Top Dimon aide Cavanagh leaves JPMorgan for Carlyle

Tue Mar 25, 2014 3:01pm EDT
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By Greg Roumeliotis and David Henry

NEW YORK (Reuters) - Private equity firm Carlyle Group LP (CG.O: Quote) poached one of Jamie Dimon's closest aides, Michael Cavanagh, from JPMorgan Chase & Co (JPM.N: Quote) on Tuesday, in a surprise hire that reflects both the increasing prominence of so-called shadow banking and the regulatory challenges faced by banks.

Cavanagh, 48, who was co-head of JPMorgan's corporate and investment bank, will become the co-president and co-chief operating officer of Carlyle, as the alternative asset manager puts its own succession plan in place. He will also join Carlyle's executive board.

He will share both new titles with Carlyle veteran Glenn Youngkin, 47, who has until now been sole chief operating officer.

Cavanagh's departure is a blow to Dimon, and sources familiar with the situation said the move came as a surprise to senior bank executives. Dimon hired Cavanagh more than two decades ago and has worked with him ever since. In recent years, Cavanagh, who was also a member of the bank's operating committee, had come to be seen as one of the potential successors to the JPMorgan chairman and CEO. Daniel Pinto, who had the same role as Cavanagh, was named sole CEO of JPMorgan's corporate and investment banking division.

Cavanagh's move underscores the challenges banks face in retaining talent amid an onslaught of regulations in the aftermath of the financial crisis, which have complicated bank managers' jobs and reduced their pay.

Several other long-time bankers, such as former JPMorgan executives Jes Staley and Steven Black, have moved in recent years to private equity, hedge funds and other more lightly regulated corners of high finance, broadly referred to as shadow banking. The sector offers executives more business opportunities as banks pull back, as well as higher pay.

Carlyle's founders - David Rubenstein, William Conway and Daniel D'Aniello - each received $92.9 million in dividends and salaries in 2013. They also received $108.1 million, $252.8 million and $109.5 million, respectively, from Carlyle's funds in 2013 as a result of investing alongside the firm's clients. By comparison, Dimon was paid $20 million for 2013, with $18.5 million of that coming in restricted stock.

Cavanagh told Dimon over the weekend that he was considering the job after having been approached by Carlyle earlier this year, one of the sources said. The increased demands from changing regulations and JPMorgan's myriad problems in recent years with regulators were factors that played into Cavanagh's decision, the source added.   Continued...

Michael Cavanagh, the head of JPMorgan Chase Management Task Force Reviewing CIO Losses, appears before testifying at the Senate Homeland Security Investigations Subcommittee in Washington March 15, 2013. REUTERS/Gary Cameron