Lebenthal Shutters Muni Underwriting to Focus on Wealth Management

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Lebenthal & Co. will exit the municipal public finance underwriting and institutional sales business to focus solely on municipal retail sales, the firm said on Monday.

The firm will lose approximately 200 institutional accounts as a result of the departure, Alexandra Lebenthal, president and chief executive officer of the firm told The Bond Buyer exclusively.

She said the move also affects 15 employees - including co-heads of public finance Greg Anderson and Matt Deane - as well as a handful of institutional traders, underwriters, bankers, and sales staff.

"Obviously, it was tough to make this decision, but it was clear where we should focus our attention - and that is not institutional sales and not senior book-running," she said in a phone interview on Monday.

Instead, effective immediately, the investment management and financial planning firm plans to dedicate its municipal resources toward building its wealth management division, which has provided the best returns on capital and is where the 89-year-old New York-based firm has inherent strength and experience, according to Ms. Lebenthal.

"We made a decision to go back to our roots and focus on high net worth sales to individual retail accounts," she said. "In looking at everything in the last couple of months, it became really clear where our focus should be," said the third generation Lebenthal to head the firm started by her grandparents, Louis and Sayra Lebenthal in 1925.

Lebenthal said the company - which is considered on Wall Street a leader in women/minority-owned firms - currently has a retail sales and trading team of seven employees, but that number could increase depending on the growth of its wealth management business.

The retail side of the municipal bond business is where the firm will be "best positioned for the coming years," she added.

She said despite market concerns over interest rates, and decreasing volume, the firm in the last six months has experienced a "big shift" in retail municipal bond sales — the cornerstone of the Lebenthal brand.

"We continue to see opportunities there -- it just depends where on the yield curve they are," she said.

Ms. Lebenthal has been at the helm of the family firm since 1995. In 2001, she sold it to Advest. The Lebenthal name disappeared a few years later when Advest was acquired by Merrill Lynch. In 2007, she bought the name back and relaunched the firm, building one of the largest woman-owned financial institutions in the city.

Lebenthal & Co. had been in a growth mode in recent years, deciding to venture into the municipal underwriting business in 2011.

In the two years following that, the firm opened offices in Chicago and Los Angeles, doubled the revenue generated by its public finance business, and qualified for more senior-managed deals, Ms. Lebenthal has previously said.

In late September 2013, it added to its public finance division by hiring Jacob "Jay" Alpert as senior managing director and head of sales, following the December 2012 addition of William Ludolph, a 40-year veteran of the muni market and former banker at Charles Schwab Securities, as head of municipal underwriting.

News of Lebenthal's departure from public finance and institutional sales quickly spread early Monday, but didn't surprise municipal veterans, given the competitive nature of the municipal industry.

"Overhead has been growing due to burgeoning regulatory compliance, while simultaneously issuance has been on the decline and underwriting spreads have continued to narrow," said one municipal expert. "Under these circumstances it becomes difficult for the more thinly capitalized firms to stay in the game."

Ms. Lebenthal acknowledged that "everyone is vying for the same business," but said her firm is here to stay.

It will continue to maintain MuniAxis, its platform for odd-lot municipal bond transactions, as well as other key components of its overall business.

"Lebenthal is a name that will continue to be involved in the [municipal] business, just not in the way it has in the last several years," she said. "We are definitely staying in corporate and equities -- that also has a retail focus for us and we are a leader in that business."

Christine Albano is a buy side reporter for The Bond Buyer.

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