• Numerous private-equity firms are raising distressed-debt funds as they seek to buy cheap assets that have been throttled by the coronavirus pandemic.
• Of all the PE firms known for their distressed chops, Blackstone has experienced a series of departures from its credit ranks over the past four or five years. 
• Many of them were in its distressed division within GSO, after Blackstone decided to shutter its hedge fund and pursue longer-term investments instead.
• We took a look at where 11 of their top distressed alumni have landed. Nowadays they're occupying senior leadership roles at Vista and Ares, and staffing hedge funds to pursue trades. 
• Visit Business Insider's homepage for more stories.

It's a hot time for private-equity shops to raise distressed-debt funds, as the coronavirus pandemic tanks companies across energy, retail, and hospitality, presenting opportunities for investors to put capital into businesses they believe will survive and deliver future returns.

Distressed-debt investing can take many forms.

This includes shorter-term trades: buying portions of a company's debt obligations and then selling it off at a higher valuation, days or weeks later. And it also includes longer-term strategies, which can involve buying debt or bankruptcy claims in a struggling company and then taking control during restructuring.

It can be quite lucrative, but it's also a niche of investing that's more complex and inherently riskier than many others, often requiring legal savvy in addition to investing chops.  

Some of the largest players include Apollo Global Management, Oaktree Capital, Cerberus Capital Management, and Blackstone GSO. 

While many of them have been making headlines for raising billions to finance their credit operations, Blackstone has made news for a different reason.

In a rare public feud, Blackstone this summer took issue with a departing credit leader joining another firm.

It was just the latest of a string of senior Blackstone exits that had come out of GSO since 2017, many of them from its distressed-credit investing team. GSO's distressed business has undergone a significant overhaul in recent years, including disbanding its special situations hedge fund and folding its assets into a longer-term strategy. 

It probably didn't help matters that the exodus of senior execs required GSO to renegotiate terms with investors and accept concessions last fall, including lower fees. 

After some lean years during the bull market run, distressed investing has ramped back up, leaving insiders to question whether Blackstone may be regretting letting a murderers row of talent walk so easily.

Departing execs have almost universally found success post-GSO, either starting profitable funds themselves or taking high-profile roles at powerhouse investment firms like Ares, Vista, Elliott Management, and Angelo Gordon. 

On the other hand, some are quick to point out that distressed investing has always been a small piece of the massive Blackstone profit machine — and though they unquestionably lost top-tier players, it's not as though the firm abandoned the strategy. 

At very least, the execs who did leave are having a little bit of schadenfreude, one insider observed, as other areas in which Blackstone is lending, like the energy industry, faces challenges throughout the pandemic.

A Blackstone spokesperson said in a statement that GSO has continued its growth to $129 billion in assets under management and is coming off a strong quarter of performance overall, its best since the global financial crisis.

"The integration of GSO into Blackstone has led to large scale deal opportunities, a rigorous investment process and a culture that prizes teamwork," the statement said.

"Yes, a number of intentional changes have been made to the distressed investing unit which have been quite positive for performance and culture."

[Read more on the backstory of those changes here.]

Below, Business Insider tracked the departures from GSO's distressed unit over the past five years. Here are the firm's 11 top distressed-investing alumni making impressive moves and poised to reap profits for rivals as the economic storm clouds darken. 

Darren Richman, Kennedy Lewis

Richman left Blackstone in early 2017 to co-found Kennedy Lewis, an opportunistic credit investor focused on middle-market companies. His firm would later go on to hire other departing GSO executives, including Doug Logigian and Dik Blewitt. 

Richman isn't the most gregarious back-slapper of GSO alums, but he's known as one of its wisest investors.  

One of his biggest wins was a gamble that MBIA Inc would survive a cash crunch after the 2008 financial crisis and avoid seizure by regulators —a wager worth about $500 million, The Wall Street Journal reported.

One of his friends says Richman has a dry sense of humor, and has a razor-sharp, analytical mind. Before he joined GSO, he held stints at Goldman Sachs and Deloitte and holds an MBA from New York University Leonard N. Stern School of Business and previously studied accounting at University of Hartford.

Jason New, Onex Credit

New, who started off his career as a restructuring lawyer at Sidley Austin, could assess risk well in the bankruptcy context.

One source who has worked with New said he excels at maneuvering through the intricacies of distressed processes, calling him perhaps the best operator in the industry at getting into thorny situations and navigating a way out. 

 fNew was the driving force behind GSO's massively profitable bet on TXU, the Texas coal and nuclear power company that capsized under the weight of a $45 billion LBO in 2007. New bought up hundreds of millions in TXU debt that paid off handsomely after the company, renamed Energy Future Holdings, filed for bankruptcy in 2014.

But at GSO, he also happened to be the head of distressed debt investing at an inconvenient time, when Blackstone looked to wind down its hedge fund business, according to people who know him.

"I think Jason took a lot of the unfair blame from up top in headquarters," said one source who has worked with him. "He was one of the most fair, down to earth people — always willing to open the aperture and listen to conflicting ideas and different investment theses." 

New stayed on at Blackstone until he departed for Onex Credit in April of this year. Some insiders thought he was a possible contender for the top spot at GSO for a time — a role now occupied by Dwight Scott — though others dispute this.

He graduated from Allegheny College and received his law degree from Duke University School of Law.

Scott Eisenberg, Francisco Partners

Eisenberg just helped close a $750 million opportunistic credit fund at Francisco Partners as part of a broader push to invest in technology companies. 

Eisenberg, known for having an uncanny pulse on the market with a focus on tech and media, exited GSO in 2017 to head up credit for Francsico Partners. 

"He is the smart money," one person who knows him said. 

Eisenberg has since been involved in supporting companies like ZocDoc and Talentsoft at Francisco Partners, according to recent media coverage. 

Eisenberg graduated from The George Washington University and received his MBA from The Wharton School.

Ryan Mollett, Angelo Gordon

Mollett exited GSO in 2019, joining Angelo Gordon as head of their distressed and corporate special situations group.

By all accounts, he was one of the most senior members of the GSO crew and responsible for some of its biggest trades, including Hovnanian. He marshaled GSO's 2014 bet on casino operator Caesars Entertainment, a messy affair that attracted some of the largest names in investing — including Apollo, Appaloosa Management, Elliott Management, and Oaktree — and resulted in a complicated, protracted bankruptcy proceeding. 

"He is a risk taker," said one person close to him.

Mollett, who specialized in leisure and gaming at GSO, also isn't afraid to express his opinions if he's adamant he's right.

At Angelo Gordon, it looks like he's gearing up to take on some more distressed bets, after having raised $3.5 billion from investors for its inaugural AG Credit Solutions Fund.

Jacob Gladstone, Angelo Gordon

Joining Mollett at Angelo Gordon is Jacob Gladstone, a younger exec who Blackstone GSO had held up as a rising star to limited partners. 

Gladstone had been a principal at GSO and became a managing director at Angelo Gordon in May.

Word on the street is that Gladstone was Mollett's protégé and he could have written his own ticket at GSO if he had wanted. But he chose to follow his mentor. 

One person close to Gladstone said he felt a certain frustration toward management at Blackstone as its execs became more involved in the GSO investment committee. 

Gladstone graduated from Franklin & Marshall College in 2010.

Craig Snyder, Ares Management

Snyder saw the writing on the wall in 2017 and joined Ares Management, where he is a partner and the head of distressed trading. 

He currently serves as a member of the management committee of Ares Management and the firm's private-equity group's special opportunities investment committee. 

His name was also behind a $3.5 billion raise of investor capital announced in June — money that is to be spent on companies undergoing disruption.

"The team pursues a differentiated strategy that pivots opportunistically between private and public market sourced opportunities and seeks to partner with management teams by embracing an 'activist for good' approach," Ares said in an announcement. 

At GSO, Snyder headed up trading for the group and served as a portfolio manager and investment committee member for its distressed special situations funds.

He focused on both public and private markets. Previously, he had been a senior trader for a distressed-debt fund at Kingstreet Capital.

Snyder graduated from Bucknell University.

David Flannery, Vista Credit

Flannery joined Vista Credit in 2018, expanding the software investor's debt platform. 

He hit the ground running, with Buyouts reporting in 2019 that Vista was gearing up to raise its third credit fund. By October, it had raised $700 million, and media outlets reported that it could raise up to $3 billion. 

In his role as president of Vista Credit, Flannery reports directly to founder Robert Smith and has been behind some of its largest loans in the tech, data and software market. 

That includes a $175 million global recapitalization of Meltwater, a media intelligence company. 

At GSO, he was considered an "adult in the room" given his level of seniority, though he was there for a relatively short period of time compared to other execs: from April 2016 to Nov. 2018, according to his LinkedIn. 

Flannery graduated from Villanova University. 

Brad Feingerts, Elliott Management

Like Gladstone, Feingerts started out in the junior ranks as an analyst in the special situations hedge fund at GSO, ascending quickly under New and Richman as the division's overall growth exploded. 

He exited in early 2017 not long after Ostrover packed his bags, landing at Elliott Management, the prestigious and feared hedge fund run by Paul Singer. 

Now, he's set to join another hedge-fund powerhouse. Feingerts is starting at Citadel in September, working to build out the credit business under Pablo Salame, the ex-Goldman Sachs trading honcho who signed on with Citadel last fall. 

Feingerts joined Blackstone fresh out of school in 2011 — he got his JD/MBA at the University of Chicago immediately after graduating from the University of Pennsylvania — initially in the restructuring business before shifting over to the distressed-credit team in 2013.

Akshay Shah, Kyma Capital

Referred to by colleagues as "the man of many faces," Shah is the shadowy figure who appeared in the FT profile when Blackstone's default manufacturing practices emerged in the spotlight.

"I don't believe it's classified as insider trading, but it's pretty damn close," one retired trader who came up against Shah and GSO told the FT. "It's quite frankly shocking that they were able to get away with doing that for so long and that no one was prepared to stand up to it."

Shah gave the FT a straight forward enough reason for leaving GSO to launch his own firm, Kyma Capital, in 2018. 

"The reason for leaving was simple: the European stressed and distressed opportunity set is a middle-market opportunity set," he said. "These sized companies don't lend themselves to megafunds." 

Michael Fabiano, Platinum Equity

Another GSO defector with an entrepreneurial streak, Fabiano left GSO in 2018 to start the credit-investing platform at Platinum Equity, the hedge fund run by billionaire Tom Gores with $19 billion in assets under management. 

The new global head of credit didn't wait long to bring aboard a trusted GSO comrade, hiring Patrick Fleury, an ex-GSO managing director who specialized in oil and gas, in 2019, to help trade both public and private high-yield and distressed situations. 

