How capital markets got here and where they might be going


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This month, Euromoney’s 50th anniversary coverage comes to the global capital markets.

Debt and equity capital raising, securities trading and associated derivatives have been at the core of this magazine ever since it was founded in 1969 to report on the new international Eurobond market that was springing up.

The pioneers of that business had approached the broadsheet newspapers of the day and asked if they would print prices of bonds along with those of the equity securities that then filled the financial pages. The established papers couldn’t see the point. The new bond business looked unimportant next to the latest prints from national stock exchanges.

Euromoney had its reason to exist. It would be international, not parochial. And it would not just be a magazine of data; it would be filled with personalities, big ideas, analysis of key trends as the mobilization of international finance transformed the global economy and of dramatic deal narratives.

Padraic Fallon, who embodied Euromoney first as editor of the magazine and then as chief executive of the eponymous business, used to teach young journalists: “People make these decisions, not firms. Get to the people.” We have got to a lot of people for this edition.

Innovation, for years the driving spirit that led practitioners to create new products and then find clever ways to get these to more users, seems to have stalled

There aren’t too many pioneers from 1969 still around, sadly, but we speak to Hans-Joerg Rudloff, one of the founders of that Eurobond market. We speak to Eric Dobkin, the recently retired partner at Goldman Sachs credited with founding the modern equity capital markets. And we talk to the people who followed: who developed modern institutional securities businesses, rose to the top of the world’s leading banks and played key roles in the crisis that eventually came 11 years ago: people such as Bob Diamond, Vikram Pandit and Jeremy Isaacs.

We also speak to heads of investment banking and capital markets at most of today’s leading firms, many of whom have come up through leveraged finance, a theme threaded through our piece on the M&A and financial advisory business.

These conversations range across both the present state of the markets and their evolution. Innovation, for years the driving spirit that led practitioners first to create new financial products for debt and equity raising and hedging and then to find clever ways to get these to more users, seems to have stalled. We examine in depth why this is and whether or not such inventiveness will return.

We also explore patterns in the crises that have periodically beset the fast-expanding capital markets since 1969 and report on how leading industry figures had their careers and their thinking shaped by these experiences. We explore the lead-up to 2008 and think a great deal about its aftermath.

What's past is prologue

When we left Rudloff, outside the offices of Marcuard Heritage in London’s Mayfair after talking for hours about the markets, he had one last piece of advice, urging us to devote no more than 20% of our coverage to the past and to concentrate on the future. It could have been Padraic Fallon talking.

We devote a great deal of this magazine to the future. Though the spirit of innovation appears to have shrunk and markets are no longer allocating capital where it is needed – to rebuild infrastructure and ensure environmental sustainability – misallocating and mispricing it instead, creativity persists.

This is evident in technology. We look at how artificial intelligence is coming to the heart of the markets and is starting to price credit. We explore how banks are striving to re-invent themselves as providers of technology to their customers.

We also look to the rise of private capital, which now seems to be the big enabler of growth in the expanding markets of Asia and key industry sectors, notably technology, which is transforming every business. And we report on how the public equity ownership model is weakening today and ask how the rise of a connected network of large private capital providers capturing more of the value creation in growth companies raises important policy questions.

It is intriguing that many of the pioneers of financial markets from the 1980s – Guy Hands who developed securitization; Isaacs, in at the birth of traded options and equity arbitrage; Pandit, who ran the lab at Morgan Stanley that drove electronic trading in equity; and Diamond, who brought securities financing and repo to European government bond markets – are all now at work in private equity. All except for Hands are investing in businesses related to finance.

Eleven years on from the crisis, the new architecture for the securities business is still overshadowed by the big banks, a last vestige of the unsustainable past. But a new architecture is now starting to emerge.

Just give it time.