Meredith Whitney trades brokerage for hedge fund
One of Wall Street’s best-known analysts, Meredith Whitney, is poised to launch a hedge fund after deregistering her own brokerage firm from the Financial Industry Regulatory Authority (FINRA).
Meredith Whitney Securities, the brokerage arm of the Meredith Whitney Advisory Group (MWAG) that was launched in 2009, was removed from FINRA’s listings on August 28, according to the filing. MWAG, which until recently published regular investment research, also appears to be winding down after its last findings were released mid-September.
A filing released by Whitney to independent securities regulator FINRA simply reads: ‘I am the managing principal/chief investment officer for a long/short fund.’ The new firm, called Kenbelle Capital, is an investment manager to a partnership based in Bermuda. Whitney has previously articulated a wish to start investing both her own and other people’s money, in what she called ‘the whole investment supercycles’ in an interview with the Financial Times.
MWAG’s potential closure comes after Whitney’s research firm steadily lost a number of buy-side clients, dropping from 30 customers shortly after its opening to 14 by the start of 2013. The firm’s research staff have also been cut from five full-time analysts in 2011 to just one on MWAG’s books this summer, Angela Cantu, who has since departed to join the Blackstone Group.
An Integrity Research Associates blog describes the closing of MWAG as ‘not a shock’ and says Whitney has faced similar problems to those of other research firms, including a shrinking US equity commission pool and increasing regulatory scrutiny.
‘In fact, many independent research companies we have spoken with over the past six months say they have experienced either dramatic client cancellations or drastic revenue reductions from buy-side customers over the past few years due to the factors mentioned above,’ the blog continues.
Whitney first fell under the spotlight in 2007 after making a prediction that banking giant Citigroup would be forced to cut its dividend, a forecast that proved true just months later. Fueled by her successful prediction, Whitney struck out in 2009 to found her research and brokerage firms.
In 2010 she made a bold but inaccurate prediction that defaults at municipalities across the US would come to be worth hundreds of billions of dollars, though called her assertion a ‘guesstimate’. Instead of collapsing, however, municipalities became star performers in 2011, to a chorus of Wall Street detractors.