* New Asia-Pacific chair rejoins Goldman after 11-year
* Beijing base underlines commitment to China market
* Western investment banks face challenge from homegrown
* Schwartz will oversee all of Asia operations
By Lawrence White
HONG KONG, June 12 Goldman Sachs said on
Tuesday it had rehired veteran banker Mark Schwartz in the role
of chairman of its Asia Pacific unit, based in Beijing, becoming
the first global investment bank to place its sole regional
chairman in China's capital.
Schwartz's placement in Beijing - rather than Hong Kong
where peers from other big banks sit - puts him in a position to
oversee the bank's joint venture there, Goldman Sachs Gao Hua,
and to have quick access to leaders of some of the world's
Schwartz, 57, first hired by Goldman 33 years ago, will
replace Michael Evans, who has served as Chairman of Asia
Pacific since 2004. Evans is based in New York and will continue
in his role as a vice chairman of the bank and global head of
After leaving Goldman in 2001, Schwartz worked as an adviser
to George Soros and in 2006 formed with Raj Rajaratnam and
former Goldman board member Rajat Gupta a combined hedge fund
and private equity group named Taj Capital.
The $1.4 billion fund, which was renamed New Silk Route,
invests in India, Asia and the Middle East. Rajaratnam was
jailed in October 2011 for insider trading, while Gupta is on
trial on charges stemming from the investigation into
Rajaratnam's Galleon Group.
Schwartz's involvement with the fund was brief, and he is
not listed as an officer on its website.
Schwartz's latest move sees Goldman Sachs fill a hole that
has lingered since mid-2010, when Evans' move to New York to
head the emerging markets drive meant that the firm's Asia
chairman was not based in the region.
"The move to Beijing is very symbolic, and is similar to
HSBC moving its CEO office to Hong Kong," said Ronald Wan, a
managing director at China Merchants Securities (Hong Kong).
"They want to show a commitment to the China market, and
probably improve ties with state-owned enterprises and the
While the firm stressed that this is a regional role,
placing Schwartz in Beijing puts him in a position to bolster
Goldman Sachs Gao Hua's efforts in China, and push key corporate
and government relationships there.
Goldman faces several challenges in China, including renewed
competition from foreign securities joint ventures and the rise
of domestic investment banks and brokerages.
The firm is the top-ranked bank globally for China equity
offerings worldwide year-to-date, though it is only 29th for
listings in the onshore "A" share market, according to Thomson
Reuters data. That ranking places it below many of its Western
rivals, including Credit Suisse, Deutsche Bank
, JP Morgan and UBS.
Foreign investment banks have found it difficult to make
headway in China's onshore markets, with local firms using their
deeper connections to win the lion's share of fees.
While Goldman Sachs has more control over its China
operations than some rivals who arrived after a tightening of
the ownership rules, the U.S. bank also suffers from not having
total ownership of its China business.
The compensation structure of foreign banks also makes it
harder for them to be profitable in China.
While Western firms need to chase big deals to cover the
costs of their well-paid bankers, Chinese securities firms
originate business using large teams of lower-paid dealmakers
who get a cut of the fee for success.
With fewer jumbo-sized mandates available as the big banks
and state-owned industrial firms complete their IPOs, the fees
are more evenly distributed among medium and small-sized
companies that the Chinese underwriters are better suited to
"That's our biggest competitive advantage," said Dan Weil,
global head of institutional sales and trading at Guosen
Securities, the top-ranked China equity house year-to-date.
"We have 500 bankers, but we're not paying them $1 million
each just to walk through door. They get paid on success. That
enables the firm to have reach."
Part of the strategy behind locating Schwartz in Beijing
will be to use his seniority to win more deals, in a market
where bankers say clients put particular emphasis on the rank of
the person pitching to them.
Goldman is on a stronger footing in Asia-Pacific investment
banking overall, having closed 2011 as the second-ranked firm in
the region by fees and market share according to Thomson Reuters
data, behind UBS.
This year, when completed listings have been thin on the
ground, it won roles on some of the more high profile attempted
listings, including Formula One and Graff Diamonds.
In Asia excluding Japan M&A advisory year-to-date, Goldman
is top-ranked so far with 39 announced deals worth a combined
Schwartz's role will see him oversee all of the firm's
business in Asia, encompassing asset management, private wealth
management and securities trading in addition to investment
While he is the first sole Asia Pacific chairman of a global
investment bank to be based in Beijing, Morgan Stanley's Asia
Pacific Co-CEO Wei Sun Christianson is there. Morgan Stanley has
no regional chairman.
Schwartz is a Goldman Sachs veteran, having joined the firm
in 1979 in the investment banking division. He was named a
partner in the firm in 1988.
His career at Goldman Sachs saw him work in fixed income and
then run the capital markets division from 1991 to 1997, before
a move to Tokyo to become president of the Japan business. He
held the title of chairman of Goldman Sachs Asia from 1999 to
On leaving Goldman at the end of that stint in 2001,
Schwartz worked for Soros Fund Management, first as an adviser
and then as president and CEO from 2003 to 2004.
Since 2006, Schwartz has been the chairman of MissionPoint
Capital Partners, an investment firm he co-founded, which is
focused on the transition to a lower carbon economy.