Fabiano got his start as an investment banker in Morgan Stanley's leveraged finance group in the early 2000s before getting in on the ground floor with GSO in 2005. 

Fabiano graduated from Georgetown and got his MBA at the University of Chicago.

Zachary Crump, Finepoint Capital

Crump, who was based in London, left his post as global head of trading within GSO Capital in early 2019. He's since been the head trader at Boston-based hedge fund Finepoint Capital, which was launched by Baupost alum Herbert Wagner.

The move to Finepoint is a homecoming for Crump, who hails from Dorchester, Massachussetts, and graduated from Boston College in 2009.

After undergrad, Crump joined Barclays distressed-trading desk, where he worked for nearly six years before joining GSO.

SEE ALSO: POWER PLAYERS OF DISTRESSED CREDIT: The 11 Wall Street stars trading busted bonds, bankruptcy claims, and other fire-sale securities

SEE ALSO: Meet 10 Wall Street power players picking through up to $1 trillion in new distressed debt opportunities to bag huge returns

SEE ALSO: PIMCO has raised $5.5 billion for private credit funds despite a hellacious March — and is telling investors it's the best opportunity in a decade

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• Longtime healthcare, pharmaceutical, and biotech investor Perceptive Advisors sees a future where a vaccine for the coronavirus is being mass-produced and distributed in the next 12 to 18 months — and believes many different companies will have a chance to make some serious money off of it.
• Even though many coronavirus programs will ultimately fail, Adam Stone — the CIO for the $7 billion manager — told Business Insider that the vaccine opportunity is "vast."
• For hedge fund managers and allocators becoming more interested in the pharmaceutical space, Stone recommends that don't forget about the opportunity that is China.
• Visit Business Insider's homepage for more stories.

Perceptive Advisors — the $7 billion healthcare-focused hedge-fund manager founded by billionaire Joseph Edelman — is not solely focused on the coronavirus. 

Adam Stone, the Manhattan-based firm's chief investment officer, told Business Insider that despite the ongoing global health crisis, Perceptive's portfolio "is fairly limited" in its exposure to companies whose future success is riding on a COVID-19 related product. The firm's more-than-$2-billion flagship Life Sciences fund returned more than 50% last year, but is down roughly 1% through the end of July this year, according to HSBC's Hedge Weekly report. Hedge Fund Research's index of healthcare-focused hedge funds returned 23.14% in 2019 and is up 3.4% through the end of July. 

But that doesn't mean the firm has not taken bets in the space, where a rush of funding and interest has accumulated thanks to governments across the world pushing desperately to end the pandemic and restart global economies. The firm bought more than 9 million shares of VBI Vaccines in the second quarter, and the Massachusetts-based company just received a more than $50 in Canadian dollars from the Canadian government for potential vaccine trials. 

For investors without much training in the tricky healthcare space — where smaller companies' fortunes can swing on the approval of a single drug — it can be near-impossible task to pick the winners, and even a trained eye like Stone says "there's a lot of noise."

"There's an overwhelming number of programs trying to treat the disease, cure the disease, prevent the disease," he said.

"Most of these programs will never amount to anything."

See more: Joseph Edelman's $4.8 billion hedge fund dominated 2019 with 53.7% returns driven by big biotech bets

The promising thing though is there is bound to be more than one winner in the race for a vaccine, Stone says. He foresees a mass-produced and distributable vaccine coming in the next 12 to 18 months, and that the opportunity for companies is "vast."

Smaller companies and the massive drugmakers will be able to get a piece of the opportunity, Stone said, as he expects there to be a booster vaccine needed to be produced for 2022 and 2023. Because billions of doses will be needed, no single company — not matter how big — will be able to dominate the market. 

"There'll be many vaccines that are approved and marketed and distributed ultimately," he said, noting that smaller companies and start-ups have "a real opportunity here."

Perceptive's advice for first-time healthcare investors

The hedge-fund industry has struggled to not only add new entrants over recent years, with launches lagging, but also retain the assets that it already had thanks to underperformance and pricey fees. 

But healthcare-focused managers have been a bright spot, with investor appetite for the sector reaching a fever pitch during the pandemic. 

Stone's advice to managers wading into the space is to not ignore China, which he believes many in his field already have.  

"They don't understand the opportunity in China," he said. He described it as "solidly number two as far as markets for pharmaceuticals in the world."

Two years ago, Stone and his team realized they needed to address a "pretty significant hole" in their portfolio, and sought to add more exposure to China and its markets. Originally, they planned to do what they do in their flagship, and invest in public pharmaceutical companies based in China. 

But they eventually launched and funded their own company LianBio, which partners with diagnostic and healthcare-technology companies to bring their products to the Chinese population. The China-based firm tapped Dr. Bing Li to run the new company, which has already signed on four different partnerships in roughly eight months. 

"This company has already moved beyond concept, and proven the business model," Li told Business Insider.

So far, the company has partnered with BridgeBio Pharma, heart-health-focused Myokardia, Navire Pharma, and QED Therapeutics, according to LianBio's website. Perceptive's flagship fund owns stock in BridgeBio and Myokardia, filings show, while QED and Navire are both affiliates of BridgeBio.

Stone says the life sciences industry has mostly been spared in the US-China trade war, and Li believes China has made progress in protecting intellectual property in the space. 

The pandemic, which originated in China, has not slowed LianBio's start too much, according to Stone. The firm's office in Shanghai is "fully functioning" right now, and Stone and his team have been able to close deals over video chats in the US.

"We look at this company as giving the largest population in the world access to drugs they should have access to." 

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• Building good credit with a credit card requires spending less than your credit limit allows and promptly paying off the bill each month.
• If you've never had a credit card or taken out a loan before, consider becoming an authorized user on a friend or family member's credit card or applying for a secured credit card.
• Your credit card payment activity and credit utilization will be reported to the credit bureaus, which will each create a credit report in your name. 
• Your credit report documents your entire credit history and will determine your credit score, the three-digit number lenders use to evaluate your ability to pay back a loan.
• Sign up to get Personal Finance Insider's newsletter in your inbox »

Building good credit from scratch can seem intimidating, but all it really takes is time and smart habits.

There are a few ways to build credit, but you can start small by using a credit card. Here's how it works:

How to build credit with a credit card

1. Become an authorized user

One of the easiest ways to establish credit from nothing is to become an authorized user on your parents' or partner's credit card. An authorized user is basically an extension of the primary cardholder, but isn't responsible for paying the bill and doesn't have to undergo a credit check.

But as an authorized user, your credit report will track the credit card's payment and utilization history, so it's important to choose someone who is financially responsible.

2. Try a secured credit card

You may try a secured credit card to start building credit on your own. With a secured credit card, you make a cash deposit to a bank or financial institution to establish a line of credit and then use the card to make purchases up to that limit. When you pay the bill each month, the bank will report your payment activity to the three credit bureaus, Equifax, TransUnion, and Experian, which will each establish a credit report in your name.

If the bill ever goes unpaid, the bank can keep your deposit. If you pay on time consistently, you should eventually qualify for a non-secured card and may even be upgraded by your bank.

3. Apply for a credit card with good rewards

Once you've established some credit history, you're probably ready to apply for your own credit card. Any credit card worth having these days will come with a suite of benefits and rewards, whether it's bonus points, cash back on qualified purchases, or travel perks. Some of the top tier credit cards levy an annual fee as high as $450, but there are many great, no-fee credit cards to choose from.

You can apply for a credit card online and the bank will perform a hard inquiry on your credit report. It usually only takes a few minutes to get approved, unless the bank needs to verify your income.

4. Check your credit limit

When the bank approves you for a credit card, it will set a credit limit based on your income and other factors in your credit report. The amount of your total available credit limit that you spend each month becomes your credit utilization rate.

You want to aim for a credit utilization rate of 10% or less to maintain a good credit score. The more lines of credit you have, the easier it gets. If you consistently keep your spending below the limit and make on-time payments, the bank may automatically increase your limit. You can also call and request a credit limit increase.

5. Know your payment due date

Before you start swiping your credit card, you should know when your monthly payment is due. This will be listed on your online account and is the date that your full outstanding balance is due every month to avoid late fees.

6. Know your annual percentage rate (APR) 

Every credit card has an APR, or annual percentage rate, which is the percentage of your outstanding balance you'll be charged for keeping a balance on the card past the payment due date.

The APR on a credit card depends in part on your credit history and can range from 17% to 26%, though some cards offer introductory APRs as low as 0% that last for a few months after opening the card. Some banks raise your APR if your payments are late.

Ideally, you shouldn't be concerned with the APR if you plan to make full and on-time payments on your credit card. But it's still smart to choose a credit card with a low APR in case you do end up carrying a balance at some point; high interest rates can quickly snowball your debt.

7. Use the card to make purchases

If you opened a rewards credit card, start using the card to make purchases that will earn you points, miles, or cash back. 

8. Make a habit of checking your transaction history

When you're swiping a card rather than handing over cash, it can be easy to lose track of how much you've spent. Get in the habit of checking your transaction history once or twice a week to make sure you're not creeping too close to the credit limit.

9. Pay off the balance in full every month

Every month, you're responsible for paying off the full current balance on your account. If you don't pay your full balance on or before the due date, it will start accruing interest until it's paid, you'll get a late fee, and the credit bureaus will be notified of your missed payment.

If you only pay the "minimum payment" listed on your account by the due date, you will avoid the late fee, but the remaining balance will still start accruing interest. 

10. Set up auto pay

If you're afraid you may forget to manually make your monthly payment, connect your credit card account with a checking account that will automatically pay your bill on the same date every month — just make sure there's enough money in the account to cover it.

11. Don't apply for more credit too soon

New credit inquiries show up on your credit report each time you apply for a new loan or credit card and temporarily bring down your score by a few points.

If you have too many inquiries in a short period of time, lenders may consider that a high risk and deny your application or give you a less-than-ideal interest rate. If you're new to establishing credit, it's best practice to space out your credit applications by at least six months.

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• Airbnb on Wednesday confidentially filed its paperwork for an initial public offering.
• Though it could still postpone or cancel the IPO, the move is the biggest indicator yet that it plans to go public this year.
• The filing was widely anticipated. CEO Brian Chesky told employees last month Airbnb was moving forward with its IPO efforts.
• The move comes despite the fact that the online travel company's business was hit hard by the coronavirus pandemic. Its revenue was down 67% in the second quarter, as countries around the world shut down their economies and limited the movement of their citizens.
• Visit Business Insider's homepage for more stories.

Airbnb just gave its biggest indication yet that it plans to go through with an initial public offering this year, confidentially filing its paperwork for an IPO.

The company, which announced in a statement that it had filed the documents, declined to say when it expected to go through with the offering, how many shares it planned to sell, or what price it expected to offer them at.

