The Shrinking Economy

Lessons From the Front Lines

Investment Management Co. L.L.C. (No. 4 on the be asset managers list with $6.9 billion in assets under management). His San Francisco-based firm reaped the benefits of recovering financial markets. “Under stress, you have to always act with integrity.”
For black-owned banks, risk has become a four-letter word and given the harsh regulatory environment, banks have become wary of making riskier loans which prompt greater regulatory scrutiny and many have opted to hold on to cash rather than lend it.

Viveca Ware, senior vice president of regulatory policy at the Independent Community Bankers of America in Washington, D.C., says a major challenge for minority banks–most of which are located in underserved communities hit hard by the recession–is generating new consumer and business loans and getting repayment on existing loans. However, she says, there are opportunities for minority banks to expand consumer, mortgage, and small-business lending. She said many consumers are ready to return to those banks for products and service, particularly after some were burned by subprime lenders in recent years. “There’s an opportunity for banks to provide relationship-based banking once again and re-attract those consumers and small businesses,” Ware says.

Many asset managers had a solid year, adding new clients while the equity markets rebounded. “We’re very encouraged about where we are now in the marketplace and our future growth,” says Gerald B. Smith, CEO of Houston-based Smith Graham & Co. Investment Advisors L.P. (No. 6 on the be asset managers list with $4.9 billion in assets under management).

Tyler Hall, a research analyst at SNL Financial, says opportunities for investment banks to earn fees for underwriting and advisory services will be created as credit markets loosen up. “I see a lot of these companies being able to take advantage of a recovering market,” Hall says.

One firm that has benefited from such market conditions has been Atlanta-based Jackson Securities L.L.C. (No. 5 in tax-exempt securities with $23.8 million in lead issues on the be investment banks list). Reuben R. McDaniel III, president and CEO, says the firm profited from less competition in both its municipal finance and equity businesses and refocused 20% of its staff to boost the size of those operations. This year, Jackson Securities plan to focus on federal recovery programs that offer new underwriting opportunities for investment banks, particularly minority-owned firms. “We’re excited about that opportunity because it could increase our business by 20%,” he says.

In the private equity world, Farmington, Connecticut-based Fairview Capital Partners (No. 1 on the be private equity firms list with $3.1 billion in capital under management) boosted its capital under management from $2.6 billion, mainly thanks to the New York Common Retirement System choosing Fairview to manage a $500 million pool of capital. Co-managing Partner JoAnn H. Price says Fairview this year plans to launch a $300 million emerging market fund that would target growth equity funds in Latin America, India, and Asia. Fairview is also looking to expand its co-investment program that would allow investors to access direct deals. All told, Price would like to see capital under management rise by another $400 million to $500 million by year’s end.

In response to the new business battlefield, be 100s commanders will be forced to develop new campaigns to increase sales and capture market share. The long-term winners are those that stay combat-ready with flexible battle plans, the most talented troops, and fiercest arsenal.

–Additional reporting by Carolyn M. Brown, Cliff Hocker, Aisha I. Jefferson & Jeffrey McKinney