Research 'Boutiques' Survive as Investment Iconoclasts

Article excerpt

IF it's ornate furnishings that you want in an investment house - mahogany sitting rooms, Ming Dynasty vases, and Persian rugs - then Gerard Klauer Mattison & Co. might seem somewhat rustic.

But Emanuel Gerard almost revels in the Spartan offices of GKM, which are tucked away in an unobtrusive building on Madison Avenue in midtown Manhattan, far from Wall Street on the southern tip of the island.

Gerard Klauer Mattison, members of the New York Stock Exchange, is a "research boutique one of some 25 small-to-medium sized research/trading firms found around the United States that compete with large investment houses such as Merrill Lynch & Co., PaineWebber, or Dean Witter & Co. And GKM is also a case study in not just how a boutique manages to survive against the big players on the investment block, but also how it finds a degree of profitability and recognition along the way. As "Manny" Gerard is quick to note, overhead is far lower in his cramped, no-frills offices than in the more lavish settings of Wall Street. However, his firm is considering moving to slightly larger quarters. The 30 people or so who work for GKM are scramblers. They work for far less than they might receive in a large brokerage house. With a mix of grit and innovation, they provide a broad range of client services, including helping to bring new issues to market, pure research, and trading. "This firm {which was founded in May, 1989} started with one basic premise," says Mr. Gerard. "We have to make money for our clients. When we can do that, then we'll create a business that's profitable."

Research boutiques are considered the hard-driving idea shops of Wall Street. They have to be to survive, says veteran Wall Street analyst Perrin Long, Jr., with First of Michigan Corporation, a brokerage house. When the stock market periodically goes into a tailspin and larger firms lay off surplus analysts and partners, some of these people launch new boutiques. These firms struggle to compete with older boutiques. Not all survive. Mr. Long says that the number of major boutiques has stayed relatively constant during the past decade.

Investment houses continue to shed analysts. …

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