Going into this year, Airbnb was widely expected to go public in 2020. But that was before its business was slammed by the coronavirus crisis. With countries around the world shutting down their economies and limiting the movement of their citizens, the travel industry collapsed and Airbnb's revenues went down with it. In May, CEO Brian Chesky said Airbnb's revenue this year would be less than half of what it pulled in last year.

To steady the business, Chesky cut 25% of its staff, laid off contractors en masse, froze the company's marketing budget, and took on $2 billion in debt. As part of its debt financing, Airbnb agreed to having its valuation slashed from $31 billion to $18 billion.

But by then, Airbnb was already bouncing back. By the end of that month, the number of global vacation rental bookings — Airbnb's market — was up 127% from the nadir it hit in April. Still, the company's revenue in the second quarter fell to $335 million, which was down 67% from the same period a year earlier.

Airbnb has been under pressure to go public

Even so, the company's IPO filing has since been widely anticipated. Chesky told employees last month Airbnb had resumed plans for an offering. And The Wall Street Journal reported last week the company would file for the offering later this month.

Airbnb has been under pressure to go public this year. Stock options held by some of its earliest employees are slated to expire this fall if they aren't exercised before then. Employees typically can't afford to exercise their options unless they can immediately turn around and sell their shares to the public.

It's important to note that while Airbnb filed its paperwork, this doesn't mean it will go public. Postmates filed confidentially for an IPO last year but never went public, announcing last month that it had reached a deal to be acquired by Uber instead. Similarly, DoorDash filed its IPO paperwork confidentially in February but has yet to go public or move forward with the process.

Airbnb's announcement Wednesday indicates it plans to go public using the traditional IPO method. In such a process, companies issue new shares that they immediately turn around and sell to big investors, raising cash in the process. The investors then sell some of those shares on a stock exchange, creating a public market for them.

Before the pandemic, Airbnb was widely expected to go public using an alternate process, a direct listing. That method is typically less costly than a traditional IPO, but companies can't use it to raise funds for their treasuries. Rather than the company itself selling shares to the public, its shareholders sell stock in a direct listing.

Got a tip about Airbnb? Contact Troy Wolverton via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

• Read more about Airbnb:
• Airbnb's revenue reportedly plunged 67% in the second quarter as COVID-19 wreaks havoc on its business
• Airbnb reportedly plans to confidentially file for an IPO later this month
• Airbnb unfroze its IPO plans thanks to bookings rebound, but the $18 billion startup has built its comeback on very thin ice
• Airbnb told employees it's resuming plans to go public as business slowly bounces back

SEE ALSO: These are the 19 Airbnb execs rebuilding the company for growth and an IPO amid the biggest travel industry crisis in decades

Join the conversation about this story »

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• JPMorgan Chase, the largest bank in the US by assets, is reportedly in talks with US Postal Service to provide services at Post Office branches. 
• Capitol Forum reported Wednesday that the bank has proposed to lease space from USPS for ATMs and other.
• The proposed deal would also grant JPMorgan exclusive rights to seek business with USPS customers, according to Capitol Forum.
• Visit Business Insider's homepage for more stories.

JPMorgan Chase is in talks with the US Postal Service regarding expanding their ATMs and banking locations to Post Office branches, Capitol Forum reported Wednesday. 

Read more:We identified the 70 most powerful people at JPMorgan. Here's our exclusive org chart.

According to the report, JPMorgan would lease space from USPS to provide ATMs and other banking services. There are 31,322 retail US Post Offices across the United States, according to USPS. It's not clear how many of those locations might have the potential for Chase banking services. 

A JPMorgan spokesperson told American Banker that the conversations were preliminary and no agreement has yet been reached. 

"We had very preliminary conversations with the U.S. Postal Service several months ago (conversations began pre-COVID) about what it might look like to lease a small number of spaces to place ATMs to better serve some historically underserved communities," the representative told the industry publication. "These were very preliminary conversations — there is no agreement in place and no imminent plans to move forward."

The proposed partnership would also grant JPMorgan "exclusive" rights to seek business with USPS customers, according to the report. That's no small feat, considering that the Postal Service recorded 811.8 million retail customer visits during 2019, according to USPS.

JPMorgan is the US' largest bank by assets, and currently operates about 5,000 branches in 38 states and Washington, D.C.

SEE ALSO: We identified the 70 most powerful people at JPMorgan. Here's our exclusive org chart.

Join the conversation about this story »

NOW WATCH: Why thoroughbred horse semen is the world's most expensive liquid

• This is a preview of Digital Banking Ecosystem research report from Business Insider Intelligence.
• Purchase this report.
• Business Insider Intelligence offers even more fintech coverage with Banking Pro. Subscribe today to receive industry-changing finance news and analysis to your inbox.

The banking industry is in the grips of an identity crisis. Leaders of the world's largest banks — such as Citi, BBVA, and Goldman Sachs — have begun describing themselves as technology companies with banking licenses.

However, this description is still aspirational. Executing the vision will require billions of dollars in investments, the restructuring of teams, a reimagining of the entire banking technology stack, and the adoption of a far more customer-centric business view. 

The stakes of failing to transform are high: Accenture projects that 35% of all bank revenues could be at risk from more tech-savvy competitors like fintechs as soon as 2020 for incumbents that fail to up their game.

As a result, a wave of digital transformation is now sweeping the banking industry, as incumbents shore up against consumer demand and competitive pressures. Major banks have already announced multibillion-dollar, multiyear digitization projects: By 2021, global banks' IT budgets will surge to $297 billion, up 14% from $261 billion in 2018, according to Celent.

Many incumbent banks are opting to decrease their branch budgets and networks and reinvest their resources in digital channels such as mobile instead to cater to current consumer preferences, and are enlisting the help of tech-savvy software vendors to modernize their tech stacks from top to bottom as part of this process.

In the Digital Banking Ecosystem report, Business Insider Intelligence explores the incumbent banking landscape as a whole, and the third parties banks are calling on to help their transition to digital. We then take a closer look at the three biggest drivers for incumbent banks' digitization push: digital-native competitors like neobanks and Big Tech companies; changing consumer behaviors and banking channel preferences; and a growing array of cybersecurity threats.

Lastly, we examine what incumbents are already doing today to transform themselves into digital-first organizations to compete in a customer-centric, data-driven global economy, and how they are learning to meaningfully measure the progress of their transformations. 

The companies mentioned in this report include: Acronis, Amazon, Ant Financial, Apple, Ario, Banco Galicia, Bancorp, Bank of America, Bank of England, Barclays US Consumer Bank, BBVA, BNP Paribas, Caixa Geral de Depositos, CaixaBank, Capital One, China Construction Bank, Citigroup, Citizens Bank, Compliance.ai, CSI, Dave, Detroit Fintech Bay, Deutsche Bank, Diasoft, Emirates NBD Bank, Finastra, Finn AI, Finxact, First Direct, FIS, Fiserv, Flagstar Bank, Forcepoint, ForSee, Forward Networks, Geezeo, Gemalto, Goldman Sachs, Google, Grab, Hello Bank, Help Systems, HotJar, HSBC, IBM, ICBC, Infosys, ING, ING Direct, Intesa Sanpaolo, Jack Henry, JPMorgan Chase, Kenna Security, Lloyds Bank, Lyft, Midwest Bank, Mission Bank, Monzo, N26, Nationwide, NatWest, nCino, ObserveIT, OnDeck, Openbank, Osano, Personetics, PNC, RBS, Reciprocity Labs, Saga, Santander, Sberbank, Square, Starling Bank, Strands, Tanium, Temenos, Tencent, Thomson Reuters, Thought Machine, Tink, TSB, Uber, United Income, US Bank, Wells Fargo, Zelle, and Zopa. 

Here are some of the key takeaways from the report:

• Incumbent banks are intensifying their digitization efforts in the face of changing consumer demands and growing competitive pressures.
  • The number of US consumers considering switching banks in the next 12 months increased by 86% from a year before, from 6.9 million to 11.9 million, per Resonate, with consumers citing the need for better digital banking services and more personalized products and tools as major motivators.
  • Meanwhile, tech giants like Google and Amazon are poised to grab up to 50% of the $1.35 trillion in US financial services revenue from incumbent banks, per McKinsey, leveraging their tech expertise to lure away customers.
• Legacy channel usage is steadily dwindling, while digital channel usage is firmly on the rise. This turn to digital is being accelerated by younger, tech-savvy generations like millennials and Gen Zers quickly becoming banks' largest addressable market.
  • Once the most widely used banking channel in the US, branch use will drop at a compound annual growth rate (CAGR) of -2.01% between 2019 and 2024, per Business Insider Intelligence projections.
  • Meanwhile, mobile banking, the least-used banking channel in 2008, is expected to grow at a CAGR of 2.83% between 2019 and 2024, the highest among all channels. 
• To digitally transform, banks need to join forces with partners, enemies, and frenemies alike. Vendors will be key to the modernization of banks' IT, with specialists catering to each layer: 81% of banking executives surveyed by Finextra and the Euro Banking Association cited working with partners as the best strategy for achieving digital transformation goals. Banks' growing IT budgets reflect their changing priorities: By 2021, global banks' IT budgets will surge to $297 billion, up 14% from $261 billion in 2018, according to Celent.
• Banks' digital transformations are already well under way, and incumbents are making massive changes to the way they operate and plan for the future to compete in a digital economy. They're doing this by embracing digital-ready innovation models; adopting new business models like open and direct banking; and reorienting their tech stacks around the digital customer experience.

In full, the report:

• Outlines the incumbent banking landscape and its components, and the structure of the banking tech stack and the vendors supplying each of its layers.
• Explains the biggest drivers behind banks' digital transformations, especially the rise of tech-savvy competitors, shifts in consumer behaviors, and a growing number of cybersecurity threats.
• Highlights the steps banks are already taking to turn themselves into digital-first, data-driven, and customer-centric organizations. 
• Evaluates the progress incumbents have made towards digitization, and how deeply they've embedded themselves in the emerging cross-industry digital banking ecosystem.

Interested in getting the full report? Here's how to get access:

1. Purchase & download the full report from our research store. >> Purchase & Download Now
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4. Current subscribers can read the report here.

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This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

Regtech solutions seemed to offer the solution to financial institutions' (FIs) compliance woes when they first came to prominence around 24 months ago, gaining support from regulators and investors alike. 

However, many of the companies offering these solutions haven't scaled as might have been expected from the initial hype, and have failed to follow the trajectory of firms in other segments of fintech.

