A California hedge fund that tormented four Northeast thrift managements for more than a year has been dissolved by its founder, who has started a new investment banking firm.
Stephen H. Gordon, who had been principal of Newport Beach-based Genesis Financial Partners since its inception in mid-1995, has formed Financial Institutional Partners LLC in Irvine, Calif. Mr. Gordon shut down Genesis at the end of last year after unsuccessfully pressuring four thrifts in Massachusetts and Pennsylvania to beef up earnings or sell out.
Abandoning his aggressive shareholder stances, Mr. Gordon said he now wants to work with bank managements, helping midsize community banks boost their profits primarily through balance sheet restructuring and asset- liability management. He and partner Fredric J. Forster, former president and chief operating officer of Irwindale-based H.F. Ahmanson & Co., said they plan to fill a specialist consulting gap out west.
"There's a massive void out here on the West Coast," said Mr. Gordon, who once was an investment banker at Sandler O'Neill & Partners in New York. "You have a number of institutions who are clearly underperforming, and there's a need for high-quality investment banking services."
Mr. Gordon's decision to terminate Genesis and return to his investment banking roots came after protracted legal and proxy battles to prompt changes at the four thrifts. Their managements repelled his efforts, and rumors had swirled for months that the Genesis fund was just not profitable enough.
"The fact that he's disbanding the fund speaks volumes," said William Morrissey, senior vice president at Somerville, Mass.-based Central Co- operative Bank, Genesis' most recent target. "It's self-evident. His activity didn't prove productive."
But Mr. Gordon insisted that his move back to investment banking had nothing to do with the performance of Genesis. He noted that the fund had met his goal of a total return of more than 25% during its lifetime.
"Do I feel that it could have done better? I always feel that way," Mr. Gordon said. "Did I think I could turn the whole industry around overnight? No. I think that's what everybody expected me to do."
"He's a very, very bright guy, and he does know how to read a balance sheet," said James Moynihan, senior vice president of Advest Group in Boston, who expressed surprise at the fund's dissolution. "I would think he'd be very, very successful in this new enterprise."
The new firm brings together two people with diverse experience. Mr. Gordon joined the upstart Sandler at its inception in 1988 and was a partner. By contrast, the 52-year-old Mr. Forster worked in small community banks, even founding one, before joining Ahmanson. He left the nation's largest thrift exactly 11 months ago.
Unlike many other investment banking firms based in or operating in California, Mr. Gordon said, FIP will not focus on corporate finance and merger-and-acquisition work. Instead, it will take a "balance sheet approach," while bringing in traditional investment banks when appropriate to give its clients access to other services.
"There is a viable, important role for community banks," Mr. Forster said, "but they can't be run the way they used to be. The dynamics of the business have changed too much."