Just in Time, a New Recruiting Firm
Former bond jocks hang their own shingle
November 26, 2007
Two Wall Street professionals have set aside their bid lists, bonds and Bloomberg terminals for a different sort of venture. Brian James and Joe Messineo have launched a recruiting firm, Link Global Solutions, tailored for a niche of specialists -- those involved in securitization -- that increasingly are finding themselves cashiered by Wall Street investment banking firms.
"The securitization market as a whole is still very healthy, despite the credit crunch," says James.
Securitization first got its start on Wall Street in the late '70s and it took off during the 1980s when US mortgage loans were resold as securities. The idea of taking a fixed stream of income and reselling it as a bond has been employed to create securities backed by credit card payments, auto loans, home equity debt and even student loans. By far, the biggest market is the one involving the resale of monthly home loan payments which has grown to be the largest credit market in the world, outstripping even the issuance of the US Treasury.
This year, though, problems with subprime mortgage lending have brought about staff cuts at Wall Street dealer firms. So far this year, 140,442 professionals have been laid off, nearly three times those who lost their jobs in 2006, according to Chicago-based Challenger, Gray & Christmas, an employment consultant.
James, 35, and Messineo, 34, former managing directors and co-heads of fixed income at Cohen & Co., launched their new firm this month. The two have worked together for eight years. They first met at UBS where they managed a taxable sales and trading desk. James managed the firm's West coast business and Messineo oversaw its East coast presence.
Five years ago, they left the Swiss investment banking giant for structured credit investment management firm Cohen & Co., which had fewer than 10 employees when they arrived. At Cohen they were responsible for building out the fixed income desk including its collateralized debt obligations (CDOs) business, banking trading, and origination. At Cohen, they managed more than $40 billion worth of assets and led the firm through more than 50 transactions across multiple asset classes.
The two left Cohen in July. "We were thinking about leaving and saw opportunities outside Cohen that looked more appealing," James said, adding, they had always considered the recruiting business. After exploring other options, the idea of opening a recruiting business became reality when they witnessed all the volatility in the market that led to many professionals being laid off.
After building up Cohen's business "we knew how difficult it was to find recruiters that knew the market," James says. "Most recruiters didn't have the experience in securitization due to the market growing so fast. Education got lost when the market started to grow so rapidly."
Until now, there has been an imbalance in the industry, and most opportunities existed on the sell-side among deal underwriters and issuers, James says. Now, though, "there is tremendous opportunity on the buy-side to take advantage of market dislocation," says James, who believes many specialists may find employment in the hedge fund world.
Hedge funds have been a minor player in the securitization and CDO market because the risk/return ratio did not work for many hedge funds, according to James. "There was not nearly enough return despite the risk. Now, markets have repriced [that risk] and will continue to [reprice it], creating significant opportunities for next year."
While there have been dramatic losses in structured products and many specialists have been laid off, the securitization market is not expected to fade. The investment community still has trillions of dollars worth of securities that need to be managed and rebalanced, according to James, who believes professionals with the ability to price, manage, and trade these assets will be in demand.
As a recruiter, Link Global will focus on senior employees, those on the executive level, but they will also recruit traders and professionals that have modeled or structured complex deals. Much of the recruiting business relies on relationships, so Link Global's co-founders plan to grow their business by relying on their fairly extensive Rolodex of former contacts from the sell-side and buy-side.
Link Global is based in New York, but also has an office in London, and the nascent business is forming a partnership with a recruiting firm in Tokyo.
jessica.papini@sourcemedia.com
(c) 2007 Investment Dealers' Digest Magazine and SourceMedia, Inc. All Rights Reserved.
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