The trend of underwriters partnering with brokerage firms to gain wide access to distribution networks continues with the latest match between Piper Jaffray and Pershing LLC.
Minneapolis-based underwriter Piper Jaffray said the agreement with Pershing will allow it to distribute municipal securities through 1,500 financial institutions that use the Pershing brokerage platform.
“We have a very strong public finance and municipal franchise, and retail distribution is important for some of our issuing clients,” said Todd Firebaugh, Piper’s co-head of public finance and fixed income. “We looked hard at Pershing and believe their distribution is unparalleled. We are diverse in our sector and geographic coverage so having a wide dispersion of retail clients on the investor side is important.”
One reason Piper Jaffray chose Pershing over other brokerage firms is because it is a BNY Mellon Co., one of the only triple-A rated banks. “We’ve done business with them before entering this arrangement and they’ve been a terrific channel for us and our products,” Firebaugh said. “We have a lot of clients in the mid-tier space and the product we’ve created is effective on Pershing’s platform.”
As book-runner, Piper targets clients issuing about $250 million or less in debt.
Pershing has a similar setup with Barclays Capital and other banks have made similar arrangements as well. Last December, muni bond underwriter M.R. Beal partnered with TD Ameritrade — a brokerage with a larger footprint with investors — due to increased retail demand for tax-exempt bonds. Last September, Goldman, Sachs & Co. paired up with Chicago-based distributor Incapital LLC.
Brad Winges, head of fixed-income services at Piper, said the new partnership will give the firm access to over five million active investor accounts, representing over $900 billion in assets.
Firebaugh added that the slow pace of municipal issuance so far this year was not necessarily taken into account when the deal was struck.
“We made this decision independently of the current market environment,” he said. “The municipal business represents a large part of the firm’s overall revenue and profit stream, and we’re committed to it for the long run.”
The decision was made as part of Piper’s growth plan. “We have a five-year plan in place and we are actively looking at growing our footprint,” Firebaugh said.
The firm has historically had a strong footprint in the western U.S. and is moving eastward. The firm recently made several new hires in Pennsylvania.
“We are very bullish on our prospects and having a national footprint like Pershing on the retail side will support our expansion,” Firebaugh said.
So far this year, Piper is ranked 10th as a lead underwriter, participating in 305 deals with a par value of $3.85 billion, according to Thomson Reuters.