A broader point following on from last week’s blog about Morgan Stanley’s new risk committee. Not only does Morgan Stanley need more risk-takers, as we enter 2010 the whole world needs more risk-takers.

As we start the year many investors still have their money parked in the safest, lowest yielding assets they can find: cash and government bonds. This is understandable given the uncertainties of last year.

But, as traders ponder the year ahead, consider how your incentives and the incentives of those around you has changed. If you work in a bank, you simply may not be able to take more risk. Many banks are still in balance sheet repair mode, or like Morgan Stanley are strengthening their risk policing functions. That doesn’t necessarily mean less risk, but it certainly means lots more questions if you do want to take more risk. And if you take the risk and succeed? Your expected bonus payout is lower and your tax rate is likely to be heading higher.  And is anyone pleased or happy that you succeeded. No. You are a parasite, you just got lucky in the casino, you have done nothing socially useful.

My point here isn’t to garner sympathy for risk takers, nor am I feeling depressed about the year ahead (quite the contrary). My point is that the current climate is not conducive to risk-taking and that is a problem. The world needs more risk-takers.

Related reading:

FT Money 2010 predictions

Banquo is still an active investor so will declare his financial interest where appropriate in any blog post.


This blog is no longer updated but it remains open as an archive.

Banquo has spent more than 20 years in investment banking and the hedge fund industry, splitting his time between London, New York and Geneva.

Why is Banquo anonymous? Because he operates at a senior level across the financial markets, advising and investing, buying and selling, hiring and firing. He's still in the game but if he has a relevant financial interest in the subject of his posts, you'll know about it. Being anonymous keeps things simple. Banquo will never betray a confidence although he is privy to many.

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