, where she was responsible for marketing the investment bank’s institutional products. 

“The firms that are taking a thoughtful approach to finding the talent will wind up with the most successful hires. They need to think strategically about how they want to expand their current organisations and which individuals should be brought on board. There are many factors that should be considered beyond availability.” 

Markus-Malone suggested that JP Morgan might be interested in Bear Stearns’ emerging markets hedge fund team, managed by Melissa Ko, because of its strategy and its performance. The offering, called Bear Stearns Emerging Markets Macro Fund, returned approximately 25.56% last year, managing to outperform the 23.60% benchmark for the top-performing BarclayHedge Emerging Markets Index. 

The strong performance also countered other strategies, namely its two now-well-known subprime-focused hedge funds that collapsed last summer, causing $1.6bn in losses and arguably marking the beginning of the credit crisis. 

If the deal goes through, JPMorgan would also absorb Bear Stearns’ prime brokerage operations, lifting it to the level of other Wall Street titans such as Goldman Sachs, Morgan Stanley, Citigroup and Deutsche Bank in terms of prime brokerage offerings. The investment bank is also believed to be eyeing a possible acquisition of Banc of America Securities’ equity prime brokerage business. 

Josh Levkov, managing director, Grady Levkov & Co, said he has received a number of calls from Bear Stearns’ hedge fund employees looking for quantitative and operational positions. “There is so much uncertainty that people want to cover all their bases,” he said. “As an employee of Bear, people are looking through the lens, saying ‘my future is uncertain.’” 

JPMorgan’s hedge fund platform might appear an attractive arena for Bear Stearns’ hedge fund professionals, given its affiliation with Highbridge Capital Management, one of the largest hedge funds. “I have spoken with a number of individuals who are looking forward to working at Morgan,” Markus-Malone said. “It has proven to be successful organisation and could provide many opportunities, particularly in this environment.”