institutional brokerage business in the technology space is, frankly, growing very fast. The asset management area is about twenty percent of what we are doing. It includes private equity, our private client department, and a number of other, smaller activities that we’re performing in the money management business. Generally, the asset management business provides another constant flow of business. In all, we’ve built a number of businesses that are very constant in terms of growth, along with the more volatile investment banking revenue.
I think many people are attracted to our firm because of private equity. It’s unique to have private equity embedded inside our organization. It’s also unique that the entire carry goes into the overall firm, and that many of our professionals in research and investment banking play a role in mapping, identifying, and working on private equity transactions. Here there’s a more diversified and interesting role for professionals than they might find in another organization.
We also have a compensation package that includes not just equity and current competitive compensation, but also a leverage co-invest in private equity where we take 4 percent of an individual’s income and leverage that four-to-one. Essentially, our employees can invest 16 percent of their current income in private equity per year. We have an options plan where, below partner level, employees have an equity stake in the firm. So, there’s equity, private equity participation, and, of course, competitive compensation, all of which is paid out in cash. There’s no script, no third of your income that is going to be vested over three years and put into stock or any of the other things organizations have done to build their compensation packages.
I think an organization needs strong leadership, so I try to provide that. I also think we have a very unique culture, the attributes of which I’ve mentioned before, such as teamwork, integrity, a real winning attitude, and having fun. These are pretty important elements of a culture where people are really charged up and come to work every day interested in advancing their careers. This is a place where the goals of the organization meet the goals of the individual. We work very hard at making sure there is direct and regular feedback on how people are doing inside our firm. This is a place where you can calibrate your progress with the progress of the organization. We try to link performance with overall compensation. Running an organization as a meritocracy is another important element in building a successful culture, so we spend a lot of time on that aspect of the business.
Near-Death Business Experience I’ve been through quite a few “near-death” business experiences. I think the most prominent was with Montgomery Securities around the stock market crash in the fall of 1987. Early in 1987, we had started a convertible arbitrage business. We started with a gentleman who we thought knew what he was doing, but we found out six months into it that he didn’t. We had built a $200 million book of business for a client, which was a lot of money to us since we had roughly $20 million in equity capital. We had to shut the convertible arbitrage operation down. As we were closing out the $200 million client account, we could see there had been a big $10 million loss for us.