Dozens of boutiques are quietly hiring bond traders and sales people as they grow on top of the wreckage of former bulge-bracket institutions.
The upstarts range from relative newcomers BTIG LLC, Broadpoint Securities Group and ICP Capital, to decades-old firms like Cantor Fitzgerald that are gearing up to capitalize on wide bid-ask spreads and an ample supply of talent fleeing major investment houses.
The boutique firms aim to do business "the right way" by leading "with brain as opposed to capital," Lee Fensterstock, Broadpoint's chief executive who once headed worldwide sales and trading at PaineWebber, told Bloomberg News. "We're not planning to run big balance sheets or big leveraged positions."
Broadpoint has added more than 240 people since September 2007, Bloomberg says - including many traders with bulge-bracket pedigrees.
Eat What You Kill
The boutique business model, stressing commission-based compensation or "eat what you kill," is particularly attractive to sales and trading professionals who've been big producers at larger institutions. Such individuals regularly earned seven-figure checks at the former bulge-brackets. But a clampdown on trading leverage and bonus arrangements plus 90 percent declines in the share prices of firms like Citigroup and Bank of America have wiped out such opportunities for the future. Now, the compensation carrot is in the hands of rivals like Broadpoint, which aims to distribute 30 - 40 percent of its trading revenue to salesmen and 10 - 20 percent to traders, the story says.
Meanwhile, BTIG, which began as an equity broker earlier this decade, jumped into credit trading last month when it hired Jon Bass, a 1980s Salomon Brothers debt trader who recently led fixed-income client management at UBS. BTIG reportedly plans to add at least 26 more salesmen and traders for investment-grade bonds, high-yield and distressed debt to its 270-person staff.
Other boutiques adding heads include four-year old ICP Capital, which has almost doubled in the past year to 74 people, and Cantor Fitzgerald which hired 100 people in the past six months from banks including UBS and Bear Stearns.
Wall Street headhunter Michael Maloney cites one salesman he says earned $500,000 in commissions at a boutique over just two days. On the other hand, many of the 50 start-up boutique dealers in New York won't succeed, Maloney told Bloomberg. A shakeout could occur over the next one to two years. But the firms that do survive "will win big," says Adam Yarnold, a former Deutsche Bank mortgage trading desk co-head who now works at New York boutique Braver Stern & Co.