Neil Sherman, head of global prime brokerage sales at Lehman Brothers in New York, has joined JP Morgan. But not, as might be expected, in the prime brokerage group, where JP Morgan is developing a focused business that aims to capitalise on its strengths in fixed income and synthetic financing.
Instead, Sherman is joining the investment banking arm of JP Morgan. It is focusing on traditional strategic advice on mergers and acquisitions, financings and re-financings, capital raising, IPOs and other financial advisory opportunities in the hedge fund industry. In addition, the group is also aiming to broaden JP Morgan’s firm-wide relationships with the hedge fund industry in areas such as treasury services and equity and fixed income sales and trading.
Sherman, 49, originally a securities and commodities lawyer, entered investment banking with Lehman in its debt, hybrid and equity capital markets groups and switched to prime brokerage only four years ago, so the move is something of a homecoming. He has also built up a prestigious list of contacts in the hedge fund industry during his years in the prime brokerage group at Lehman, which he can now put to work on behalf of JP Morgan.
“The opportunity is substantial due to the significant pools of capital that have entered the hedge fund market, the diversification of hedge fund investment activities and the institutionalization of the hedge fund business,” Sherman says.
There has been much talk of the convergence between hedge funds and private equity funds, which have certainly discovered an appetite for IPOs. KKR Private Equity Investors floated on Euronext Amsterdam earlier this month, raising $5 billion, or more than three times the original target of $1.5 billion, and Blackstone and Apollo Management are thought to be looking to follow suit, and Carlyle Group and Texas Pacific Group are reported to be considering a public flotation.
Sherman sees no reason why more of the larger and better established hedge fund groups should not follow the same logic. JP Morgan has itself acquired a hedge fund (Highbridge Capital Management) and a year ago Lehman Brothers bought a stake in another hedge fund, Ospraie Management. It has since added stakes in two others.
Boutique provider Putnam Lovell has developed a niche in corporate finance work for alternative funds of all kinds, but major houses such as JP Morgan reckon they bring more to the table. “After 23 years at Lehman, I miss my former colleagues, but this opportunity and the commitment of JP Morgan to seizing it were hard to ignore,” says Sherman.