Unicredit on Wednesday beefed up its fixed income operations by hiring a team of debt specialists from NewSmith Capital Partners, the London-based advisory and asset management boutique.
The Italian bank, which is keen to build up its investment banking business after avoiding the worst of the credit crunch, is buying NewSmith’s 10-man debt advisory business and appointing TJ Lim, the head of the unit, as co-head of its markets operations.
The move illustrates how some banks are positioning themselves to take advantage of the turmoil in the credit markets, which has prompted some large players to scale back their operations after suffering heavy losses.
It also underlines the demand for experienced bankers capable of helping financial institutions and investors restructure portfolios of complex debt securities.
As part of the deal, Unicredit will buy a 5 per cent stake in NewSmith for an undisclosed amount and pledge to invest in new funds set up by the group, which has about $5bn under management.
“They’re a serious institution and we’re very pleased to have a relationship with them,” said Paul Roy, one of NewSmith’s founding partners.
As part of the move NewSmith, which was set up by former Merrill Lynch executives with a view to creating an independent boutique investment bank, will wind down its advisory business in order to focus on fund management.
The deal reunites Mr Lim, who joined NewSmith after working as a banker at Merrill Lynch and Dresdner, with some of his former colleagues. Sergio Ermotti, Unicredit’s deputy chief executive, is a former Merrill Lynch banker as is Eduardo Spezzotti, head of the markets and investment banking division.
In the past five years, Mr Lim has concentrated on building up a business to advise companies, banks and investors on restructuring their portfolios of complex debt securities.
Demand for these services has increased since the onset of the credit crunch, though NewSmith executives have struggled to ensure that its bankers were properly paid for their expertise.
According to people familiar with the matter, Mr Lim and his colleagues had in recent months discussed setting up a fund to invest in portfolios of distressed debt securities. It is unclear whether the fundraising effort will continue following the team’s move to Unicredit.
Many bankers believe the credit crunch has created opportunities for patient investors to buy distressed debt securities at very low prices. However, the scope for banks to own these securities is constrained by investors, who are suspicious of the assets, and by regulators, who are in the process of increasing the amount of capital that banks must hold against complex, illiquid securities.
At Unicredit, Mr Lim will share responsibility for the markets business with Mike Hammond, another former Merrill Lynch executive who is responsible for the bank’s equities businesses.