This unexpected inertia in the regtech industry is likely to resolve over the next 12-18 months as other factors come into play that shift FIs' approach to regtech solutions, and as the companies offering them evolve. External factors driving this change include regulatory support of regtech solutions, and consultancies offering more help to FIs wanting to sift through solutions. Startups offering regtech solutions will also play a part by partnering with each other, forming industry organizations, and taking advantage of new opportunities.

This report from Business Insider Intelligence, Business Insider's premium research service, provides a brief overview of the current global financial regulatory compliance landscape, and the regtech industry's position within it. It then details the major drivers that will shift the dial on FIs' adoption of regtech over the next 12-18 months, as well as those that will propel startups offering regtech solutions to new heights. Finally, it outlines what impact these drivers will have, and gives insight into what the global regtech industry will look like by 2020.

Here are some of the key takeaways:

• Regulatory compliance is still a significant issue faced by global FIs. In 2018 alone, EU regulations MiFID II and PSD2 have come into effect, bringing with them huge handbooks and gigantic reporting requirements. 
• Regtech startups boast solutions that can ease FIs' compliance burden — but they are struggling to scale. 
• Some changes expected to drive greater adoption of these solutions in the next 12 to 18 months are: the ongoing evolution of startups' business models, increasing numbers of partnerships, regulators' promotion of regtech, changing attitudes to the segment among FIs, and consultancies helping to facilitate adoption.
• FIs will actively be using solutions from regtech startups by 2020, and startups will be collaborating in an organized fashion with each other and with FIs. Global regulators will have adopted regtech themselves, while continuing to act as advocates for the industry.

In full, the report:

• Reviews the major changes expected to hit the regtech segment in the next 12 to 18 months.
• Examines the drivers behind these changes, and how the proliferation of regtech will improve compliance for FIs.
• Provides our view on what the future of the regtech industry looks like through 2020.
  Get The Regtech Revisited Report
  

   

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• James Bullard, the president of the St. Louis Fed, says that while the US stock market hitting all-time highs might seem out of touch with the reality of COVID-19, Wall Street's record-breaking rally actually makes a lot of sense.
• "I think Wall Street has called this about right so far," he said, speaking after the S&P 500 and Nasdaq hit record highs this week.
• He expects the US to perform better than expected as major corporates such as Walmart have found new ways to operate safely, and led others to adopt efficient modes of business. 
• "I expect more businesses to be able to operate and more of the economy to be able to run successfully in the second half of 2020," he told Reuters.
• Visit Business Insider's homepage for more stories.

James Bullard, the president of the St. Louis Fed, said in an interview with Reuters that the US stock market hitting all-time highs might seem out of touch with the reality of COVID-19, but that Wall Street's record-breaking rally actually makes a lot of sense.

He expects the US economy to perform much better than predictions suggest as businesses and households continue to mitigate virus-related risks, and the economy remains open.

As the world's case total and death toll continues to climb, federal, state, and local officials take on varied stances on what constitutes safe activity under certain conditions.

People will make adjustments and fine-tune their behaviour in order to continue commercial and economic activity accordingly, Bullard told Reuters. 

"I think Wall Street has called this about right so far," Bullard said, and noted how firms like Walmart have found ways to operate safely during the pandemic, implementing measures such as encouraging shoppers to wear face coverings. 

"There is a lot of ability to mitigate and proceed and most of the data has surprised to the upside ... So I think we are going to do somewhat better," he said. 

"I expect more businesses to be able to operate and more of the economy to be able to run successfully in the second half of 2020."

Read More: A JPMorgan equity chief sees stocks staying rangebound for another year, even if there's a vaccine breakthrough — but says investors can still get big returns in these 11 regions and sectors

His views contrast with those of the current Federal Open Markets Committee members who have agreed that "the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term."

Bullard, who will be a voting member of the FOMC in 2022, predicts that US GDP will shrink by 4% for this year — a more optimistic outlook than the -6.5% that his colleagues laid out in June.  

But Bullard said he does not currently see the rush for any further US stimulus as that should depend on what circumstances will look like once the health crisis is contained.

It would also depend on whether the Fed wants to actively encourage more borrowing, spending, and activity to boost the economy into engaging in commercial activity, he said. 

"At least for now expectations are that the Fed will stay where we are for a very long time," he said. "The idea that you want to stimulate things presupposes that the virus has gone away."

Bullard also said he is against implementing another lockdown in the US because a "lot more" is now known about the virus and its ability to spread than before.

His views are not in line with Minneapolis Fed President Neel Kashkari who recently warned that the US coronavirus case count can only be controlled under a stricter lockdown.

Kashkari, who is a voting member of the FOMC, said last week that further stimulus efforts must be executed to ensure people can stay home and sustain costs of living.

Read More: A $5 billion chief market strategist shares 5 post-pandemic stocks to buy now for gains as COVID-19 cases level off — and 2 big-tech winners to start cashing out of

SEE ALSO: Fed raises concerns of slowing economic rebound in most recent meeting minutes

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NOW WATCH: Epidemiologists debunk 13 coronavirus myths

• This is a preview of the Business Insider Intelligence Personal Finance Management premium research report. Purchase this report here.
• Business Insider Intelligence offers even more banking coverage with our Banking Briefing. Subscribe today to receive industry-changing financial news and analysis to your inbox.

Personal finance management (PFM) tools can allow banks to create highly personalized customer experiences and, in turn, drive revenue and retention. 

The diversity of today's PFM market illustrates the value that a wide range of providers see in developing such offerings, but its promise — PFM was lauded as the future of banking for over a decade — has long failed to materialize for most incumbent banks as well as consumers. PFM user share plateaued at between 10% and 12% as of 2017, the most recently available data, per Celent.

This plateau is the result of several design flaws that made earlier iterations of PFM tools unengaging. These include only showing users their financial data without providing actionable insights, personalized financial advice, or tools to manage their finances more easily; poor user experience (UX) due to many banks' PFM functionalities being confined to separate tabs to better track engagement metrics; and limited data sharing before open banking regulations (in some jurisdictions), making personalization difficult to achieve due to incomplete financial data for each user.

Today's most sophisticated PFM features, however, can give users maximal control of their finances while requiring little effort on users' end through advances in AI, smart analytics, automation, and regulations like open banking. A new breed of PFM providers is drawing on these developments to roll out features that are more insightful, accurate, and predictive than before, making them a powerful tool for getting consumers to engage with their finances in a meaningful way. Customers are responding to this upgraded version of PFM, and banks need to pay attention or they'll risk eroding customer engagement and loyalty. As customers engage with their finances more meaningfully, banks can translate this increased engagement into more revenue.

In the Personal Finance Management Disruptors report, Business Insider Intelligence gives an overview of the major categories of players shaping the PFM market today. We continue by outlining some best practices for banks looking to upgrade their PFM offerings, based on exclusive interviews conducted with seven leading PFM providers. We then present the PFM Digital Maturity Model to show banks and other providers the standards they should be aiming for as they build new PFM features to satisfy customers. We continue by making the case for why banks should reinvest in PFM, and why they can't afford not to. Then, we examine eight sophisticated PFM features we believe are bringing significant value to customers and banks today, enriched through our interviews with the companies providing them. 

The companies mentioned in this report include: Cleo AI, Greenlight, Meniga, Minna Technologies, N26, Personal Capital, Personetics, and Strands.

Here are some of the key takeaways from the report:

• PFM tools allow financial services providers to create highly personalized customer experiences and drive revenue and retention in turn — but banks are falling short of customers' expectations. Consumers are more dissatisfied with their banks' PFM services than with any other type of services they provide, and more than 40% of those surveyed stated that they find PFM services from nonbank providers more useful and helpful, per Oracle.
• There's ample demand for bank-provided PFM tools, however, suggesting that banks should revisit in PFM tools as an essential value proposition. Over 75% of respondents to an RFi survey cited by The Financial Brand said they would prefer to use PFM tools from their primary financial services provider (typically a bank). This compares with just 6% who said they'd prefer PFM tools from fintechs or neobanks.
• The more that banks can employ highly mature PFM tools, the better they will be able to capture the significant opportunity presented. They can specifically gain ROI on their PFM investments in two key areas:
  • Customer retention: 71% of Gen Zers believe brands should "help them achieve personal goals and aspirations," per PSFK data, so incorporating personalized insights and advice into banks' PFM products would create substantial customer value. 
  • Increased customer lifetime value: On average, bank customers who make use of PFM tools are 18% wealthier than those who don't, per Javelin Research data cited by MX, and they tend to own every major financial product, such as mortgages and car loans, all of which are key bank revenue sources.

In full, the report:

• Provides best practices for banks looking to upgrade their PFM offerings to bring more value to their customers.
• Gives an overview of the main types of companies shaping the cutting edge of PFM in today's crowded market.
• Presents the PFM Digital Maturity Model to help banks understand what separates mature from basic PFM features.
• Explains why reinvesting in PFM is imperative for banks, and what they stand to gain from doing so.
• Examines winning strategies for implementing sophisticated PFM features, based on exclusive interviews.

Interested in getting the full report? Here's how to get access:

1. Business Insider Intelligence analyzes the banking industry and provides in-depth analyst reports, proprietary forecasts, customizable charts, and more. >> Check if your company has BII Enterprise membership access to the full report
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• Global stocks fell on Thursday as investors weighed the Fed's cautious stance on further stimulus, and Germany posted a record increase in new coronavirus infections. 
• Investors had expected the latest Fed meeting to "open the door to the next phase in central-bank jigger-pokery," Rabobank analysts said.
• Federal Open Market Committee members confirmed that new stimulus measures were "not warranted in the current environment," dashing investor hopes.
• Germany added over 1,500 new cases of the coronavirus in 24 hours, the biggest single day increase since April.
• Visit Business Insider's homepage for more stories.

Global stocks fell on Thursday after the Federal Reserve dashed any hopes of further stimulus measures in a cautionary set of FOMC minutes released Wednesday. 

In Europe, markets were pushed further down after Germany posted over 1,500 new cases within 24 hours — its highest daily increase since the end of April. The current case count in Europe's largest economy stands at 229,807.

Data from Europe's leading economy carried an "extra sting" for investors who were keen to look beyond other bleak reports on the market, an analyst said. 

The Fed's dispirited meeting minutes "sort of did a number" on markets, said Connor Campbell, a financial analyst at SpreadEx, as officials warned that the pandemic would weigh heavily on economic activity, employment, and inflation in the near term.

However, FOMC members stated that new stimulus measures are "not warranted in the current environment."

Read More:A JPMorgan equity chief sees stocks staying rangebound for another year, even if there's a vaccine breakthrough — but says investors can still get big returns in these 11 regions and sectors

This scenario was largely unexpected as investors had hoped the Fed's latest meeting would "open the door to the next phase in central-bank jigger-pokery" because of the roaring success of initial stimulus plans, Rabobank analysts said.

