Remember Cresvale, the one-time high-flier in Japanese convertible bonds and equity warrants? Cresvale was as much of a 1980s success story as Baring Securities. Both companies made huge profits on the back of the Tokyo stock market boom. Baring Securities survives thanks to Dutch courage and sympathy. Cresvale lies somewhere on the Euromarket Boot Hill in a shallow grave.
Don't shed a tear for two of Cresvale's original founders, Steve Burnham and Malcolm Stevenson. Their shareholdings in Cresvale brought multi-million fortunes, an enviable lifestyle and lots of fun around the world. Cresvale parties were famous. To celebrate the opening of the firm's new offices in Tokyo, Burnham and Stevenson hosted one which was said to have cost $1 million for the evening. But the Cresvale founders also timed the downturn in the Tokyo stock market well. They sold out to the European Banque Pallas Stern Group for a sum that required a two-year "working holiday" in Hong Kong for tax purposes. When Banque Pallas allowed Cresvale's business to crumble, Burnham and Stevenson were long gone.
Now the "Cresvale Kids" are back, older but with new ambitions to build a specialist trading powerhouse in Europe. This time they have teamed up with Herzog, Heine, Geduld, the New York brokerage and trading house, to open an office in London. In New York Herzog, Heine, Geduld is famous as the most important Nasdaq trading house which makes a market in all 4,500 stock quoted on the exchange and has a market share of 5% to 7%.
What can Stevenson and Burnham bring to Herzog's New York table? The firm concentrates almost entirely on us domestic securities. Burnham and Stevenson saw an opportunity to create a European counterpart that would eventually trade all Easdaq and Aim listed securities. What were the basic attractions in these markets? Surely they were a world apart from the "heads I win, tails I win again" markets in Japanese convertible bonds and equity warrants which provided a gold-mine in the 1980s.
Not really. Burnham and Stevenson saw a niche market with wide trading margins, growing institutional interest and limited competition. That was enough. But they needed a platform and found an enthusiastic audience in the US. Bear Stearns, with its reputation for seizing new "smart" trading opportunities, might have been a logical partner but it was Herzog, Heine, Geduld, led by the mercurial Buzzy Geduld (the firm's largest shareholder) who seized the reins. As HHG trades all the Nasdaq stocks, surely it would be simple to add initially another 150 to 200 European companies? For HHG it was a chance to create an international presence, increase the firm's exposure and form an alliance with two traders who had proven track records in the overseas markets.
Burnham and Stevenson do not directly own any equity although they tried for it in the new London firm of Herzog, Heine, Geduld International. Instead, they have an undisclosed participation in the London trading profits. Will there be a problem with the parent firm's lack of name recognition in the overseas markets? In New York it's as well-known as Oppenheimer or Neuberger Berman but in Europe it doesn't roll quite so easily off the tongue. Spreading the word is up to Burnham and Stevenson and they certainly proved their ability as crusaders with the promotion of Cresvale, which was not simply a trading house but also a high-flying Far Eastern fund manager during the Japanese equity boom. Offices have been leased at 11 Old Jewry near the Bank of England. A 16-trader desk is being installed. Young dealers, and perhaps even the occasional grey hair, are being interviewed.
While HHG isn't a household name like Goldman Sachs or Salomon, the firm has an excellent reputation in New York and was founded more than 70 years ago. The firm is privately held and almost all of the equity is owned by the founding families and staff. There are 600 employees and the firm's capital exceeds $150 million. As a private company HHG is not required to disclose earnings, but Wall Street observers suggest that the firm is solidly profitable.
What do London commentators make of Burnham and Stevenson's comeback? It's early days yet but certain institutions are privately welcoming the arrival of competition in a sector currently dominated by Winterflood Securities and the omnipresent Brian Winterflood. One fund manager says: "Both Brian Winterflood and Steve Burnham have equal determination and egos. Brian has more experience but Steve is a lot younger." Did I hear someone say "seconds out"?