“This is my 30-year anniversary in the business and at Citi this summer,” Tyler Dickson tells Euromoney. “I have learned a lot over these three decades of dedication to the business and to my firm, and have learned that I have much more to learn and to accomplish. Banking and capital markets has never been more dynamic and Citi has never been more well positioned to help our clients succeed.”
Tyler Dickson, Citi
Dickson and Manolo Falco became co-heads of banking, capital markets and advisory (BCMA), which combines Citi’s corporate and investment bank with its capital-markets origination business, in September last year, reporting to Jamie Forese. Prior to this Dickson had run capital markets origination globally since the group’s inception in 2008.
“I started in Salomon Brothers M&A,” he recalls. “What was different in the late 1980s was that market participants were much more fragmented. The Wall Street firms were smaller and more niche oriented, and they were not as big as they are today. They were good at a few things, but not dominant at a lot of things. Consolidation has changed the landscape for ever.”
The market was very different too.
“Liquidity was materially lower then, so the investor pools available to support banking activity were smaller and more rigid, and the pace and volumes were more rigid. It was a smaller market environment,” Dickson explains.
He began his career as the capital markets were becoming institutionalized.
“When I started in M&A it was a great grounding on fundamentals of finance and strategic thinking, but I quickly learned that I needed to better understand the impact of capital markets on advice to be a more effective adviser. That’s why I moved to capital markets after three years, to get a better handle on that. I’ve been doing that for the last 27 years.”
He saw increasing innovation in the late 1990s, including the introduction of convertible bonds and structured credit, but also setbacks in the form of the 1998 LTCM collapse, the Asia crisis, the 2000 tech bubble and then 9/11.
There were more bumps after the financial crisis of 2007 with MF Global in 2010, the 2012 Jobs Act and the leveraged lending guidelines in 2013. However, Dickson emphasizes the capital markets’ enduring ability to cope.
The latest frontier is the evolution of the non-bank system, as regulation has moved lots of activities into alternative capital markets- Tyler Dickson
“While there is a danger in generalising, I would challenge the idea that markets shut for longer periods now,” he says. “Based on my experience over the past 30 years in banking, most markets now dislocate then rebound and recover more quickly than in the past. Today, you see a market go through periods of violent disruption, shut down temporarily, and then fairly quickly prices adjust with reasonable efficiency. Capital raising in that market cools off, but then typically reopens conservatively within several months, if not sooner. I don’t really see that trend changing. Information transparency, deep liquidity pools, positive experiences with prior recoveries after prior dislocations, and increased indexation give investors the confidence, opportunity and, in some cases, the requirement to participate in the markets after periods of dislocation more than ever before. New-issue terms are often most attractive in such windows.”
Having seen the explosion of hedge funds in the 1990s, the emergence of private equity firms in the leveraged buyout business, the growth of sovereign wealth funds, exchange-traded funds and passive money, the market is now witnessing the diversification of assets and the hybridization of asset managers. This has led to the emergence of very powerful asset managers that are active across the spectrum of the business, both in terms of investment, trading and direct lending.
“The latest frontier is the evolution of the non-bank system, as regulation has moved lots of activities into alternative capital markets,” says Dickson. “Also, we have seen the power of family offices increase as players in the alternative capital markets and capital markets more generally. We see them as becoming more and more impactful because they have flexibility – I would argue a lot like the flexibility that hedge funds used to have. They are not competing through information asymmetries like hedge funds, but they do have greater flexibility than many institutional investor groups have today.”
The growth in private markets is an extraordinary opportunity for investors that can get associated with the right companies early enough in their evolution. The desire by mutual funds, sovereign wealth funds, hedge funds and family offices to take a step into the private markets is therefore understandable, given that this will likely generate higher returns than in the public market.
“Look at the Alibaba $14 billion private equity placement, the largest one in history and bigger than most IPOs,” says Dickson. “Alternative capital markets have evolved to handle companies of that size. That kind of dynamic would be inconceivable in private markets unless they had matured so much. Mutual funds that would typically need to invest in public market securities can now get in alongside sovereign wealth funds and private equity. Private placements are not new, but the industrial strength of these solutions is extremely important.”