On Thursday, Australia's Qantas airlines warned that it would scrap international travel to the US until the development of a vaccine, because it is the world's worst-affected country with over 5.5 million cases and more than 172,000 deaths.

In further turmoil for European markets, Croatia may be added to the UK's COVID-19 travel quarantine list, adding to worries for travel and cruise operators in the region. 

Last week, the UK included France, Netherlands, Malta, Monaco, Aruba, and the Turks and Caicos Islands to the list, implying that travellers arriving from these destinations would be required to self-isolate for 14 days. 

Read More:A $5 billion chief market strategist shares 5 post-pandemic stocks to buy now for gains as COVID-19 cases level off — and 2 big-tech winners to start cashing out of

Here's the market roundup as of 11.35 a.m. in London (6.35 a.m. ET):

• Asian indexes finished lower with China's Shanghai Composite down 1.3%, Hong Kong's Hang Seng down 1.5%, and Japan's Nikkei down 1%.
• European equities fell, with Germany's DAX down 0.8%, Britain's FTSE 100 down 1.2%, and the Euro Stoxx 50 down 0.9%.
• US stocks are set to open lower. Futures underlying the Dow Jones Industrial Average, the S&P 500, and the US Tech 100 fell 0.3%.
• Oil prices fell, with West Texas Intermediate down 1% at $42, and Brent crude down 1% at $44.
• The benchmark 10-year Treasury yield fell to 0.65%.
• Gold fell 1.9% to $1,932 per ounce.  

Read More:Jefferies says buy these 7 back-to-school stocks poised for big returns with much of the US going remote

SEE ALSO: A senior Fed official says 'Wall Street has called this about right' after stocks rally to record highs even as fears persist about US economic health

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• Major startup Plaid announced Thursday that Meredith Fuchs, a veteran lawyer with decades of experience in government regulatory agencies, is joining as its new general counsel.
• Fuchs has worked in a slew of high-profile jobs in government, from chief investigative counsel for the US House of Representatives' committee on energy and commerce, to deputy director at the Consumer Financial Protection Bureau.
• Business Insider spoke with Fuchs about how she landed at Plaid, and how she plans on helping the startup navigate tensions with banks that are concerned about fintechs accessing their data.
• Visit Business Insider's homepage for more stories.

Plaid has hired Meredith Fuchs, an attorney with extensive experience working in government regulatory agencies, to join the startup as its new general counsel, the firm announced Thursday.

As GC, she will be overseeing the legal and risk teams at Plaid, a major Wall Street startup that links users' bank accounts with digital finance apps and services, and helping it navigate the thorny policy and legal issues surrounding the personal financial information it handles.

As fintechs have grown in stature, some banks have become wary of giving them unlimited access to customers' accounts and data. Zach Perret, Plaid's CEO and cofounder, told Business Insider in February a main focus of the startup was to put more controls in place around access to customers' data. Visa is in the process of acquiring Plaid.

Fuch foresees a potential challenge in helping banks, who are typically very focused on risks, understand that fintech products can actually benefit their customers and business.

"Part of what I want to bring to Plaid is just understanding that when banks are pushing hard about their interactions with Plaid, it's because they feel a lot of pressure from the way they're regulated," she said. "Once Plaid understands the banks better and the banks understand Plaid better, I think we're going to be able to jointly find solutions."

With her background in regulatory agencies like the CFPB, as well as in banks like Capital One, Fuchs is well-positioned to help bridge these seemingly opposed mindsets.

The road from regulator to legal counsel 

Although she always thought she'd be a litigator, Fuchs found herself jumping into a string of consumer-centered regulatory jobs after graduating from the New York University law school in 1993. 

In 2011, Fuchs spent a year as the chief investigative counsel for the US House of Representatives, before joining the government's newly-minted Consumer Financial Protection Bureau in the wake of the financial crisis.

It was an encounter with a Texan megachurch's food bank during a CFPB work trip that stuck with Fuchs throughout her legal career. The church described how it was seeing more people coming to its food bank to ask for money — not to buy food, but to pay off their loans. 

"I thought, 'that is just not acceptable.' There's gotta be ways for our system to work, to allow people access to small-dollar loans, to help them get through hardship," she recalled.

Fuchs then moved in-house, spending four and a half years as senior vice president and chief counsel at Capital One. She helped the bank "make the right choices and stay out of trouble" as it navigated the complex regulatory landscape.

Read more: How lawyers can break into the $34.5 billion world of fintechs and land lucrative jobs at hot startups, from general counsel working at companies like Lemonade, Toast, and Stash

When Plaid reached out with the GC offer several months ago, right in the middle of the pandemic, Fuchs was initially hesitant, but the opportunity for growth ultimately reeled her in.

"I was happy at Capital One, but after speaking with the CEO of Plaid, I became excited by a company that wants to build the infrastructure for future financial services and expand access for consumers," she said.

Ultimately, Fuchs is the most eager to be part of a forward-looking startup whose core business is innovation.

"Several years down the line, Plaid is going to be able to look at all of the apps and developers who use its services… and realize that it actually helped change financial services," she said. "And I just think that's really exciting. The change is going to be access — access for any person to the services they need."

Read more:

• $5.3 billion fintech Plaid is in the middle of a high-stakes fight over customer data. Its CEO told us why the startup wants to give users control.
• Average fintech salaries are in the six figures. A talent exec at $5.3 billion Plaid lays out 3 ways to get your foot in the door.
• The notoriously old-school legal industry is finally warming up to tech. Here are the winners and losers as law firms turn to startups to cut costs.

SEE ALSO: How lawyers can break into the $34.5 billion world of fintechs and land lucrative jobs at hot startups, from general counsel working at companies like Lemonade, Toast, and Stash

SEE ALSO: $5.3 billion fintech Plaid is in the middle of a high-stakes fight over customer data. Its CEO told us why the startup wants to give users control.

Join the conversation about this story »

NOW WATCH: Why electric planes haven't taken off yet

• This is a preview of The Digital Identity And The Future Of Banking research report from Business Insider Intelligence.
• Purchase this report.
• Business Insider Intelligence offers even more insights like this with our brand new Banking coverage. Subscribe today to receive industry-changing banking news and analysis to your inbox.

Disruptive digital-only banks, innovative regulations, and shifting consumer demands have made today's banking digital-first — but the benefits of digitization are being held back by identity verification challenges.

Identity verification underlies many of the core processes associated with financial services, with banks required to subject their customers to strict identity checks, both to protect those users' finances and to meet regulatory compliance demands.

There have been a plethora of efforts aimed at streamlining identity verification online, but these attempts have largely failed to address the issue in its entirety. For example, customers are often required to create unwieldy passwords and verification details that can be difficult to keep track of to access their accounts. Not only have these efforts created new points of friction for users, but they're also expensive for banks, with each password reset costing up to $70 according to Forrester Research estimates.

These issues run deeper than password reset costs, though: Banks spend billions annually on compliance requirements related to identity verification, while agile and technology-first players are snapping at these players' heels by streamlining how they offer services to banks' customers.

However, digital ID solutions can help iron out these identity verification headwinds, in the process providing a foundation for banks to bat away the growing threat to their core business from industry insurgents.  Digital IDs, when done right, can help banks ease identity verification pain points for their customers while also helping them slash operational and compliance costs.

These reasons alone are sufficient for banks to take the lead in developing digital ID schemes. But the identity verification challenge isn't limited to financial services, and banks that are successful in developing their own digital ID solutions can tap into new business opportunities as trusted providers of identity solutions across a whole range of industries, from e-commerce to healthcare and public services.

In the DIGITAL IDENTITY AND THE FUTURE OF BANKING report, Business Insider Intelligence defines digital ID and discusses the technologies used to deliver the solution, and lays out the case for why banks have a compelling reason — and are best suited — to take the lead on digital identity. This report will illustrate how these players can go about developing scalable and effective digital ID solutions to solve genuine pain points in their own business and take advantage of the opportunities that digital identity infrastructures open up.

The companies mentioned in this report are: Barclays, Belfius, BNP Paribas Fortis, Capital One, CIBC, Danske Bank, Desjardins, First American Corporation, Handelsbanken, ING, KBC/CBC, Mastercard, Microsoft, Orange, Proximus, Rabobank, RBC, Scotiabank, Signicat, SkandiaBanken, Sparbanken Gripen, Telenet, TD Bank.

Here are some of the key takeaways from the report:

• Digitization — driven by agile and innovative fintechs, regulations, and falling costs of technologies like smartphones — has transformed how customers interact with their banks.
• But efforts to realize the full benefits of digitization are being stymied by inefficient identification processes, which are creating new pain points for banks and their customers.
• Digital ID solutions, which contain the set of information that can be used on digital channels to accurately identify a person, can help solve these pain points for consumers.
• If done well, banks will be the biggest beneficiaries of digital IDs, because these solutions can help them slash onboarding and compliance costs while also allowing them to tap into new revenue opportunities. 

In full, the report:

• Details the key challenges with existing identity verification solutions.
• Identifies how digital IDs can help eliminate existing identity verification pain points.
• Explores how digital IDs can unlock new revenue streams for banks.
• Canvases a number of successful digital ID efforts undertaken by banks, and provides an example of a failed project to highlight the role banks can play in solving the vexing identity verification challenge.

Interested in getting the full report? Here's how to get access:

1. Purchase & download the full report from our research store. >> Purchase & Download Now
2. Sign up for Banking Pro, Business Insider Intelligence's expert product suite tailored for today's (and tomorrow's) decision-makers in the financial services industry, delivered to your inbox 6x a week. >>Get Started
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We're almost at the weekend. 

I usually like to highlight a major story of the day, but we've published too much good stuff to wait. Let's just get into it. 

If you're not yet a subscriber, you can sign up here to get your daily dose of the stories dominating banking, business, and big deals.

Like the newsletter? Hate the newsletter? Feel free to drop me a line at ddefrancesco@businessinsider.com or on Twitter @DanDeFrancesco. 

Recruiting on Wall Street is no joke. The competition is always ferocious, as firms want to maintain a pipeline of young talent. That goes double for alternative asset managers like hedge funds and private-equity firms. 

Reed Alexander, Alex Morrell, and Casey Sullivan leaned on their sources to suss out the 12 headhunting firms that are excelling at placing talent on the buy side. 

The resulting list is a great snapshot of who are the key people when it comes to staffing roles at firms like Blackstone, Apollo Global, and Citadel. 

So whether you're early in your career and looking to make a move to the buy side, or you're an investment firm looking for ways to source young talent, it's a list worth checking out. 

Click here to read the full list.

