Collins Stewart Looks to Rebound

Traders Magazine Online News, February 5, 2010

James Ramage

Setbacks might have sidetracked Collins Stewart's U.S brokerage arm, but they haven't stopped it from expanding its presence.

If anything, Collins Stewart's U.S. office has been on a hiring spree the past six months. The effort to beef up its cash equities business has yielded the addition of 10 new trading pros over the last half year.

Company officials say the current group of 22 sales traders and six position traders in three offices--New York, Chicago and San Francisco--is positioned to overcome past bumps in the road that it now believes are behind it.

The first blow was a disastrous acquisition of CE Unterberg Towbin in July 2007--the firm's attempt to move into traditional research-backed investment banking. "The Unterberg acquisition was an ill-timed one," according to John Abularrage, chief executive of Collins Stewart, North America. "It was at the top of the market."

In addition, the U.S. office experienced a major shakeup within its leadership more than a year ago. That's when Shawn McLoughlin, then chief executive for North America, left the firm. He then teamed up with Joel Plasco, a former Collins Stewart executive from the U.K, to acquire the brokerage Reynders, Gray & Co. last May. They renamed it Ticonderoga Securities, which itself has been on a hiring spree.

Abularrage thinks Collins Stewart is on the right track with the beefed up trading and research talent. The firm has re-shaped its research coverage to focus on large caps, said Abularrage, who arrived to head the 13-year-old New York office in January of last year. He previously ran the firm's London equities desk.

 "We're not an organization that is entering the U.S. lightly," Abularrage added. "We're a publicly listed London company with more than $100 million on the balance sheet, and no debt. We're going to be here a long time." The parent's market cap is $285 million.

The firm now researches financials and consumer stocks, in addition to technology, media, telecom and the energy sectors. And it has strengthened its health care team.

According to Don Dillon, the U.S. office's co-head of sales trading and trading, the U.S. business began as an overnight trading desk that used European research for U.S. accounts. It grew from there. Five years ago, the firm hired five people out of Merrill Lynch to start a trading operation in U.S. domestic stocks. Dillon and Bryan Fay, the other co-head of sales trading and trading, joined then. At Merrill, Fay had been director of sales trading; Dillon had been director of trading.

Dillon explained current strategy at Collins Stewart: "The firm was very much siloed in the past, in terms of one individual here covering one account," We need to have multiple touch points on sales trading and trading into the larger accounts, to make sure we're leveraging everything that we've built here, in terms of research and the sales effort."