A Record Year for Layoffs in Finance

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Senior Dealmakers Aren't Immune

It's difficult to say just what percentage of investment banking jobs are being eliminated, because the firms generally don't disclose the number of bankers they have. Experts believe that the job cuts are about 10% of the workforce, and that the cuts in certain areas with lots of exposure to subprime mortgages and leveraged buyouts will be deeper, according to Gary Matus, a managing partner at executive search firm Egon Zehnder International.

So far, the job cuts in investment banking are about half as deep as the cuts that followed the stock market crash of 2000. But after years of job and income growth (BusinessWeek.com, 1/9/07) in the investment banking world, the cuts will feel like a shock. And banks tend to be leaner than they were in the early part of the decade, so the job cuts are hitting senior dealmakers such as team leaders earning $3 million to $5 million a year. "We're talking about the most dramatic adjustment to the investment banking talent pool in five years. It feels serious to me," Matus said.

Private Equity Unscathed So Far

Private equity firms and hedge funds have largely escaped the job cuts so far, even though their expected returns have dropped. "Private equity is still pretty insulated," says Brian Korb of Glocap Advisors, an executive search firm that serves the private equity and hedge fund sectors. Industry experts say private equity firms maintained lean shops even at the height of the boom, often outsourcing research and other work to consultants. One hedge fund manager who declined to be identified said he didn't have much room for job cutting, but that he would be spending less money on research. Another hedge fund manger who also spoke on condition of anonymity said he had eliminated research positions from his budget years ago, and employed only a few traders capable of generating enough revenue to pay for their own compensation.

Finance professionals stand to lose more jobs if the problems in the credit and equity markets don't settle down during the next few months. "There is some fear, for sure, that there will be more job cuts," said one finance industry executive who declined to be identified. The stressful year (BusinessWeek.com, 10/14/07) for finance professionals could still generate more anxiety before it's finished.

Rosenbush is a senior writer for BusinessWeek.com in New York.