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Friedman, Billings, Ramsey Group, Inc. - Investment Banking -
Category Directory
www.fbr.com
Sales
$629
million
Business Description
We are a leading national investment bank that provides investment banking,
institutional brokerage and asset management services and invests as
principal in mortgage-backed securities (MBS) and merchant banking
investments.
On March 31, 2003, we were formed through the merger of two existing
companies, both engaged in related businesses and both managed by the
Friedman, Billings, Ramsey Group, Inc. (Pre-Merger FBR) management team.
Prior to the merger, FBR Asset Investment Corporation (FBR Asset) was a New
York Stock Exchange listed REIT externally managed by a subsidiary of
Pre-Merger FBR with a primary focus in mortgage-backed securities and
merchant banking investments in debt and equity securities. Pre-Merger FBR
was a New York Stock Exchange listed company engaged in the investment
banking, institutional brokerage and asset management business. Upon
completion of the merger, the surviving corporation assumed the name
Friedman, Billings, Ramsey Group, Inc. and succeeded to the REIT status of
FBR Asset for U.S. federal income tax purposes.
Capital Markets Businesses
FBR TRS Holdings, Inc., a taxable REIT subsidiary holding company, is a
holding company for our capital markets businesses that provide investment
banking and institutional brokerage products and services.
Through these businesses, we provide financial products and services in the
following broad industry sectors that we believe offer significant business
opportunities: financial services, real estate, technology, healthcare,
energy and diversified industries. We have continued to strengthen our
business by adding coverage of new industry sectors, broadening and
deepening our research, institutional brokerage and investment banking
coverage within our industry sectors, adding new products and services that
benefit from our knowledge of each sector, and building a wider customer
base.
In order for us to remain competitive, it is important for us to focus on
our industry sectors and within those sectors to offer products and services
both to corporate issuers who are seeking advice and financing, and to our
brokerage customers. We also believe it is important for us to be involved
with companies early in their lifecycles (or even to be involved in creating
businesses) in order to establish relationships that will provide us with
ongoing revenues as these companies’ finance and advisory needs grow. As an
investment bank with a merchant banking capability, we seek to provide our
corporate clients with the financing and advisory services that they will
need at all stages of their corporate lifecycle.
The majority of our non-REIT revenues have historically been generated from
our investment banking and institutional brokerage businesses. In investment
banking we provide a range of services, including capital raising services
and merger and acquisition, restructuring and other advisory services.
Capital Raising Services
Our capital raising activities encompass a range of securities, structures
and size ranges. We are a leading national underwriter of equity securities
and are dedicated to the successful completion and aftermarket performance
of underwriting transactions we execute. Our strategy is to maintain
long-term relationships with our corporate clients by serving their capital
and advisory needs beyond their initial access to capital markets. We
believe that our approach of understanding our chosen industry sectors in
depth, combined with the advice we provide investment banking clients on
capital structure and access to the capital markets has helped us increase
our base of issuer clients.
Mergers and Acquisitions, Restructuring and Other Advisory Services
Our mergers and acquisitions business builds on our capital markets
expertise to evaluate merger and acquisition candidates and opportunities
for our clients. We believe that our activities and reputation have created
a network of relationships that enables us to quickly identify and execute
mutually beneficial business combinations.
Restructuring and other financial advisory services have included valuation
advice, fairness opinions, advice on mergers and acquisitions (including
ongoing review of merger and acquisition opportunities), market comparable
performance analysis, advice on dividend policy, and evaluation of stock
repurchase programs.
Institutional Brokerage
We focus on providing research, institutional sales and trading services to
equity and high-yield investors in the United States, Europe and elsewhere.
We execute securities transactions for institutional investors such as
banks, mutual funds, insurance companies, hedge funds, money managers and
pension and profit-sharing plans. Institutional investors normally purchase
and sell securities in large quantities, which requires the special market
making and trading expertise that we provide.
Our sales professionals work closely with our research analysts and our
trading desk to provide the most up-to-date information to our institutional
clients. Our sales, trading and research professionals work together to
maintain regular contact with the specialized portfolio managers and
buy-side analysts of each institutional client.
Our trading professionals facilitate trading in equity and high-yield
securities. We make markets in NASDAQ and other securities, trade listed
securities and service the trading desks of major institutions in the United
States, Europe and elsewhere.
Online Distribution Services
Our online securities distribution channel provides traditional online
brokerage services such as low-cost trades, quotes and news, and offers
investors the opportunity to participate in initial public offerings and
follow- on offerings in which we participate as an underwriter through our
proprietary Offering MarketplaceSM. In addition, we offer online access to a
mutual fund supermarket with over 8,000 funds.
