Christopher Middleton, chief of U.S. equities sales and research for Cazenove -- and 12 of his colleagues -- have resigned en masse from the venerable English investment bank to set up their own London-based research boutique. Atlantic Equities will peddle insights on U.S. stocks to U.K. institutions.
Because the defectors constituted 80 percent of Cazenove’s 15-person U.S. equity research and sales operation in London, the troubled bank has simply shut the unit down. “This was a very small business for us, and we were not committed to it in the long term,” says a Cazenove spokeswoman.
The 36-year-old Middleton, who dropped out of London’s Guildhall University to join the bank’s training program in 1985 and eventually became a Cazenove director, says the departure was “amicable.” But he admits to “an element of frustration in our decision to leave.”
As a U.K.-based investment bank, Cazenove was not directly subject to the recent settlement between Wall Street firms and New York State Attorney General Eliot Spitzer over research conflicts of interest. But to avoid the appearance of impropriety, Cazenove banned Middleton’s salespeople and analysts from helping the firm’s investment bankers land and sell U.S. corporate finance deals in the U.K.
Moreover, both Cazenove itself and Middleton’s group have been pummeled by the bear market. Cazenove’s profits dropped from £60 million ($100 million) in the fiscal year ended April 2002 to £14 million in fiscal 2003. A preeminent corporate adviser, the British bank has little fixed-income or derivatives business to cushion it in severe equities downturns. Middleton’s own staff was trimmed from 25 to 15.
His new firm is the first dedicated to providing independent research on U.S. companies to U.K. investors. Atlantic consists of seven analysts, four salespeople and an economist, plus Middleton as CEO and sales chief.
“There is a real commercial opportunity in research that’s independent of investment banking,” he contends.
