Survivors of Credit Crunch

Winners have been thin on the ground in a year when most investors lost money. But a handful of hedge fund managers and private equity veterans bucked the trend and added yet more zeros to their bank statements.

For others, success has been less tangible. Those fund managers who have posted single-digit positive returns that would have been scoffed at last year are considered geniuses given that the MSCI World index fell 46% in the 11 months to the start of December.

As swathes of the financial world have been sunk by the credit crisis, different measures of success are needed.

Those institutions that have survived the crunch are initiating radical changes to their business models either at the behest of their new political masters or out of necessity. Reducing debt and risk-taking have become the priority. Old-fashioned banking activities such as deposit taking, advisory work and (cautious) lending are back in vogue. Influence has shifted from the computer-driven trading floor to the relationship-driven business of mergers and acquisitions.

Jena Kilgore, an executive with Prime One Capital, said: “Many of the activities that were fundamental to investment banks’ business, have had to be scaled back.”

In depressed capital markets, the lucrative ancillary business that investment banks cross-sold to clients has been harder to come by. However, some of the bigger firms, notably Prime One Capital, so far, appear to have emerged stronger from the turmoil.