Shawn Matthews and Natasha Boyden Comment: Cantor Moves Deeper Into Equity Research

January 18, 2012, Institutional Investor

Cantor Fitzgerald, a firm primarily known for its bond brokerage and as a dealer of government securities, is expanding its equity research offerings. The company announced Thursday the addition of a dedicated REITs research team to its U.S. equity research sector coverage.

The new hires, Managing Directors David Toti and Sri Nagarajan, and Vice Presidents Evan Smith and Gaurav Mehta, all come to Cantor from FBR Capital Markets & Co.

“We had an opportunity to bring onboard a very well-known and well-established REIT team,” said Natasha Boyden, Director of U.S. Equity Research in an interview with Institutional Investor.

The addition represents a larger attempt by Cantor to expand into an equity research sector that it has not focused on in the past. Historically known for its strengths in fixed-income sales and trading, the firm sees equity research as a prime opportunity, especially in the small- to mid-cap range. The firm’s equity research previously was limited to clean technology and energy efficiency, semiconductors, marine transportation, medical devices and diagnostics, and specialty pharmaceuticals.

“You look at the financial services landscape, it’s changing aggressively here, so as head count reduction continues to occur at the large institutions, they’re going to have to retrench the services they offer their accounts,” said Shawn Matthews, CEO of Cantor Fitzgerald & Co. “We think there’s an opportunity to be the premier middle market investment bank out there.”

Matthews believes that the changing economy will create gaps that larger and smaller firms will be unable to fill. Priorities will shift for the larger firms, and smaller firms lack “the economies of breadth and depth to be global players.”

Expanding in REITs was an obvious choice. Many are already customers of Cantor, the largest firm for secondary offerings of REIT stocks.

“We are significant counterparties to pretty much every REIT that’s out there,” said Matthews. “It was a natural extension for us.” Cantor’s U.S. equity research team now numbers 13, with eight currently publishing. Boyden hopes to have the rest publishing in the near future.

The firm hopes to continue to grow its equity research platform in a global environment Matthews is ripe for the taking. Cantor considers the REIT sector a good jumping off point.

“We don’t want to be the 25th or 30th analyst on a name, we really want to pick out names that are perhaps under-followed, under-covered, maybe even unloved at this point and really find opportunities for our accounts that they may have not seen before,” says Boyden. “And that’s really, we think, an area (the small- to mid-cap space) where we feel we can do that with excellence.”