Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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1. How dangerous is passive investing for the asset management industry?
A top US research and brokerage firm has released a note claiming that the rise of passive asset management in the industry could cause serious detriment under a capitalist economy, more so than if we were to operate in a Marxist economy.
The note titled “The Silent Road to Serfdom: Why Passive Investing is Worse Than Marxism”, was published by Sanford C. Bernstein & Co, and warns that passive investing is a threat to asset management as a capital economy should naturally be run as an active market.
They claim: “a supposedly capitalist economy where the only investment is passive is worse than either a centrally planned economy or an economy with active market led capital management.”
In recent times, the asset management industry has seen a rise in legal and regulatory policy initiatives as well as considerably less prosperous market conditions, leading to a dip in the performance of active, high-risk funds. With this lack of performance and sky-high fees, the market has encountered an uplift in the demand of exchange-traded funds and other passively managed vehicles as investors look for more prudent strategies.
Bernstein argues that this method of investing goes against the grain in a capitalist society, where capital should be managed in the most productive manner, seeking the highest returns, which should in turn create new jobs and raise the standard of living.
Bernstein’s head of global quantitative and European equity strategy Inigo Fraser-Jenkins argues that ‘The commonality between both active market management and the Marxist approach is that in both cases there are a set of agents trying – at least in principle – to optimise the flows of capital in the real economy. It is just such a feature that is lacking in passive investment management.’
Although this seems to be a fair argument, it is common for all economies to weather a variety of market trends, in particular, during the recession and expansion phases of the economic cycle. There is a possibility that the popularity of passive investing is purely a temporary stage in asset management, and the inevitable return of investor confidence in financial markets will undoubtedly bring active funds back to the fore. But whilst the FCA is in process of their thematic review of the Asset Management industry and with fees at the top of their agenda, it is perhaps a matter of time before investors decide that the active fund managers still have a part to play in the development and growth of wealth.
2. Nearly half of senior associates regret legal career – what’s the solution?
With only four out of 10 senior associates surveyed that they would choose to become a lawyer again if they had the chance, it seems the legal profession doesn’t provide as much job satisfaction as one might think.
New research carried out in The Lawyer Salary Survey revealed that only 37 per cent of senior associates would take the same path given a second chance. This was the lowest figure compared to all those both higher and lower in experience. Trainees seemed the most happy about their decision, with 59 per cent claiming they would make the same choice.
These figures also highlight that lawyers become much happier with their choice when joining the partnership, as the numbers from 7+PQE to Partner jump by nearly 10 per cent.
The survey highlights the alarming number of lawyers who aren’t happy with either the profession or their position in their respective firms and businesses. With such a small proportion of senior associates making it as a partner, law firms need to improve, or even create, a solid path of career progression outside the traditional partnership track.
Moreover, the statistics also emphasise how low the level of job satisfaction for lawyers is across the board. The exceedingly long hours, combined with pressing deadlines, and the constant struggle with adversity all contribute to the amount of dissatisfaction. Many of these factors, however, can be overcome by the numerous initiatives that law firms are gradually beginning to implement.
Bringing in and adhering to initiatives, such as diversity and inclusion and agile working, is crucial when trying to provide lawyers with a necessary work/life balance and foster the kind of firm culture in which lawyers find their jobs rewarding and engaging, as opposed to challenging and fundamentally unrewarding. It is this final point that might hold these statistics back. Despite firms’ best efforts, how do law firms motivate senior associates who know their goals of partnership are continually diminishing and are therefore questioning the decade or more they have spent working towards this goal? Some do make it to where they want to be but unfortunately the majority don’t and keeping the majority motivated is clearly a challenge law firms and the industry in general is failing currently.
Movers & Shakers of the Week
Greenberg overhauls management structure
London chair Paul Maher, global practice chair Patricia Menéndez-Cambó and regional operations chair Richard Edlin have all been appointed global vice-chairs of Greenberg Traurig
Eversheds’ international arbitration head to join Freshfields
Will Thomas, head of international arbitration at Eversheds, joins Freshfields Bruckhaus Deringer in the City
Linkaters corporate head takes a GC role
Head of Corporate London for Linklaters Stuart Bedford moves to private equity house LeapFrog Investments as their general counsel.
A&O loses two German partners to US firms
Latham & Watkins hired Allen & Overy’s international capital markets group head Oliver Seiler in Frankfurt, whilst corporate partner Michael Ulmer also leaves the magic circle firm’s Frankfurt office for Cleary Gottlieb Steen & Hamilton
Olswang sees two exits from City office
Corporate partner Duncan McDonald departs Olswang for Taylor Wessing and Howard Cartlidge, former London competition head, joins DWF
Office Openings & Closings
Mergers & Alliances