U.S. Bancorp Piper Jaffray is expanding its derivatives practice, and has hired Doug Campbell, former Bank of America municipal derivatives expert, as a managing director to head up the effort.
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Frank Fairman, director of the public finance group at Piper Jaffray, said the fixed-income derivatives practice will include both municipal and corporate derivatives. However, municipal derivatives are taking top priority at first because they are a natural fit with the firm's public finance business.
"We feel that we can instantly expand upon it," Fairman said.
In the past, the group has helped clients structure derivatives in conjunction with derivatives dealers, including some of the largest investment banking firms, according to Fairman, though he did not disclose any names. Now the division is setting up the capacity to provide a broader set of products under its own name to all of its clients, Fairman said.
The firm will offer the standard types of municipal products. They include interest rate hedging products, interest rate caps, collars, and other forms of structured investment products for investment in municipal funds.
The division is now putting policies, procedures, and approvals in place and expects to be fully operational early next year.
The derivatives group currently consists of four officials, but it will add others as business dictates.
Campbell is based in the firm's Minnesota office. Prior to his position at Bank of America, he worked at First Union National Bank.
Erin Freeman, Piper Jaffray's director of public affairs and media relations, said the firm decided to expand its derivatives business at this point because the volatile market environment has created the opportunity to expand in strategic areas.
In addition, derivatives are becoming an increasingly important product area for Piper Jaffray's clients, given the current interest rate environment, she added.
Campbell was unable to comment because he had not yet completed internal media training, according to Freeman.
Fairman said that the firm has a very strong presence in the Midwest and has a large number of bankers and sales and trading staff that have worked in the region for a long time.
The firm is most active in the general government, housing, health care, and higher-education sectors.
This year it has led a $64 million deal for Lee Summit School District in Missouri. It has also worked on a $40 million bond issue for North County Health Services in Bemidji, Minn.
In addition, the firm is able to maintain a loyal client base because it usually steps in when others pull out, Fairman said, pointing out that the firm was the only bidder on two competitive deals earlier in October when interest rates moved up. These included the $25 million portion of a Minneapolis general obligation issue on which it was the only bidder. It was also the single bidder on two series of a $55 million lease deal, for a state office building, for the Port Authority of St. Paul.
U.S. Bancorp Piper Jaffray, a subsidiary of U.S. Bancorp, is not rated. U.S. Bancorp's senior unsecured long-term paper and short-term commercial paper are rated A/A1 by Standard & Poor's and AA3/P1 by Moody's Investors Service.
In the third quarter, Piper Jaffray participated in 241 municipal bond offerings totaling $4.5 billion.
Since January, the municipal finance team has completed 847 transactions valued at over $18.9 billion. That figure represents a 10.81% increase in the amount of capital raised.
"Our division is coming off a record year last year and the strength in our third quarter results demonstrates the great momentum in our business," Barry Nordstrom, president and head of the fixed-income capital markets division, said in a prepared statement.