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• Warren Buffett advised Airbnb CEO Brian Chesky to "get rich slow" at a lunch years ago.
• Chesky sped up the process on Wednesday by filing to take his home-rental company public, even though it's still battling the coronavirus pandemic.
• Airbnb's bosses cut costs, raised $2 billion in capital, and laid off 25% of their workforce earlier this year as they expected annual revenue to plunge more than 50%.
• More positively, Airbnb customers booked more than 1 million nights of future stays worldwide on July 8 for the first time since March.
• Visit Business Insider's homepage for more stories.

  ---

Warren Buffett once advised Airbnb CEO Brian Chesky to "get rich slow." Chesky sped things up on Wednesday by filing to take his home-rental company public, despite the coronavirus pandemic continuing to weigh on its business.

Buffett, a billionaire investor and the CEO of Berkshire Hathaway, made the comment during lunch with Chesky and Amazon CEO Jeff Bezos, Chesky said in a PandoMonthly interview in 2013. Bezos asked Buffett why everyone doesn't copy his simple investing strategy and make a fortune.

"Because no one wants to get rich slow," Buffett replied. 

'Getting rich slow isn't actually slower'

Chesky underlined the wisdom of Buffett's approach in a Fortune interview in 2017, after Airbnb was privately valued at $30 billion.

"Nothing about Airbnb was slow," he said. "It's only nine years old. But I do think that it's been helpful for us to be able to go a little slower and take a little bit of a breather and be a little more thoughtful."

However, Chesky added that tapping the brakes at a fast-growing company is tricky and can lead to work piling up in the future.

"Getting rich slow isn't actually slower," he said. "It's slower in year one, but it might be faster in year seven."

Airbnb didn't immediately respond to a request for comment from Business Insider.

Bouncing back

Chesky and his cofounders are attempting an IPO shortly after the toughest period in Airbnb's history. The coronavirus pandemic sparked widespread lockdowns earlier this year, devastating global travel and eviscerating demand on Airbnb's platform.

Chesky wrote in May that Airbnb's revenues were forecast to plunge more than 50% this year. He responded by slashing costs, raising $2 billion in fresh capital, and laying off 1,900 employees or 25% of the group's global workforce. The measures were intended to help focus and "evolve" the company for the post-virus era, he said.

Airbnb also refunded customers who were forced to cancel trips, and set aside $250 million to reimburse hosts who lost bookings. Bookings rebounded in June but were still down 30% versus the same period last year, Bloomberg reported.

The overall outcome was a 67% year-on-year plunge in revenues to $335 million last quarter, which fueled a $400 million loss before interest, tax, depreciation, and amortization, Bloomberg said.

More positively, customers booked more than one million nights of future Airbnb stays worldwide on July 8 — the first time that bookings reached that level since March, Airbnb said.

Airbnb's recent challenges call into question why Chesky is pushing to list the company this year, potentially disregarding Buffett's advice. One reason could be pressure from employees to go public before lucrative stock options expire, The Wall Street Journal reported.

The stock market's swift recovery may also be a factor. Both the S&P 500 and Nasdaq closed at record highs early this week.

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• First-year investment banking analysts at bulge-bracket banks average nearly $91,000 per year in base pay, according to data from Wall Street Oasis.
• Leading investment banks also pay their analysts handsomely in annual bonuses, which can drive up their base salaries by tens of thousands of dollars.
• Bank of America Merrill Lynch tops the list with the highest average total comp for first-year analysts among bulge-bracket banks, coming in just shy of $160,000.
• Business Insider parsed through data from Wall Street Oasis to round up what the 10 bulge-bracket banks pay their first-year analysts.
• Visit Business Insider's homepage for more stories.

Considering a career in investment banking? One of the primary reasons is probably because of the money. 

And for good reason: Investment bankers are among America's highest-paid earners straight out of college.

Indeed, bulge-bracket banks like Goldman Sachs, Wells Fargo, and UBS pay their first-year analysts in investment banking, on average, $91,000 per year — not including bonuses — according to data from the website Wall Street Oasis.

If that's not enviable enough, just consider the additional tens of thousands of dollars that some of these young professionals receive in bonuses, which can be upwards of $50,000, WSO's data show.

Read more: REVEALED: How much investment bankers get paid as they rise the ranks at firms like Moelis and Evercore, from analyst up to VP

For context, the average US college graduate earns a $50,000 annual salary in their first job, according to a survey from the National Association of Colleges and Employers.

But, roughly $50,000 is what first-year analysts at Bank of America Merrill Lynch earn in bonuses alone (it's actually slightly more: $51,800). Add that to their annual salaries — $107,900, according to WSO data — and those analysts walk away with nearly $160,000 for their first year on the job.

To compile its salary data, Wall Street Oasis users submitted compensation numbers to the site. Data on first-year analyst salaries were compiled from 544 submissions across the top 10 investment banks. When approached by Business Insider, these banks either declined or did not respond to a request for comment for this story.

Here's what first-year analysts in investment banking earn in salary and bonuses at Wall Street's bulge-bracket banks.

(All numbers are based on data as of August 19th.)

SEE ALSO: POWER PLAYERS: Meet 20 top Wall Street restructuring bankers taking center stage as a wave of bankruptcies rocks Corporate America

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Bank of America Merrill Lynch

Mean base salary: $107,900

Mean bonus: $51,800

Median bonus: $55,000

Total mean compensation: $159,700

Barclays Capital

Mean base salary: $83,000

Mean bonus: $34,000

Median bonus: $32,500

Total mean compensation: $117,000

Citigroup

Mean base salary: $98,400

Mean bonus: $44,300

Median bonus: $50,000

Total mean compensation: $142,700

Credit Suisse

Mean base salary: $87,300

Mean bonus: $37,900

Median bonus: $50,000

Total mean compensation: $125,200

Deutsche Bank

Mean base salary: $81,500

Mean bonus: $28,900

Median bonus: $25,000

Total mean compensation: $110,400

Goldman Sachs

Mean base salary: $86,600

Mean bonus: $36,900

Median bonus: $40,000

Total mean compensation: $123,500

JPMorgan Chase

Mean base salary: $77,900

Mean bonus: $33,800

Median bonus: $25,000

Total mean compensation: $111,700

Morgan Stanley

Mean base salary: $85,000

Mean bonus: $40,700

Median bonus: $50,000

Total mean compensation: $125,700

UBS AG

Mean base salary: $81,700

Mean bonus: $21,900

Median bonus: $25,000

Total mean compensation: $103,600

Wells Fargo

Mean base salary: $95,200

Mean bonus: $40,900

Median bonus: $50,000

Total mean compensation: $136,100

• In a sign of the fierce competition among wealth managers offering low-cost advice, Charles Schwab said Thursday it launched a new digital tool that automates the financial planning process for users. 
• The new platform resembles approaches from robo-advisers Betterment and Wealthfront, which evaluate users' financial situations and create plans for them, and legacy competitors like Fidelity. 
• The tool comes just over a year after it put a subscription-based twist on its automated investing product.
• Visit Business Insider's homepage for more stories.

Late last year, brokerages and wealth management firms scrambled to eliminate the cost of do-it-yourself trading so they could stay relevant and compete with the cult of Robinhood.

Now that the commission-free trading battle has faded, a different front in the brokerage wars is playing out across the industry: firms have to compete aggressively on the price of financial planning advice. 

On Thursday, wealth and brokerage powerhouse Charles Schwab launched a new digital tool that automates users' financial and retirement planning process, complete with a big-picture evaluation of risk appetite and goals. Anyone with a Schwab brokerage account can sign up, and there is no minimum to use the new product, Schwab Plan.

The approach should sound familiar. Firms across the industry are coming up with sleek, low-barrier-to-entry digital approaches to help people plan out their financial lives so they can draw in a new set of digitally savvy customers. 

Schwab Plan is distinct from the firm's robo-adviser it introduced in 2015 and re-branded as Intelligent Portfolios Premium with a subscription-based twist last year. The robo-adviser has fees, and an account minimum.

"The client type really is about preferring a digital methodology as opposed to someone who wants to meet with or speak with someone in person, and is comfortable self-guiding through that experience," said Cynthia Loh, Schwab's vice president of digital advice, in an interview on Wednesday.

"That's how we think about the target," she said when asked about the client Schwab had in mind when building out Schwab Plan. "If you wanted more sophisticated planning, or to meet with someone one-on-one, we would probably recommend one of our other financial planning offers."

Loh, who joined San Francisco-based Schwab in 2017 from the robo-adviser Betterment, oversees the client experience for the Intelligent Portfolios lineup and was part of spearheading its new planning tool.

Schwab worked with the Envestnet-owned wealth management software firm MoneyGuidePro to launch the new tool, which sets users up with a dashboard and can pull together accounts held away from Schwab. 

The firm does not expect to generate revenue directly from the new tool, which comes at no cost to self-directed users. Schwab sees the platform as a way to level the playing field for users who want to start planning out their long-term financial goals, like saving for retirement, and can direct customers to its other products like the Intelligent Portfolios suite.

Schwab, set to close on its $26 billion TD Ameritrade acquisition by year-end, oversaw $4.3 trillion in client assets through July 31 and reported 14.2 million active brokerage accounts as of August 14.

Competition for low-cost financial planning

Charles Schwab executives have acknowledged the rivalry for new customers in the self-directed and hybrid human-and-digital advice spheres is fierce — not only from establishment names, but new entrants, too. 

At an investor presentation in February, management said the intensity of incentives from competitors to open new accounts, like cash, was "higher than ever before." 

Read more: Charles Schwab execs explained why the firm is now having to make 'distasteful' cash offers to investors just to compete in the cut-throat brokerage industry

"Unfortunately, this approach works," Schwab CEO Walt Bettinger said at the time. "And so therefore, organizations like ours, despite finding it a somewhat distasteful approach, recognize that we have to be willing to match these types of things or there's a certain percentage of clients who will move on."

One of Schwab's biggest rivals, Boston-based Fidelity Investments, last month introduced a new, free app geared toward "young adults" and their financial goals, allowing users to track their process and time horizon.

Fidelity also said would offer $5 sign-up and referral bonuses, and introduce subscription-style pricing for its four-year-old robo-adviser, called Fidelity Go.

Meanwhile Betterment and Wealthfront, which both launched around a decade ago, before legacy firms developed their own robo-advice offerings, have similar features for users to plan out their financial lives and track progress.  

SEE ALSO: Charles Schwab execs explained why the firm is now having to make 'distasteful' cash offers to investors just to compete in the cut-throat brokerage industry

SEE ALSO: Pain points around onboarding new clients and remote transactions are causing wealth firms to lose clients and talent. Here's how they can improve.

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• Law firms are increasingly giving clients access to anonymized, internal data that may give them an edge in a dispute or deal.
• The firms view it as a way to keep clients "sticky" in a competitive legal market. 
• Visit Business Insider's homepage for more stories.

