Utendahl, John 1956(?)–
John Utendahl 1956(?)–
As founder and owner of Utendahl Capital Partners LP, the largest African American-owned investment bank in the United States, John Utendahl made Wall Street history by launching the first minority-owned firm that did not specialize in municipal bonds. Just seven years after its founding, Utendahl’s company has emerged as one of the finance industry’s rising new investment leaders, entering into partnerships with some of Wall Street’s most austere financial brokerage houses. Utendahl is proud to have created a multifaceted operation that not only trades stocks and bonds, but also provides merger and acquisition advice to large corporations—a field in which Utendahl Capital Partners LP was the first African American firm to enter. Named by Fortune magazine as “the leading example of a new generation of black entrepreneurs on Wall Street,” Utendahl is forthright about his visionary goals to create a full-service investment firm that does not benefit from the rules of affirmative action.
Utendahl was born in the New York City borough of Queens in the mid-1950s, and earned his undergraduate degree from Long Island University, where he played basketball. After graduation, he was hired by a New York bank, but one day visited the trading floor of Salomon Brothers, one of Wall Street’s largest investment bank firms with a trading floor the size of a football field. Utendahl was spellbound by the buzz of the action, with hundreds of traders busily shouting out orders, and decided to pursue a graduate degree in business. After being admitted to the prestigious business school program at Columbia University, he earned his Ivy League M.B.A. and found himself again overwhelmed—this time by the numerous job offers that came his way.
Utendahl worked first as a corporate bond trader for Salomon Brothers, beginning in 1982, and then moved on to the brokerage house of Merrill Lynch. He quickly rose to the position of vice-president. After the Wall Street crash in October of 1987 and the subsequent recession of the early 1990s, he began to notice that there were fewer staffers at the bond sales desk. At the same time, he observed that there were more traders at the dealer desk, which at Merrill Lynch was the department that sold the bonds to other brokerages and investment boutiques.” Utendahl could remember when there had been just one person on the dealer desk; now there were five,” noted David Whitford in Fortune. “Somewhere out there beyond the busy dealer desks, Utendahl surmised, was ‘an environment in which boutiques specializing in niche products could do very well if they had talented individuals and the right capital and focus,’” Utendahl told Fortune.
After a decade of working at two of the top investment houses in New York, Utendahl went to the partners at Merrill Lynch with a business proposal. He knew that
At a Glance…
Career: Salomon Brothers, New York, NY, began as corporate bond trader, 1982; Merrill Lynch, New York, NY, began as corporate bond trader, became vice president and senior bond trader; Utendahl Capital Partners LP, New York, NY, founder, 1992, and chief executive officer, 1992-.
Addresses: Office —Utendahl Capital Partners LP, 30 Broad St, New York, NY 10004.
there already were several minority-owned brokerage firms on Wall Street, but all of them dealt in public finance—in other words, creating bond issues for public-works projects for cities and states. There were no minority firms that specialized in corporate finance, the realm of Wall Street that issued corporate bonds and stocks. With backing from Merrill Lynch and in partnership with a friend who worked at another top Wall Street firm, Utendahl Capital Partners opened its doors in April of 1992. “I always felt I would be running a company,” Utendahl told Barbara Benson for Cram’s New York Business. “The trick was convincing people to share the vision and the dream—to come to work with me, not necessarily for me.”
One of the firm’s first successes came when it was selected as an underwriter for securities that came onto the market from the Resolution Trust Corporation, which had been established to clean up the debris from the savings-and-loan scandal of the 1980s. With that coup, Utendahl Capital Partners began co-managing $750 million in mortgage-backed securities. In June of 1992, Utendahl guided his firm into a historic deal as the first minority firm to co-manage a Federal Home Loan Mortgage (Freddie Mac) transaction, a venture that was undertaken with Goldman, Sachs & Co.
Such top firms remain Utendahl’s role model for his own company. In particular, he recognizes the blue-chip investment banking firm of Lazard Freres as the arche-type for his own. Lazard Freres has numerous departments staffed by top brokers and securities professionals who working in investment banking, asset management, advisory assignments, and merger-and-acquisition analysis. With this in mind, Utendahl set up within his own firm Utendahl Capital Management, which invests funds on behalf of an impressive list of institutional clients, including Time-Warner, Colgate-Palmolive, Borden, and American Express.
