So far, we’ve heard quite a lot about how different classes of investment banking jobs might be replaced by artificial intelligence, but there’s not been much evidence of this actually happening. That was, until yesterday, when JPMorgan Asset Management announced that they would no longer be using the services of “proxy advisors”, but would instead make decisions about how to vote their shares at board meetings using an “internal AI tool”.
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This isn’t likely to mean immediate job cuts, as the proxy advisors in question are external companies who sell their corporate governance opinions to investors. But if you are working in that particular specialized field, you might reasonably be very worried indeed that a major client has decided that what you do can be replaced by the computer.
The trouble that proxy services have always had is that shareholder votes are almost always either “basically inconsequential” or “very consequential indeed”, with the vast majority falling into the former category. And so investors either don’t really value advice on what to do with them, or they will want to take the decision themselves. It’s very hard to add value.
So why did the services exist in the first place? To a large extent, they performed the useful function of an “accountability sink” – someone external to blame a decision on. If institutional investors vote against the board, that can complicate their relationships with companies. But if they always vote in favour of the board, that can cause problems with other stakeholders. The advisory services allowed them to get rid of this irksome responsibility and get on with the real job of investing, saving their brainpower for the very occasional proxy votes which could make a difference.
And it turns out that one thing that AI algorithms are good at is taking the blame. If a decision is delegated to the computer, nobody can criticise you for being too woke, or for anything else. So it’s quite possible that a niche but not insignificant financial career might be heading toward technological obsolescence.
Of course, there are not very many industries similar to proxy advisory, so there is not necessarily much read-through to investment banking as a whole. But this ought to be a wake-up call nonetheless for everyone in finance to ask themselves whether they are really adding value, or just doing a necessary job that nobody else can be bothered with.
Elsewhere, there was no phoenix-from-the-flames recovery for hedge fund Eisler Capital, which sent out its last investor letter for December detailing a 7.35% loss for the month and taking the 2025 FY result to a decline of 14.3%.
Apparently “nearly all” of the losses were nothing to do with actual investment performance, which makes sense since this was the month in which the fund was finally fully run down and wound up. They were instead attributable to “pass through” expenses, which are charged to investors under the standard multistrategy fund fee structure.
Eisler may have received a double whammy in December with losses driven higher in percentage terms by exit costs on one hand, and by the reduced size of the portfolio on the other. Even so, it does look like one of the drivers of its failure was staff costs running out of control, creating a drag on investment returns which ended up turning into a self-defeating spiral.
It’s partly a cautionary tale about the way in which the “pod shop talent war” has made the multistrategy space unviable for all but the very biggest players. But if Eisler had been generating good returns in the first place, it would have been able to cover the expenses. So this is really a lesson in Warren Buffett’s two golden rules of investing. Rule One, don’t lose money. And Rule Two, never forget rule one.
Meanwhile…
India has been a very hot market for a couple of years now, but it’s also incredibly competitive. In a recent IPO, fees were being quoted as 0.01% of the transaction value, causing JPMorgan and Citi to decide it wasn’t worth participating. Something to remember at league table time. (Bloomberg)
Harriet Tyce, the wife of Nomura’s head of global markets, is doing very well out of her appearance on The Traitors; her book sales have almost doubled. (The Bookseller)
Once upon a time this was a trophy asset, but Goldman Sachs will most likely be pleased to get rid of the Apple credit card business, and JPMorgan are likely to treat it as a normal third-party relationship rather than an exciting future direction. (Bloomberg)
And as Goldman shuts the curtains on its brief retail financial services adventure, it confirms its leadership in the core business, ending another year at the top of the global M&A league table. (Reuters)
A somewhat curious-looking case, in which a second year analyst brought a discrimination case against JPMorgan for an amount (£58,000) much smaller than the usual level of banking employment cases. The lawsuit has been dismissed, in what was apparently a pretty short judgement, after JPMorgan testified that the plaintiff had been cherry-picking examples and wasn’t actually paid any less than equivalent male employees. (Bloomberg)
When it comes to messy arguments about departing employees, banking has nothing on luxury retail. Check out this story of litigation, alleged retaliation and alleged “returns fraud”, all over the departure from Saks Fifth Avenue of one of its highest-performing personal shoppers. (WSJ)
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