Lawyers have a reputation for keeping secrets, but more of them are starting to see value in sharing proprietary data with clients.

Under pressure from their clients to provide more certainty about how a lawsuit might progress, employment law firms are turning to internal databases to estimate damages and give settlement values. And transactions lawyers see value in analyzing the nonpublic aspects of the deals they work on and sharing that information with clients.

The data isn't for sale. But similar to how banks and consultants share insights as part of their offering to clients, attorneys and others in the legal industry say providing unique data is a way to keep clients "sticky" in a competitive marketplace.

"Clients would call us and they'd say, 'what are you seeing for' — fill in the blank — 'pricing,' 'leverage in this particular industry' — and we knew what the answer was," said Stephen Boyko, whose private credit group at Proskauer Rose tabulates information for the roughly 200 debt deals it processes per year. The firm began publishing a select handful of statistics about defaults on such deals in May, but issues lengthy reports that are for clients' eyes only.

Other players in the private credit markets have asked about buying Proskauer's data, but Boyko said the firm has decided against it. "I'd rather have it be something that's part of the relationship than to charge them $50,000 for something," he said. "I'd rather them send me another transaction."

Over the past decade or so, startups and big names in legal research like LexisNexis have been aggregating, formatting and analyzing public information from court databases and securities filings to offer insights into litigation, regulation and corporate activity. Law firms have also been getting public data in front of clients; Dechert puts out quarterly reports on the timelines and outcomes of investigations by antitrust authorities in the US and Europe.

But a growing number of law firms have been using their own data to make themselves more valuable to clients.

Law firms like Proskauer are finding that the data they generate from their engagements is a hot commodity. Michael Rynowecer, the president of BTI Consulting, who focuses on law firm-client relationships, said private equity and M&A lawyers get deep into the weeds on deals and can provide exclusive data to their clients.

"If I put out a brochure on it, it might be interesting, it might be telling, it might be helpful, but it doesn't have that you-just-whispered-something-in-my-ear approach," he said.

Doug Ellenoff, whose firm Ellenoff Grossman & Schole has a bigger market share than many larger firms when it comes to winning mandates for special-purpose acquisition companies' IPOs and acquisitions, said lots of SPAC data can be gleaned from public records. But some information that doesn't concern public shareholders — like the sources of funding that a SPAC sponsor usually taps for its own investment in the new company — isn't something most lawyers can provide, he said.

"We have aggregated data on those that's anonymized so we can guide our clients," Ellenoff said. He's comfortable disclosing fees — his firm charges between $200,000 and $250,000 for a SPAC IPO, depending on its value — but said the firm saves its insights on nonpublic aspects of SPACs for pitches and client interactions.

If his firm published such data, "everyone would take what we created," Ellenoff said.

Litigators also have proprietary data they can wow clients with. Justin Sanders, a co-managing partner of the employment defense firm Sanders Roberts, said his firm can use detailed records of the attributes of the cases it works on — from the specific legal claims plaintiffs bring to their seniority level within a company — to give employers a sense of what's at stake and what they should consider settling for. But he said care must be taken to keep confidences.

"We're not selling data," he said. "We're selling advice, based on data."

Several lawyers and law-firm consultants made that same distinction. While law firms can use data to give their clients certainty and add value, they don't see themselves as a substitute for the investment bankers and accounting and consulting firms like KPMG, EY, PwC and Deloitte that their clients turn to for everything short of legal advice.

"We are providing our clients with a granularity of information about market terms and trends that others in the industry cannot," Boyko said in an email. "We don't view our data as displacing investment bankers or financial advisors but augmenting the information that others can provide."

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• Blackstone, the world's largest corporate landlord, has $46 billion of dry powder allocated for real estate, as the pandemic commercial real estate shakeout begins.
• Global co-head of real estate Ken Caplan spoke with Business Insider about how the firm is thinking of investing its money in the post-lockdown landscape. 
• Logistics, already the biggest part of Blackstone's portfolio, remains a major opportunity, even as others look to the already crowded asset class.
• While office, retail, and hotels have all had some ill-effect from the pandemic, Blackstone continues to see long-term tailwinds about the hotel and certain sectors of the office market, while retail is more challenging.
• Visit Business Insider's homepage for more stories.

When the world's largest corporate landlord Blackstone acquired GLP's logistics assets last year in the largest private real estate deal ever, it was just the tip of a much bigger iceberg. The firm has been laser-focused on the real-world infrastructure that supports e-commerce for a decade, adding over one billion square feet of logistics space in more than 200 separate transactions in that time. Logistics assets are now the largest asset class in Blackstone's portfolio. 

This strategy was winning before the coronavirus, but now it's looking even better as online shopping soars amid the pandemic. 

"Logistics is a very popular sector right now, but not one we just decided last week was interesting," Ken Caplan, global co-head of real estate, told Business Insider. 

Caplan has been thinking about the broader industrial world since he first started at the firm in 1997, and actually worked on the firm's first warehouse purchase in Europe back in the late 90s. The firm's current strategy on logistics took hold around 2010. At the time, logistics was only 2% of their real estate portfolio, and now makes up a third of its $324 billion real estate portfolio. 

Blackstone, which is currently sitting on a record amount of dry powder, $156 billion, is starting to gear up to invest in assets in the post-COVID world. It has $46 billion allocated for real estate investments. 

Caplan sat down with Business Insider to talk about how the firm is thinking about investing in the time of COVID. Blackstone, famous for its thematic investing style, is using data from its properties to come up with themes about the changing world, and then investing based on those themes. The pandemic has shuffled some of the deck, but the firm believes that many of the themes it was following continue to remain good investments now.

"Our business is driven by investing thematically in sectors with powerful secular tailwinds, like content creation, logistics, and life science," Caplan said.

Despite being popular, logistics real estate is undervalued 

The pandemic's effect on logistics real estate can not be overstated. It turned a hot sector into the hottest sector, as more people used e-commerce for more purchases than ever before. Prologis, the largest REIT in the logistics space, is actually trading at a higher price per share now than it did before the public markets collapsed in late February. REITs in other categories like retail or hotels can't say the same.

This has brought more players into the space than ever before. While there aren't many companies that can compete with Blackstone on giant transactions like the GLP deal, more and more players of all sizes are trying to strike gold in the category. 

Read more:Cold storage is 2020's red-hot real estate play. Here's how the private-equity backed industry leader is spending $500 million to tighten its grip on the market.

Still, Caplan and Blackstone continue to see many opportunities for new deals, and new opportunities to make money. The reasoning is deeply tied to the theme that undergirds their investments, e-commerce. 

Caplan said that the market is still undervaluing just how essential and valuable logistical real estate is, and the market hasn't yet caught up to the realities of what e-commerce means.  

"There has been such a fundamental shift in utility for this asset and demand for this asset that the value has shifted very meaningfully as well, and we think that it is still under-appreciated," Caplan told Business Insider. 

There are still great opportunities for the firm, he added, especially in markets that don't have as high levels of e-commerce adoption as the US, such as Europe and parts of Asia.

Why offices are still good opportunities

On Blackstone's second-quarter earning's call, COO Jon Gray said that the firm would look to invest in offices and hotels, where challenges appear to be more "cyclical," while avoiding the retail sector which has more fundamental "secular" issues. 

Some think that remote work has the potential to be a long-term threat to offices. However, Blackstone's view here is quite clear: while fully remote work is able to keep businesses operating in a crisis, it poses significant challenges for training new employees, collaboration, and company culture.

While some office locations, like New York City, will see significant challenges in the near-term, Blackstone is confident that office demand will return. It doesn't have the same feeling about struggling retail. 

"One of the challenges in retail is that it oftentimes is not a better experience than the alternative, whereas, with office, it is often a better experience than the alternative," Caplan said, comparing the ease of e-commerce to the struggle of running a building remotely. 

Read more:Markets for retail and office space are under enormous pressure. A foreclosure in the works for a building on NYC's glitzy Fifth Avenue shopping corridor shows just how bad it's getting.

In the office space, Caplan said there are "powerful secular tailwinds" for the life sciences and content-creation/media sectors specifically. Both sectors require in-person activity, whether a lab or a movie studio, which insulates them from the potential downside of an increasingly remote world. 

These trends, which Blackstone was already invested in, have been bolstered by the effects of the pandemic. Blackstone's life sciences office company, BioMed, is one of the firm's four largest investments, and the firm owns over half of the Class A office space in film studio-rich Burbank, California.

Blackstone has already completed another major transaction since the pandemic began: signing a deal in late June for a 49% stake in three Hollywood studios and five offices owned by Hudson Pacific Properties and valued at $1.65 billion. These acquisitions count Netflix, CBS, and Walt Disney as tenants. Disney is also a tenant of some of Blackstone's Burbank office space. 

Outlook on hotels and retail

The hotel industry has understandably been hit extremely hard by the coronavirus, with some hotels having essentially no income at all for the first two months of the pandemic. However, Blackstone still believes that the long-standing trend of increased travel will continue once consumers feel comfortable to travel again. 

"In other areas where we've had high conviction in a longer-term trend and have seen that trend interrupted, like global travel, we believe it will return over time," Caplan said.

Blackstone sold Hilton after 11 years in 2018, but the company still owns hotels. Blackstone hotels that have reopened are beginning to see demand from regional leisure travelers, though business travel will likely take longer to bounce back.

Read more:Investments in risky hotel debt could get wiped out as travel gets slammed — and one group of lenders may see an outsized hit

While the larger trend of online shopping dims most enthusiasm for the space, some retail, especially a shopping center anchored by a grocery store or a high performing Asian mall, remains an attractive deal.

"In retail, we see a more secular change happening, where you have this shift to online or e-commerce that is reducing demand in the space and causing challenges that we don't think will reverse," Caplan said.

SEE ALSO: Real estate giant CBRE has an 'unparalleled' amount of data. Its tech chief lays out how it's putting it to good use.

SEE ALSO: Real-estate developers are betting on a risky strategy to reimagine retail space in hopes of rescuing struggling shopping centers

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• Blackstone's acquisition in 2008 of credit-investing platform GSO has been a massive success, with assets growing from $10 billion to nearly $130 billion today. 
• But the absorption of GSO wasn't entirely smooth, with two distinctly separate cultures that sometimes clashed — especially as it pertained to its distressed-investing unit.
• The distressed-credit group in particular featured a slew of all-star investors, but it also created PR black eyes for the firm and mixed-performance over the years. The firm closed up its distressed hedge fund in 2017 and folded it into longer-term strategies. 
• Many of the firm's top distressed traders and analysts left amid the turmoil and have landed at powerhouse competitors or attracted billions for their own fund launches.
• With the pandemic wreaking havoc on the economy, billions are flocking to distressed-debt strategies — and GSO's alumni are now positioned to buy up assets for rival funds
• Visit Business Insider's homepage for more stories.