Utendahl’s ties to Merrill Lynch have provoked some negative criticism, especially from older, minority-owned Wall Street firms who decry such alliances between large established firms and new businesses like Utendahl. As Whitford explained in Fortune, Utendahl and another African American-owned firm, “have been blasted by some minorities who regard them as at best pawns and at worst parties to a conspiracy orchestrated by the white establishment to divert business rightfully intended—by law or corporate fiat—for truly independent minority firms.” Whitford conceded that, indeed, “Merrill may be using Utendahl to reel in the business of companies that want minority participation in their deals,” he wrote in the Fortune article. “But Utendahl is also using Merrill Lynch to become a player on the Street. And there it would end, under normal circumstances—what is the Street about if not using every available edge in order to make a buck?”
Utendahl recognizes that success brings with it a requisite amount of criticism. He asserted that he never began his own firm in order to deal solely in opportunities created by affirmative-action laws. “If my firm had to depend on set-asides, we would have been out of business a few months after we started,” Utendahl stated in the interview with Grain’s New York Business. Although Merrill Lynch owns 20 percent of Utendahl Capital Partners, Utendahl dismisses the speculation that Merrill Lynch dictates how he runs his business, and stresses that the larger firm is “a limited partner.” As he told Black Enterprise’s Lynnette Khalfani, “every business school teaches you that strategic alliances are one way to sustain and promote growth in any industry.”
By 1998, the subsidiary office of Utendahl Capital Management was managing $700 million in corporate assets. In March of 1999, the firm captured another momentous coup when it became co-manager for the IPO, or initial public offering, of a corporate stock issue for the Pepsi Bottling Group. Civil-rights activist Jesse Jackson was instrumental in helping Utendahl’s office become a part of the deal: Jackson’s not-for-profit “Wall Street Project,” according to Whitford in a 1999 Fortune article, “aims to create more entry-level jobs for blacks on Wall Street, promote diversity on corporate boards, promote black ownership of professional sports franchises, place institutional funds with minority money managers, and foster what Jackson calls Vehicles for the transport of capital’ from Wall Street to Appalachia and Mississippi.” As co-manager of the IPO, Utendahl Capital Partners would receive a share of the $19 million management fee.
Utendahl has been hailed as part of a new wave of forward-thinking African American investment specialists, and his foresight in avoiding the municipal bond market proved a wise one when that segment ran into financial trouble in the mid-1990s. Overall, the number of African Americans working in investment banking remains quite low. In the mid-1990s, only 8 percent of securities-industry professionals were African American. Utendahl, however, realizes that making serious gains inside one of the country’s most venerable, mythical industries is a long journey. “I’m not one to highlight publicly what I might have identified as prejudice,” he told Grain’s Neu; York Business. “I acknowledge that prejudice exists. It exists not just in corporate America, but everywhere. That’s reality.”
Black Collegian, February, 1997.
Black Enterprise, October, 1992, p. 47; June, 1998, pp. 191-199.
Crain’s New York Business, March 27, 1995.
Forbes, April 25, 1994, p. 188.
Fortune, August 4, 1997, pp. 48-51, June 21, 1999, pp. 102-108.
