Joachim Willnow, managing director in equity derivatives at Nomura in London and one of the former Merrill staffers who recently joined, said the number of good equity derivative staffers in the job market made now an ideal time to build this business. "Nomura will establish itself by being more focused than other players and specializing in certain product areas," such as fund-linked derivatives, explained Willnow. "We feel there is a continued growth opportunity in this area," he added.
The group will also work on equity-linked products for corporates, financial institutions and retail investors. Some products will be sold under the Nomura name, but others will be white-labelled, particularly in the case of retail products, said Willnow. He declined to name distributors with which Nomura might work.
Rivals said Merrill Lynch's lack of retail distribution means it will be far easier for Nomura to win over the U.S. firm's clients than if it poached a team out of Deutsche Bank or Société Générale where much of the business is direct and relies on their brands. They said most of the fund products that Merrill structures are white-labelled so the end user does not know which derivatives house is behind them. In addition, Nomura will have to offer all the products, rather than just hedges in order to make inroads into this sector, said rivals. Tim Hailes, assistant general counsel atJPMorgan in London, said, "A divide is opening between investment banks that price and provide hedges on an open auction basis and investment banks that can deliver a full service, across a spectrum of wrappers."
Nomura's hiring spree shows it is willing to make serious investments, said one rival. He added, however, that this is a competitive area to break into and many firms have been working to establish themselves for several years. "There are still healthy margins in this business," said one fund-linked product distributor.
Standard & Poor's rates Nomura A minus and Moody's Investors Service has it at A3, which could be a problem for some clients, said the distributor. Both rating agencies upgraded Nomura last month. Zenji Nakamura, head of global markets for Europe, retorted via an e-mail statement, which said, "Nomura completed enormous amounts of interest rate, FX and credit derivative transactions whilst at BBB plus rating with various European and global counterparts. With our recent upgrade, Nomura aims to build on this past success and further expand its derivatives business both in Europe and globally."
