At a time when most large investment banks are slashing their fixed-income teams, Cantor Fitzgerald is making a hiring push in its debt capital markets group. Shawn Matthews, who heads the group and is based in New York, runs a sales and trading desk that already boasts more than 200 salesmen and traders. Bank Loan Report sat down with Matthews recently to discuss the group's expansion.
BLR: Why is Cantor Fitzgerald looking to grow its debt capital markets sales and trading team now?
Matthews: This is a great opportunity to take advantage of the current dislocation on the Street, and right now we're in full growth mode across the entire fixed-income spectrum.
BLR: How many people is the firm looking to add?
Matthews: We've added 30 to 40 professionals in the past four months, and when I look across my floor right now, I certainly see opportunity in the mortgage- and asset-backed space, as well as in investment grade, high yield and agency-investments that are like Treasury bills, but instead of being backed by the U.S. government, are backed by government-sponsored enterprises. I could see us adding 20 people or more to our mortgage area, 20 to our agency area and 15 to our corporate deals. And that's just U.S.-based.
BLR: Are you expanding operations abroad as well?
Matthews: Yes, we're talking to people in Asia and looking at Europe. The world has gotten fragmented, and there is a tremendous opportunity to grow our business. We are focusing on fixed-income securities in emerging markets and throughout the world. Emerging markets is an area where the liquidity that was provided by the Street in the past will no longer be there, which clearly gives us an opportunity to capitalize on the situation and add value in the marketplace. If we continue to hire very seasoned salespeople and traders, our platform will continuously get better. We are looking at this as our chance to really create a worldwide distribution model, which has been part of the fabric of Cantor's methodology.
BLR: What is Cantor Fitzgerald's overall sales and trading philosophy or methodology?
Matthews: In comparison to the rest of the Street, we have very short holding periods, we do not believe in trading arbitrage, we believe in customer transactions, and we are in the velocity business, meaning we want to move our capital as quickly as possible. Looking back over many cycles, the arbitrage business doesn't provide a great return on equity, and I certainly feel that the market needs a player like us, which is dealing specifically with the customer base. We are really a transaction-oriented broker-dealer who doesn't believe in the model of trading like a hedge fund. We're a traditional-style broker-dealer.
BLR: What is your general capital markets outlook for the second half of 2008?
Matthews: I think we're going to see more spread-widening going into the second half of the year. Essentially, it's all about liquidity. Bonds have fallen so far this year because liquidity was pulled out of the system. Then bonds rallied because liquidity was put back in the system by the discount window. The Fed did a great job by opening the discount window and helping the system when it was needed. But asset quality is still deteriorating, which means we will see another wave of spread-widening.
Matthews earned his undergrad finance degree from Fairfield University and his graduate finance degree from Hofstra. Before he was at Cantor, he ran a hedge fund, Alchemist Capital Management, for seven years.
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