Bull Bear Report Apr 23 2010

Boutique Hiring Rolls On

By yoree koh

The hiring sprees of 2009 are starting to pay off at boutique investment firms. As first-quarter earnings season gets underway, smaller firms are reporting impressive revenues on the backs of talent acquired last year. And many have continued to add to its employee roster since the start of 2010 with plans to make selective hires in the coming months.

Here's a look at the plans of three high-profile boutiques:

1. Jefferies: The New York-based firm marched forward with its plans to build out into a full-service securities and investment firm. As of March 31, it increased headcount by 101 to 2,729 employees from the previous quarter, according to its first-quarter earnings report. Staff levels inched up every quarter in 2009, rising 19% compared to the same period a year ago.

"The majority of this increase was driven by the continued build up the infrastructure required to support our recent expanded sales and trading and investment banking platforms," said Peregrine C. Broadbent, the firm's chief financial officer, on a conference call with investors and analysts this week. Some of the new hires were made in London. Jefferies had announced last August a plan to recruit talent there to expand an integrated European credit effort that would focus on investment grade, high yield and loan products.

Net revenues jumped 71% to $583 million in the first quarter compared to $342 million in the prior year.

2. Piper Jaffray: The Minneapolis-based firm grew its staff to 1,092, up 53 workers from the fourth quarter. In anticipation of a hotter M&A market in 2010, Piper Jaffray filled 25 of the 30 senior hires it planned to make this year, said CEO Andrew Duff on a conference call with analysts. The firm had hired 50 senior revenue producers in 2009. Though the firm initially aimed to recruit approximately the same number of senior-level professionals this year, it revised its plans to bring on more junior bankers.

The adjustment was partially due to the "competitive landscape" that "has changed fairly significantly, Duff said on the call. "So we're going to moderate that and, if you will, kind of mature what we've done and then remix and hire some more junior than we had originally planned."

Approximately one-third of the new hires in the first quarter were in Europe and Asia and the remaining jobs will likely be focused there as well. While the bulk of the banking hires have been completed, the firm said it is still looking to fill positions in research and distribution. It will also continue to add to its middle-market sales force with a concentration in fixed income.

The larger work force is a part of the firm's strategy to increase its return on equity to up to 12% by 2012. The firm's return on equity was 4.6% at the end of last year.

3. Evercore Partners: Hiring activity is strong in the New York-based boutique's capital markets advisory and institutional equities business. Having received its underwriting authority in March, Evercore is "starting to very significantly ramp up hiring," said chief financial officer Robert Walsh on a conference call with analysts this week. The new underwriting business completed its first assignment during the quarter.

The firm made four key hires in its advisory unit in the first quarter to accompany its launch into coverage of real-estate banking, metals and mining, and fund-raising. Further hiring will likely follow the firm's foray into these areas.

Evercore did not specify firm employee numbers in its first quarter earnings release. The firm reported net revenues of $85.1 million, up 77% compared to the same period a year ago. Earnings were driven by continued strong revenues stemming from its investment banking advisory business.

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