Changing Of The Guard

Dynamic, new money managers are setting up shop and expanding their offerings

of the top firms on Wall Street were Salomon Brothers, E.F. Hutton, Drexel, Rothschild and First Boston,” he notes. “Those companies are no longer in business, but nobody wants to talk about that.” Though markets and firms change, Brandford contends, “The players remain, perhaps just at different places.”

GROWTH VIA DIVERSIFICATION
Muni bonds may be the staple some players still depend on, but several investment banking shops have steered completely away from urban and suburban finance altogether. One, Utendahl Capital Partners, has made diversification into new businesses a way of life. Founded in 1992, Utendahl was the first minority-owned investment bank to specialize in taxable fixed-income securities, and has since broadened its business to include equity and convertible securities, corporate finance, mortgage and real estate finance, structured finance and financial advisory services.

The firm’s money management affiliate has also experienced explosive growth. In 1995, Utendahl Capital had $150 million in assets under management. Today, it manages more than $700 million for blue-chip clients including Colgate-Palmolive Co., RJR Nabisco and Time Warner Inc.

President and CEO John Utendahl says his strategy is very simple. “Diversification minimizes risk. That’s a very basic concept,” he says. “You can’t put all your eggs in one basket and expect to succeed in this industry.” To further buttress the firm’s success, Utendahl Capital has teamed up with America’s biggest brokerage firm, Merrill Lynch & Co. Merrill was one of the original investors in Utendahl but now owns less than 20% of the company.

It’s an increasingly common strategy being pursued by African American investment firms. But it’s also one that’s generating a lot of controversy. Benita Pierce, one of the few African American women in the business to head her own firm, B. Pierce & Co. Inc., has been approached by majority-owned institutions looking to enter into a relationship with a black-owned firm. But Pierce turned down the offers because she questions the wisdom of such arrangements. “Look, no one’s going to give you millions of dollars and not have something to say.”

Utendahl acknowledges that “it’s very important that we show we have independence,” even as he shrugs off criticism about his Merrill Lynch partnership. “Merrill Lynch is a limited partner,” he notes, “and synergy is the game.” Besides, “every business school teaches you that strategic alliances are one way to sustain and promote growth in any industry.” In considering the firm’s needs, “we weren’t looking to reinvent the wheel,” he adds.

Utendahl Capital isn’t the only investment bank leveraging the deep pockets and other resources of majority-owned firms. Jefferies & Co. has a 19% equity stake in Williams Capital, and Blaylock & Partners has ties with Bear Stearns & Co., which has an 18% ownership interest. For Blaylock, the partnership has helped lead to some high-profile deals in the corporate bond market.

Blaylock made history in 1996, when it became the first minority-owned firm to lead a corporate bond deal in excess of $100 million. Blaylock underwrote

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