Tuesday, February 28, 2006

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How do N.Y. financial services translate into the German banking culture?

When Goldman Sachs began in 1991 to adapt its block trading methods to the European market, nobody could believe, that anyone could sell a large amount of shares at once, and only write off 1 to 2 percent loss. This stellar performance had been the norm on Wall Street for decades. In Europe, it was a sensation.

At that time Goldman Sachs boasted 4000 vice presidents. Form that group partners would be culled every second year. Partners expected to make $150.000.000 p.a. plus 0,25 percent profit. Take-home pay of 20 million at year's end was to be expected.

Now, after Goldman Sachs has gone through an IPO, there are no longer any partners. Mergers and Acquisition still are going strong. The expertise and sophistication of its analysis and investment methods may still be unmatched. The culture at Goldman Sachs may be less elitist and shrouded than before the IPO. And still, even houses like Morgan Stanley or Lehman Brothers have had a hard time penetrating the secret of Goldman Sachs' success. And these are firms steeped in the traditionally sophisticated investment banking culture of New York City.

Deutsche Bank has been pouching Goldman Sachs professionals and is, via London, attempting to build an investment vehicle which aims to imitate the legend.

But often the opposite is the case - U.S. asset management and equity funds zoom in on German local opportunities, approach regional banks, poach employees and utilize the trust engendered. The sort of trust engendered less so perhaps by stellar performance than by long-standing, often deeply emotional ties with local clients. German native bankers' astonishingly robust self-esteem combined with a relentless instinct to tap into those ties, serves U.S. dynamic fund management companies well, in adapting their array of complex international investment instruments to a fragmented German market, often catching German bankers, hired to aid the process, unawares

In essence, local bank employees simply continue with what they always did - dealing with customers and negotiating German laws and regulations. With the only difference that the new masters they are serving are less strict and more casual leaders, with an enormous storehouse of knowledge and skills, which can be leveraged ad-hoc on a need-to-know-basis.

It's a win-win situation - poached German banking employees - compared to their colleagues - get more money, enjoy flat hierarchies, and learn just what they need to know, about globally managed and hedged equities - U.S. style.



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Gisela Strauss

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