Morgan Stanley Poaches Two of Jefferies Top Four Brokers
What Morgan Stanley giveth, it also taketh away. Just ask Jefferies.
The New York-based middle-market investment bank, which last year hired a $4 million Morgan Stanley producer and poached Morgan Stanley complex manager Robert Peyreigne to lead its small wealth unit, lost two of its top four producers to the wirehouse on Friday, according to sources familiar with their move.
John M. “Jack” Carvalho and Samuel Whit Yates managed around $750 million in assets, according to a well-placed Jefferies source. They generated $9.6 million in fees and commissions over the past 12 months, or about 40% of the Atlanta office’s total revenue, according to two other sources with knowledge of their book.
A Morgan Stanley spokeswoman confirmed the hires, saying in an email that they “are consistent with our commitment and focus of our Private Wealth Management business in the Southeast.”
Carvalho and Yates, syndicate specialists who derive about a quarter of their business from giving wealthy clients access to initial public offerings, did not return calls left at their new office. They were the third and fourth largest producers among the 55 brokers in Jefferies nine-office retail network, according to the Jefferies source.
Morgan Stanley has a larger product platform and recruiting budget than Jefferies, and a top-grid payout of over 50% compared with the smaller firm’s 40%. However, Jefferies places less of a haircut on some of the syndicate and alternative investment sales than the larger firm and offers its retail brokers more direct access to trading desks, according to its advocates. About 45% of Carvalho and Yates’ revenue derived from private equity and hedge fund sales, said the source familiar with their business.
Their access to equity syndicate deals is likely to expand at Morgan Stanley, which last year had a 9.1% underwriting share of U.S. equity offerings compared to 2.0% for Jefferies, according to Bloomberg data. However, Morgan Stanley has penalized brokers who “ride” new-issue calendars, behavior that peeves bankers and their issuer clients by putting shares in the hands of customers who quickly flip out of the investments.
With new-issue business off industry-wide, Morgan Stanley’s payout and recruiting deal likely proved too strong to resist, said Jeffrey Bischoff, a recruiter in Old Greenwich, Conn.
“A large part of the value proposition of Jefferies is the interplay with the investment bank,” said Bischoff, who was not involved in the team’s move. “On a non-competitive 40% payout, if there isn’t a great flow from the investment bank [it affects that] value proposition.”
The Morgan Stanley spokeswoman declined to discuss Carvalho and his younger partner’s business mix or details of the recruiting deal they received.
Carvalho and Yates joined Jefferies from Credit Suisse in 2007 to open the New York-based firm’s Atlanta office.
Carvalho began his career at Legg Mason Wood Walker Inc. in 1993, and also worked at J.C. Bradford in Alabama and at CIBC Oppenheimer Corp. before joining Donaldson, Lufkin & Jenrette Securities in 1998, according to his BrokerCheck history. Credit Suisse bought DLJ in 2000.
Yates began his career in DLJ’s training program in 1999.