FTN Financial has hired two senior analysts from J.P. Morgan Securities, bringing to six the number of senior people the firm, a virtual unknown in the corporate bond market, has snatched away from J.P. Morgan in recent weeks. And, with the publication of its first research piece, FTN is talking the pseudo-independent talk while being sharply critical of the big investment banks.
Bill Cunningham, FTN's head of credit strategy and research, who himself came over from J.P. Morgan some six weeks ago, says he wants to build a research team that places an emphasis on ideas and relationships, in contrast to the focus on new issues and proprietary trading that he says dominates research at the large underwriting houses. "Arguably, the bulge bracket business model is broken. The new issue calendar isn't going to be what it was, and in that model the client didn't matter and in some respects the employee didn't matter," Cunningham says. He argues that because FTN has only a small underwriting business it can act more as a consultant to investors to better serve their interests. J.P. Morgan ranked second in the U.S. corporate bond underwriting last year, while FTN ranked 54th, according to Bloomberg.
The latest hires from J.P. Morgan include Joe McCusker, who followed telecom at J.P. Morgan, and Mark McCarthy, who covered technology and utilities. They join Cunningham and traders Jeff Thornbury and Chris Buzaid, and Bill Burke, BondWeek's 2002 salesperson of the year. Burke's reportedly sizeable contract at FTN has set the Street buzzing, with talk of over $2 million per year. Burke, reached at his desk, declined to comment.
Cunningham says he will look to make one more junior research hire. Hiring plans outside of research could not be determined. A call to Brian Shapiro, FTN's head of sales, was not returned.
Calls to Margaret Cannella, head of credit research at J.P. Morgan, were referred to Mike Dorfsman, spokesman. "Institutional Investor [Magazine's] own survey ranked J.P. Morgan as among the top research firms last year. Obviously, the investor community recognizes the value and the integrity we bring to Wall Street research," he says, addressing Cunningham's comments. (J.P. Morgan tied for second in the II survey last year.) Regarding personnel, he says Scott Marchakitus, an analyst who had been based in Europe, will move to New York to cover telecom, media and technology, and other announcements may be forthcoming.
Tom Marthaler, who oversees $18 billion in taxable fixed-income at ABN AMRO Asset Management, expressed skepticism when told of Cunningham's comments. "Conceptually what he says makes sense, but it's hard to believe when you hire people who came from the environment he's in that they'll change their stripes," Marthaler says. "If you want to have a different model, hire people from Moody's [Investors Service] or the buy-side: people who have had no associations with the sell-side culture you're criticizing."