European Investment Bank
European Investment Bank
Total Assets: $289.14 (2003)
NAIC: 522293 International Trade Financing; 522110 Commercial Banking
As the primary financial arm of the European Union, the European Investment Bank (EIB) is also the world's largest bank and the world's largest lender, topping even such better-known institutions as the World Bank and the International Monetary Fund. The bulk of the non-profit bank's lending remains focused on the member states of the European Union. Of the more than EUR 42 billion in loans signed in 2003, nearly 80 percent went to support infrastructure, industrial, high tech and other investments within the European Union. Germany remains the single-largest contributor to the EIB's capital base and is also its top recipient—largely in order to support development in the former East Germany regions—accounting for more than 19 percent of all loans in 2003. Spain is the next-largest recipient, with loans of about 19 percent as well. EIB has also played an important role in supporting the "accession" of the EU's newest member states from Eastern Europe, which joined in 2004 and expanding the EU to 25 states. The EIB has been providing infrastructure and other development loans to these regions on a massive scale since the late 1980s. Nonetheless, since the early 2000s, the EIB has been shifting away from its traditional role as a financing institution and instead has been redeveloping itself as a motor for European economic growth and competitiveness. In this capacity, the EIB has shifted a significant percentage of its lending portfolio towards high-technology investments and to the SME (small and mid-sized enterprise) segment, including medium and long-term loans, venture capital, and other financial backing. The bank also supports the so-called TENs (Trans-European Networks) projects linking all of the EU or at least several of its member states, such as the preparation of a European-wide broadband network. The EIB is based in Luxembourg and operates independently of the European Union government, while deriving its capital base of more than EUR 250 billion from contributions from each EU member. The EU states also provide the EIB with its strong Triple AAA rating by providing financial guarantees. Since 2000, EIB has been a member of the EIB Group, which also includes the European Investment Fund (held at 60.5 percent by EIB itself). Philippe Maystadt, former Belgian finance minister, has been president of EIB since 2000.
Financing the European Community in the 1960s
The European Investment Bank was created by the Treaty of Rome—which established the basis for the European Community—in 1958. Codified under Articles 129 and 130 of the treaty, the EIB's role was to provide financing in the form of loans for Europe's major infrastructure projects. Special emphasis was placed on infrastructure projects benefiting all five of the EC's initial members, particularly those that contributed to the smooth and balanced creation of a common market. Another initial function of the EIB was to serve as a means of compensating the presumed "losers" of an inter-European union, that is, ensuring that resources were to be directed toward the weaker economies among the EC's partners.
As the strongest and largest of the five initial EC countries, Germany played a prominent role in defining the nature of the new bank. At that country's insistence, for example, the EIB's capital base was developed through funds raised on the international capital markets, rather than through direct subsidies from member countries. Instead, member countries provided the financial guarantees for the EIB's bonds, which in turn enabled the EIB to achieve a Triple AAA rating among market analysts. This rating made the EIB's bonds all the more attractive among the international investment community.
Another feature of the EIB was that it was established as an independent entity within the EC, with its headquarters in Luxembourg, rather than in Brussels. Directorships were created for each member state, as well as for the EC as a whole. While the EIB was expected to cooperate with the other institutions of the EC, its independence meant that it was able to establish its own lending objectives, rather than serve as a financial tool for the EC's political agenda. (Other EC structures, such as the European Social Fund, were established for these objectives.) In this way, the EC's investment and social "adjustment" priorities remained independent from each other. This meant, too, that the EIB was established purely as a lending agent and not as a grant-making authority.
The EIB came into being under the presidency of Italy's Pietro Campilli, who was succeeded after just one year by Paride Formentini, also from Italy. The bank's initial capital base stood at one billion "units of account" (ua)—the currency measurement put in place before the creation of a virtual European currency, the ECU, itself supplanted by the euro in 1999. Italy, the poorest of the original five EC members, became the primary recipient for the EIB's infrastructure and development lending. The EIB also quickly extended its lending activities beyond the EC itself, making its first loans on extra-community projects in 1962. The EC remained, however, the EIB's primary focus.
For the most part of its first decade or so of existence, the EIB played a largely secondary and supporting role. This was in large part because the booming economies among the member nations during the late 1950s and through the 1960s meant that the states themselves were better able to shoulder the burden of their infrastructure development. At the same time, the establishment of a common customs union proceeded strongly. This success meant that there was less of a need to call upon the EIB for assistance in financing the putting in place of the common market among members.
Growing up in the 1970s
The shock of the economic crisis that struck Europe in the early 1970s brought about a refocus in the EIB's role and objectives. The dwindling economies of the original EC member countries made it more difficult for the individual nations to pursue their separate and often disparate national policy objectives. At the same time, the enlargement of the EC, with the addition of the United Kingdom, Denmark, Ireland, and others in the 1970s, followed by the joining of Greece, Spain, and Portugal into the mid-1980s, had brought the EC a still more diversified landscape of economic and infrastructure development.
