Life After Alex. Brown: Alumni: Companies created by former Alex. Brown employees are thriving. Scores have left since the two mergers of the past two years.

August 29, 1999|By Bill Atkinson | Bill Atkinson,SUN STAFF

Over a lunch of gourmet sandwiches, salad and dessert, Benjamin S. Schapiro and Thomas R. Hitchner served up a sales pitch to two Mitsui & Co. Commodities Corp. executives.

The two venture capitalists, who in December opened a private investment business, QuestMark Management Co., wanted Mitsui to pump at least $5 million into their fund. And their message was convincing. They talked about their strategy, their industry contacts and their well-connected board.

"The real priority is getting excellent returns," Schapiro told his guests. "We want to serve up enough deals and serve up that fat pitch."

Apparent throughout the meeting was their nearly 50 years' combined experience, and how they did business at their former company, whose creed was: "Client first, firm second, individual third."

Schapiro and Hitchner are proving that there is life after Alex. Brown.

Since leaving the Baltimore investment banking company in November, Schapiro and Hitchner have worked 80-hour weeks, met with investors across the country and in Europe, and spent countless hours poring over financial data of companies that look like promising investments.

In six months, their fund, QuestMark Partners L.P., has raised $221.6 million from about 60 investors, including New York-based Rockefeller & Co.; Artal Luxembourg S.A., an offshore investment vehicle for wealthy European families; and the Johns Hopkins Health System.

"I couldn't be happier with the way things are going," Schapiro said. "I am working my butt off."

Baltimore was stunned April 7, 1997, when Alex. Brown & Sons Inc., the country's oldest investment banking house, with roots in Baltimore that went back about 200 years, agreed to sell to New York-based Bankers Trust Corp.

In November the following year, Bankers Trust was acquired by Germany's largest banking company, Deutsche Bank AG, meaning Alex. Brown had its second parent in 15 months.

Since the mergers, scores of traders, brokers and executives have left Alex. Brown tojoin competitors. Schapiro and Hitchner struck out on their own, and they aren't the only ones.

Thirteen months ago, a group of Alex. Brown employees and directors acquired from Bankers Trust an investment advisory operation, Alex. Brown Capital Advisory & Trust Co. It has been renamed Brown Investment Advisory & Trust Co., and it is on a tear.

It manages $3.74 billion in assets for institutions and wealthy families, up nearly $1 billion since the buyout. In addition, it opened two mutuals funds in June and has hired several top investment experts, some of them from Alex. Brown.

"I think it is going great," said Michael D. Hankin, president and chief executive officer of Brown Investment. "We have gotten a lot of new clients."

Hankin's group began planning to strike out on its own the day the merger between Alex. Brown and Bankers Trust was announced. It found an ally in A. B. "Buzzy" Krongard, a former Alex. Brown chairman, who lobbied on their behalf.

The small group posed little threat to Bankers Trust, and 10 months after the merger was made final Sept. 1, 1997, nine directors and 70 employees left.

"It was exciting," Hankin said. "We did not have a big party. We got to work."

There were few changes. Employees worked in the same Alex. Brown building, worked with the same people and dealt with the same clients. But one change was noticeable.

"For the first time in a year, we didn't have to worry about being merged into a New York bank," Hankin said. "That is a big relief."

Brown Investment's strategy is to have a manageable number of large clients so that it can spend more time with each. The company manages assets, conducts estate planning and sets up trusts for its customers.

"That is what we are in the business of doing, custom-tailored [money] managing," said William Paternotte, chairman of the company's investment committee. "In our approach to serving high-net-worth clients is to provide them with a high degree of customized service and not off-the-shelf, or cookie-cutter, approach."

New fund

Brown Investment is expanding. It recently opened BIA Growth Equity Fund, which invests in large-company stocks, and the BIA Small-Cap Fund, which invests in small companies.

The company has about 350 clients, about 50 percent of them in the mid-Atlantic region. The average client invests $11 million with the company, Hankin said.

Since the buyout, the company has hired several key people, including Paternotte, who most recently was chairman of BT Alex. Brown's investment committee.

He joined because he wanted to be with a smaller company, he said.

"When a firm gets as large as an Alex. Brown, it is now part of a global bank. It is very hard to retain that sense of intimacy and closeness," he said. "We are in control of our own destiny."

His belief that Brown Investment could survive on its own was reinforced when the stock market plunged last summer before he joined the company.

Strength demonstrated

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