Bond trading specialist Cantor Fitzgerald has in recent years expanded into such fields as investment banking and emissions trading, so it was only a matter of time before it entered the booming private equity field. The launch of its buyout arm, Cantor Capital Partners, kicks off with the hiring of investment banker Burke Dempsey, who started last month.

Dempsey, 44, first met Cantor chairman and CEO Howard Lutnick in 2000, when the banker, then at UBS in New York, took on Cantor's ESpeed as a corporate finance client. Over the next few years, Dempsey not only advised ESpeed on a Canadian joint venture and several financings, he also worked on Reuters's spin-off of its electronic brokerage Instinet and the Chicago Mercantile Exchange's 2002 IPO.

In 2005, Dempsey left UBS to join the New York office of Presidio Financial, where he structured investments for wealth management clients. Lutnick, who will help source and vet deals at Cantor Capital, recruited Dempsey, naming him managing director running the new business.

It's still early in the game for Dempsey, who has yet to assemble his team. In looking for investments, he will first build on his and Cantor's financial services expertise, then expand into other industries as he hires partners. The plan is to aim at the middle market: transactions of less than $500 million. The first deal could be announced within the next few months.

Initial capital will come from Cantor and the firm's contacts. That's fine with Dempsey, who doesn't want to get involved in a sometimes-frothy private equity market. "We don't have money burning a hole in my pocket," he says. "And Howard seems to be okay with that."