When Mike Whitman vacated his role as leader of Blackstone's European credit division late 2019, he didn't expect that, months later, he'd find himself out of his new job after his former employer objected to his hire at the growth-equity firm, General Atlantic.

After Whitman took on the newly formed role as head of capital solutions at GA, Blackstone reached out to the firm and pointed to a contract that prohibited another exec who was working with GA — a onetime member of Blackstone leadership — from poaching their talent.

Whitman subsequently departed GA and Blackstone chalked up the kerfuffle to a unique dust-up that wasn't reflective of the firm's treatment toward outgoing executives. 

"Many former employees have gone on to great success after leaving the firm and we have never had such a dispute in our 35-year history," Blackstone spokesperson Kate Holderness told Bloomberg in July.

"We made it clear to General Atlantic that our objective was never to interfere with the successful launch of their venture."

Intentions aside, the news of Whitman's forced departure touched a nerve in a certain segment of the credit-investing community.

Some who have worked with Blackstone felt the maneuver showed how sensitive the investment giant had become to losing talent in its credit business after a push to integrate the unit with its corporate Blackstone owner. 

Aside from Whitman, GSO has experienced an exodus of senior traders, analysts, and execs in recent years, especially in its distressed-credit business — a unit that produced prodigious talent but also a considerable amount of controversy. Amid the run of exits and the rash of new opportunities from the ongoing economic carnage, Business Insider tracked where 11 of the firm's top distressed professionals are today, including powerhouse rivals like Ares and Angelo Gordon as well as successful fund launches of their own.

"The facts speak for themselves. GSO has continued its tremendous growth to $129B AUM and is coming off its best quarter since the global financial crisis," said a Blackstone spokesperson. "The integration of GSO into Blackstone has led to large scale deal opportunities, a rigorous investment process and a culture that prizes teamwork. Yes, a number of intentional changes have been made to the distressed investing unit which have been quite positive for performance and culture."

Blackstone and GSO had distinctly separate cultures from the start

Blackstone acquired its credit business in 2008, through a company called GSO, named after Bennett Goodman, by all accounts the face of the firm; Tripp Smith, who was closely involved with liquid funds; and Doug Ostrover, who oversaw fundraising. 

By almost any measure, the acquisition was phenomenally successful, with assets for the group ballooning from $10 billion to nearly $130 billion today. But the absorption of GSO wasn't an entirely smooth process, with distinctly separate cultures and executives focused on smaller deals let go in the early days.

While GSO had its own "in crowd" like many other businesses, its workplace wasn't as buttoned up, or hierarchical, as Blackstone, according to former employees. 

They had to implement new procedures to approve everything from investments to small company expenses. And some, at least in the years shortly following Blackstone's acquisition, found it mildly annoying that there seemed to be such a focus on cost management, pointing to a lack of bottled water in their offices. 

"GSO is the only place where executives didn't wear ties, in all of Blackstone," another former employee said. "The prototype of someone who worked at GSO was just way different." 

Distressed investing became a lightning rod

As time went by, more significant fault lines surfaced than cultural divisions — especially in relation to GSO's distressed-investing operations.

Following stellar performance in 2012 and 2013, the distressed-debt unit of GSO had some bumpy years — it pulled net returns of just 3% in 2014 and lost 8% in 2015, tougher years for the industry at large, before bouncing back with a 13% net return in 2016, according to the firm's public filings.  

Along the way, the compensation structure in GSO was retooled, sources said, shifting away from pay for performance in special situations after Ostrover left in 2015, toward lockstep compensation — which emphasizes seniority and tenure — to better equalize pay across GSO.

That presented retention challenges for the special-situations staffers who chiefly invest in public markets, where track records are more transparent and competition for high-performing traders and analysts is fierce. 

Paying high performers in lockstep meant they underpaid the market, making it easier for competitors to swoop in, sources said. 

But Blackstone wasn't exactly protecting the business from poachers, either. Amid the mixed performance as well as some public relations dust-ups, the firm opted to shut the distressed hedge fund in 2017, shifting its assets into a "lock up" structure more akin to its longer horizon private-equity businesses rather than the quarterly format favored by hedge funds that enables frequent investor redemptions.

Those moves signaled a push away from a controversial trading practice GSO had become known for, called "default manufacturing."

The practice was perhaps most closely associated with a London-based trader named Akshay Shah. And here is how it would go:

Blackstone would buy a credit-default swap on the debt of a struggling company, and then offer its executives a separate loan to keep the business afloat — with the condition that the company pay other loan obligations a couple days late, triggering a payout from the CDS Blackstone had bought. 

That kind of trading landed Blackstone on the Daily Show with Jon Stewart, who called the activity "insane" and drew a parallel to the 1990 movie Goodfellas when the lead characters bought insurance on a restaurant and then "deliberately [blew] the restaurant up."

"But in 'Goodfellas,' it was illegal; in the financial world, it's above board," Stewart said.

Some of the companies in which GSO conducted this default manufacturing included Spanish gaming company Codere SA — which Stewart referred to — and homebuilder, Hovnanian. 

Blackstone shuttered its distressed hedge fund

But it all came to an end in 2017 when Blackstone disbanded its hedge fund business and some of the lead distressed debt executives found new homes.

Shah, whose aggressive tactics were profiled at length in the Financial Times, launched his own European fund, Kyma Capital, while Ryan Mollett, another top-ranking executive behind some of GSO's friskiest trades, joined Angelo Gordon.

Throughout the tumult, there was internal finger-pointing over who was most responsible for causing what Blackstone's top brass considered an optics problem, according to insiders. One executive who rose the ranks within GSO — and succeeded firm founders in 2019— was Dwight Scott, an energy focused investor who was close with Blackstone's president, Jon Gray. 

Gray, the chair of Hilton Worldwide whose rise on Wall Street came from real estate and private-equity investing, wasn't the biggest fan of distressed-debt trading, especially given the unflattering media coverage it had generated for Blackstone, according to people who know him.

Amid a run of black eyes for GSO, including poor performance and senior defections that forced the firm to renegotiate with investors and accept lower fees, Gray has been buoyant about the credit division, telling the FT last December it was in "extraordinarily positive shape," — except for its distressed business. 

"The one area where we're not satisfied with the performance has been in this distressed area," Gray said.

A slew of senior exits — and an economy riped for distressed-credit all-stars

Now, the coronavirus is presenting opportunities for distressed professionals as businesses in many industries find themselves in need of rescue financing.

While GSO has just under $8 billion in assets dedicated to the strategy as of April— a formidable figure — many of the executives who GSO said goodbye to after shuttering its hedge fund are gearing up for action, too. 

With the help of ex-GSO exec Ryan Mollett, Angelo Gordon has raised $3.5 billion for distressed debt investing according to Bloomberg, while Craig Snyder over at Ares has helped raised more than $3.5 billion for special opportunities.

Meanwhile, Kennedy Lewis, a fund co-founded by former GSO exec Darren Richman, has raised $2 billion for companies undergoing some form of disruption.

To be sure, despite these exits, there has been continuity within GSO: In aggregate, GSO's roster shows 16 executives who have remained with the group since before the 2008 acquistion by Blackstone. 

And GSO stands by its decision to part ways, after having clinched other lending deals in areas outside of shorter term distressed bets, which wouldn't have been possible without having integrated more fully with Blackstone.

This includes a $2 billion financing of biopharmaceutical company, Alnylam Pharmaceuticals Inc., this April, when GSO worked with other Blackstone divisions including a life sciences arm to get the deal done.

"The facts speak for themselves," said a Blackstone spokesperson in a statement, pointing to GSO's growth to $129 billion in assets under management and coming off a strong quarter — its best, by the firm's measure, since the global financial crisis. 

"The integration of GSO into Blackstone has led to large scale deal opportunities, a rigorous investment process and a culture that prizes teamwork," the spokesperson said.

"Yes, a number of intentional changes have been made to the distressed investing unit which have been quite positive for performance and culture."

GSO's distressed debt business is now being co-run by Dan Oneglia, a former Goldman Sachs exec hired in 2019, who is working with GSO veteran David Posnick. 

But for those who did leave, either voluntarily or otherwise, we took a look at which GSO alums are now well positioned to buy assets shaken loose by the pandemic. 

Read our full list of 11 top GSO distressed debt alums here.

SEE ALSO: 

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• A new survey reveals that most UK fintechs are critical of the government's support schemes during the pandemic.
• And the lack of government aid is creating an uneven playing field, where only larger fintechs can capitalize on rising fintech adoption.
• Insider Intelligence publishes hundreds of insights, charts, and forecasts on the Fintech industry with the Fintech Briefing. You can learn more about subscribing here.

Only 25% of respondents surveyed by fintech network and lobbying group Digital Finance Forum believe the UK government has done enough to support the fintech sector during the coronavirus pandemic. Over 100 fintech founders responded, and 65% were small businesses with 50 employees or less.

The lack of government aid is all the more harmful to smaller UK fintechs amid the drop in private funding.

• Many fintechs are ineligible for government assistance. Thirty-seven percent of respondents said they could not qualify for a government loan. The Coronavirus Business Interruption Loan Scheme (CBILS), for example, isn't available to fintechs with a banking license, full-stack insurtechs, or those with unviable borrowing proposals, such as running a loss-making model. In addition, the UK Treasury recently blocked alt lenders' access to cheap finance from the Bank of England Term Funding Scheme, making it harder for them to meet small businesses' financing needs.
• And what remains of dwindling private funding is going toward established fintechs. Forty-six percent of respondents cited limited access to capital as their most pressing challenge. UK funding dropped by 39% in H1 2020, and while this affects all fintechs, the lion's share went to a select few established players, including Starling Bank and Revolut. As a result, small UK fintechs in particular are faced with limited cash runway, exacerbating the need for government support.

Such government inadequacies are creating an uneven playing field, where only larger fintechs can capitalize on rising fintech adoption. UK fintech adoption is surging in the pandemic's wake, as consumers turn to digital financial management tools. Yet established players could be the sole beneficiaries as they have the necessary cash to outlast the challenging upcoming months and expand their offerings to capitalize on this trend: For example, Thought Machine is expanding to the US and Asia following its megaround, while TransferWise successfully sold $200 million worth of its shares and is developing an investment product.

To better nurture a competitive fintech ecosystem, the UK government should amend its schemes to offer smaller fintechs better access to funding. It could also look to other proactive financial regulators for inspiration: The Monetary Authority of Singapore, for example, has rolled out specific fintech funding packages, as well as expanded its Proof-of-Concept Grants and innovation labs.

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