Research
A key part of our strategy is to support our brokerage clients with
specialized and in-depth research. Our analysts cover a universe of over 500
companies in our focus industry sectors. Our research covers equity, high
yield and special situations. In addition, our metro-Washington, D.C. based
Economic and Policy Research Group provides general economic analysis, and
insight on the federal government’s activities as they effect the economy
and the market.
Our research analysts operate under three guiding principles: (i) to provide
objective, independent analysis of securities, their issuers, and their
place in the capital markets; (ii) to identify undervalued investment
opportunities in the capital markets, and (iii) to communicate effectively
the fundamentals of these investment opportunities to potential investors.
To achieve these objectives, we believe that industry specialization is
necessary, and, as a result, we organize our research staff along industry
lines. Each industry team works together to identify and evaluate industry
trends and developments. Within industry groups, analysts are further
subdivided into specific areas of focus so that they can maintain and apply
specific industry knowledge to each investment opportunity they address.
We have focused our research efforts in what we believe are some of the
fastest growing and most rapidly changing sectors of the United States and
world economies. These sectors include banks, thrifts, real estate
investment trusts, specialty finance and insurance companies, energy,
technology, bio-technology, genomics, healthcare, and diversified
industries. We believe that within these industry sectors there will be
great demand for the products and services we offer and that this in turn
will provide ample diversification opportunities for our business.
After initiating coverage on a company, our analysts seek to maintain a
long-term relationship with that company and a long-term commitment to
ensure that new developments are effectively communicated to our sales force
and institutional investors. We produce full-length research reports, notes
and earnings estimates on the companies we cover. In addition, our analysts
distribute written updates on these issuers both internally and to our
clients through the use of daily morning meeting notes, real-time electronic
mail and other forms of immediate communication. Our clients can also
receive analyst comments through electronic media, and our sales force
receives intra-day updates at meetings and through regular announcements of
developments.
Asset Management
Our asset management subsidiaries are subsidiaries of FBR TRS Holdings, Inc.
and also are taxable REIT subsidiaries. Since 1989, we have managed hedge
funds and other alternative asset management products. Since 1996, we have
expanded these specialized asset management capabilities, adding private
equity, arbitrage, and venture capital funds and public mutual funds, both
equity and fixed income, as part of our strategy to diversify our revenue
stream. We use the expertise of our portfolio managers and other
professionals to develop and implement investment products for institutional
investors and, through our Private Client Group (PCG), for high net worth
individual investors.
PCG seeks to offer creative money management solutions and investment ideas
suited to high net worth individuals - generally individuals with a net
worth in excess of $1.5 million. PCG offers a range of asset allocation and
long range wealth management services. Management of assets allocated to
various strategies is provided by us, and by external managers. PCG clients
are also afforded access to our proprietary asset management products,
institutional research and new securities issues. Using a consultative
approach, PCG professionals research, interpret, evaluate and recommend
sophisticated investment strategies. PCG provides hedging and monetizing
solutions for significant equity positions. PCG professionals are
knowledgeable in various aspects of the sale of restricted and control
stocks, as well as the financing of employee stock option exercises.
Individuals who own restricted or control stock receive PCG assistance with
the complex regulations and paperwork required to sell such securities. For
individuals unable to sell positions, PCG offers a number of strategies for
preserving value in such assets, as well as the ability to borrow funds at
favorable rates to provide liquidity.
Private Equity and Venture Capital Funds
At December 31, 2003, our private equity and venture capital funds had $93.2
million in gross assets under management and $147.2 million in productive
capital on which our base management fees of 2% to 2.5% are calculated. In
addition to base fees, these funds provide the potential for incentive
income if certain benchmarks are met.
Hedge Funds
At December 31, 2003 our hedge funds had $330.2 million in gross assets
under management and $277.2 million in productive capital on which our base
management fees of 1% to 1.5% are calculated. In addition to base fees,
these funds provide the potential for incentive income if certain benchmarks
are met.
Mutual Funds
The FBR Family of Funds, an open-end management type investment company
registered under the Investment Company Act of 1940, began business in 1997
and currently is comprised of six no-load equity mutual funds: the FBR Large
Cap Financial Fund, the FBR Small Cap Financial Fund, the FBR Small Cap
Fund, the FBR Large Cap Technology Fund, the FBR Small Cap Technology Fund
(commenced operations on January 20, 2004) and the FBR American Gas Index
Fund, as well as the FBR Fund for Government Investors, a money market fund
that invests in short term U.S. government securities, and two municipal
bond funds.
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