Ken Posner, best known for his work as a Morgan Stanley analyst who tracked consumer finance companies as well as Fannie Mae and Freddie Mac, has teamed up with a group of banking professionals to start a firm that will invest in financial institutions.
North American Financial Holdings is based in Charlotte, but Posner will work out of the firm's New York offices as chief of investment analytics and research. The firm's chief executive and chairman is Gene Taylor, former vice chairman of Bank of America Corp.
In December, North American raised $550 million in a 144A private placement. Posner, in a telephone interview last week with Investment Dealers' Digest, did not name the institutional investors, but a press release from Crestview Partners, a private-equity investment firm with $4 billion under management, identifies Crestview as one of the backers.
The startup has a bank shelf charter, so it can — in theory — buy a bank. So far it has not made any investments.
Posner left Morgan Stanley in 2008 after 15 years at the firm.
"I thought it was time for change of pace," he said. If "you do the same thing for a long time, you get very good in that same thing, but you may miss some of the bigger picture."
He continued: "I thought it would be interesting to take a break from research and see if the skills I developed as an analyst were, in fact, transferable to the real investment world of putting money to work."
Posner, who is 46, graduated from Yale University and received an MBA from the University of Chicago. He is the author of the recently published "Stalking the Black Swan" (Columbia Business School Publishing).
In the book, Posner discusses some of the tripwires that felled many Wall Street analysts. One of those, he said, is the fact that a professional tracking a publicly traded business can be so in tune with the company and understand its inner workings that he or she fails to notice broader macroeconomic trends. Asked if he may have been too narrow in his thinking as a Wall Street analyst, Posner replied, "definitely."
"There is a trade-off," he said. "The deeper you dig, the more information you have about the question at hand. But the deeper you dig, the less information you have about everything else."
Posner said he made some erroneous assumptions concerning securitization.
"One of the mistakes I made was I put too much weight on financial innovation as a technology for dispersing risk," he said. "My hypothesis was that the securitization markets would respond to deteriorating subprime mortgage quality through wider spreads. I didn't think they would shut down."
"The models were not really built on the underlying causal drivers of the credit cycle," he said. "People were excessively focused on the micro and they missed the macro."
Asked if Europe's debt crisis is the next black swan to catch Wall Street unaware, Posner said "you don't know for sure until it's too late."
"When the market is this upset an individual investor should be very careful about assuming that they know the long-term future for a company or an industry."