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Back to the office for bank employees

So many of us have been preoccupied with when pubs and bars are reopening (11 days in the UK, not that we’re counting), that we have almost forgotten about the office. We’ve got our priorities straight. 

Banks, however, have been thinking about office reopenings a lot. From London to New York, Frankfurt and Paris (most of Hong Kong is back to office mode) many are eager to get their employees back on the trading floor after almost three months of working from home. The only question is: how can they make it safe without a vaccine? 

It largely depends on what is at their disposal. 

Credit Suisse, for example, is offering free antibody tests, a move aimed at reassuring its staff to safely return to its Paradeplatz head office. But not all banks want to do this. The Swiss lender, whose board member Severin Schwan is chief executive of Roche, has access to one of only three tests deemed reliable. 

Banks tend to have large offices, so getting a small percentage of the workforce back under acceptable social distancing guidelines shouldn’t be too much trouble. The big problem is lifts. To avoid crowding, only a handful of people will be able to use them at any given time. 

UBS moved its London office to a low-rise 12-storey building close to Shoreditch a while back so it expects staff will use the stairs as much as possible (there are going to be some very fit UBS traders by the end of this). Lifts will continue to operate with a maximum of four people — one in each corner.

Barclays is also expecting a small number of staff to return to its 32-floor Canary Wharf tower over the next three weeks, as is Morgan Stanley in its 12-storey building nearby.

In New York, JPMorgan Chase and Goldman Sachs started refilling their offices on Monday, still at very limited capacity. Citigroup, Bank of America and Deutsche Bank will be bringing staff back later in the summer.

Goldman will use a team-based rotation system, with deep cleaning in between, whereas BofA and Citi will instead have lists of people authorised to be in the building. 

While banks can, to a large extent, control the safety of their employees inside the office, the commute is another beast altogether. Public transportation is public enemy number one right now so the alternative is essentially cars — which some banks are willing to pay for — scooters, mopeds and bikes. Or, quite simply, just staying at home. 

Inside CQS’s $1.4bn loss

Every market downturn has its fair share of winners and losers. For obvious reasons, this depends on how prepared you are for things turning sour. 

Hedge fund billionaire Bill Ackman, for example, saw the global lockdowns coming and put a huge bet on the notion that companies would struggle to repay their debts. The $27m he paid in premiums on credit default swaps had earned him a nice $2.6bn in a few short weeks. 

Yes, CDS trades can reap a huge windfall, but they can also lead to a big downfall if you’re on the wrong side of the bet. That’s where Michael Hintze, the founder of hedge fund CQS, found himself. (To be clear, we’re not suggesting that Ackman’s and Hintze’s trades are related.) 

His flagship fund lost 33 per cent in the March market rout, wiping off $1bn in value. Things only got worse from there. By May, the fund was down almost 47 per cent — a loss of about $1.4bn. What happened? 

Hintze entered 2020 “cautiously optimistic”. Didn’t we all. In recent years the backbone of his fund was built on a complex branch of structured credit where instruments such as loans or CDS are sliced up to back new debt and equity. 

The yields from these investments tend to be high but to boost returns even more, the fund would ask banks to structure investments that bundle together default protection on individual companies. CQS would often then buy the riskier slices of these deals.

That meant if defaults went up, CQS would quickly be on the hook. To add to that, the positions were often short-dated — meaning it would take an extreme and sudden event to prompt large losses. Coronavirus was pretty much the perfect storm. 

For a deep dive into one of the highest-profile hedge fund casualties of the coronavirus crisis, read this analysis by the FT’s Laurence Fletcher, Joe Rennison and Samuel Agini.

The Bulgari playbook: nine years of growth under LVMH

Investors looking for clues as to LVMH’s ambitions with US jeweller Tiffany & Co (if its proposed $16.5bn acquisition goes through) should look no further than Bulgari.

When the world’s largest luxury group by revenues bought the quintessentially Roman jeweller — known for its colourful cabochon stones and architectural designs — for €4.3bn back in 2011, the brand had lost a bit of its sparkle.

It isn’t a dissimilar story to Tiffanys today. Bulgari had suffered from declining sales since the mid-2000s, and the business was fragmented across four divisions: jewellery, watches, perfume and accessories.

Our FT colleague Harriet Agnew sat down with Bulgari’s chief executive officer Jean-Christophe Babin and creative director Lucia Silvestri to hear how the duo helped turn round the brand’s fortunes.

Bulgari shifted the emphasis away from accessories, fragrances and male watches to jewellery and women’s watches. It also homed in on its Roman heritage and its signature motifs, like the reptilian scales and snake heads of “Serpenti” (made famous by actress Elizabeth Taylor). At the same time it expanded high jewellery with new collections that drew on Bulgari’s Roman heritage.

Job moves

  • Activist investor Jeff Ubben has left ValueAct Capital, the $16bn hedge fund he founded, to launch an environmental and social impact investment company. More here

  • Rothschild & Co has hired Colin Cropper as managing director in North America. Copper, who joins from RBC Capital Markets, will work with the industrials team, focusing on deals in the automotive sector. 

  • Herbert Smith Freehills has hired Michael Jacobs from Allen & Overy to join its London-based global corporate team as partner.

  • Private equity group PAI Partners has appointed Marc Boullier as a managing director, to lead IT at the buyout group and its portfolio companies. He was previously chief operating officer of the tech company Mobility Work

Smart reads

Low ride Jump was a promising bike-share company that had a sense of mission. Then it was acquired by Uber and fell prey to the ride-hailing company’s obsession with scale. (Vice)

No tech-xodus Aside from the fact that San Francisco sits on top of multiple faults that could at any time rip the city apart, rents are high and inequality is rife. Now that everyone is working from home, there’s little reason to stay there. Yet, the city keeps growing. (FT)

Inflated assets The shale oil industry was coming undone even before coronavirus struck a severe blow. Producers had a habit of being overly optimistic about output even though there is still no standardised way to measure potential reserves. (Bloomberg)

News round-up

Schneider, Emerson eye bids for SoftBank-backed OSIsoft (BBG)

Mastercard to buy US open-banking group Finicity for $1bn (FT)

Ackman’s ‘blank cheque’ company looks to raise up to $6.5bn (FT)

Millennium seeks $3bn of private equity-style capital (BBG)

Volatility forces closures of Credit Suisse VelocityShares (FT)

When shareholder activism gets physical (FT Alphaville)

Big tech expected to shake up wealth management industry (FT)

Amazon to launch $2bn venture capital fund to invest in clean energy (WSJ)

Due Diligence is written by Arash Massoudi, Kaye Wiggins and Robert Smith in London, Javier Espinoza in Brussels, James Fontanella-Khan, Ortenca Aliaj, Sujeet Indap, Eric Platt and Mark Vandevelde in New York, Miles Kruppa in San Francisco and Don Weinland in Beijing. Please send feedback to due.diligence@ft.com

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