These factors led the EC to begin taking steps toward developing a European-wide economic policy. The EIB in turn began adopting lending patterns more closely associated with EC economic strategies and objectives. Another important factor in this shift was the fact that the EIB achieved the best rates on its own borrowing from the international market when the projects it proposed to support were directly in line with the EC's own sanctioned policies. In turn, such projects, which received additional guarantees from the EC states, were also viewed as low risk, which also helped the EIB borrow on better terms.
The addition of new countries to the EC brought the EIB's first capital enlargement in 1973, when the banks lending base was expanded to 2.025 billion ua. The larger financial base, coupled with the development of European-wide policies at the European Parliament, led the EIB to draft its own regional lending policy starting in 1974. Under its new policy, the EIB now expanded its lending focus to include industrial development loans in the depressed industrial regions of the growing EC membership. At the same time, the EIB benefited from the creation of a new structural fund, the European Regional Development Fund (ERDF). The EIB began co-financing many of the ERDF's own projects, providing the EIB with a low-risk means of diversifying its portfolio and expanding its range of operations.
The EIB also began lending specifically to the growing number of European Community "associates," particularly countries seeking admission to the EC. The Mediterranean region became a favored target for EIB lending projects. The EIB became responsible in the 1980s for assisting associate countries such as Greece, Spain, and Portugal in achieving requirements for EC admission. In order to fulfill its new mandate, the bank enlarged its capital base twice in the 1980s, to ECU 14.4 billion in 1981 and to ECU 28.8 billion in 1986. Spain in particular became one of the largest beneficiaries of the EIB's new Mediterranean focus and remained the second-largest recipient of EIB loans into the 2000s.
European Growth Motor in the New Century
Another important focus for the EIB, stemming from the oil crises of the 1970s, was the promotion of alternative energy developments in Europe, especially the development of nuclear energy capacity in the member states. Yet the EIB also found itself exposed to a degree of criticism for its environmental policies—or, rather, its perceived lack of environmental concern. In 1984, the EIB countered this criticism with the adoption of a first environmental policy statement. This was, however, considered too weak in its language by many observers and was unable to prevent the EIB's lending to such environmental disasters as the bridge between Sweden and Denmark, the Lihir Gold Mine in Papua New Guinea, and the Lesotho hydroelectric dam, which forced the displacement of more than 20,000 people as well as flooding a large portion of a highly fertile agricultural region.
Our mission is to further the objectives of the European Union by making long-term finance available for sound investment.
In the late 1980s and early 1990s, the EIB began developing a number of new markets. On the one hand, the bank began focusing more of its loan portfolio on financing the SME market, as well as telecommunications and urban transport initiatives among EC member countries. In 1989, the EIB also began providing financing to countries in the former Eastern Bloc as these emerged from Soviet rule, lending to Poland, Romania, Hungary, Bulgaria, the Czech Republic, and Slovakia. The EIB stepped up its operations in the region toward the late 1990s as these countries prepared their applications to join the 15 members of what by then had become known as the European Union (EU).
In keeping with its growing portfolio, the EIB increased its capital again, doubling its base to ECU 58 billion in 1991. By 1995, after Finland, Sweden, and Austria had joined the EU, the bank's capital base had climbed to ECU 62 billion. By 2004, with the expansion of the EU to 25 states, the bank's capital base had swelled past EUR 163.7 billion. Meanwhile, the EIB had long become the world's largest lending bank, having surpassed even the World Bank in 1992.
Following the Lisbon European Council in 2000 and the appointment of a new president, former Belgian finance minister Philippe Maystadt, the EIB announced a shift in its objectives. While the EIB intended to continue providing infrastructure and policy support to the European Union as it had for more than 40 years, in the new century the bank was determined to play a significant part in achieving the Lisbon summit's stated objective of making Europe the world's most competitive high-technology and knowledge-based economy by 2010.
As part of this shift, EIB quickly refocused its lending portfolio, shifting an increasing percentage of its loans toward supporting high-technology and venture capital programs, as well as the SME market. In support of this effort, the EIB drafted a new policy, called "Innovation 2010 Initiative," in June 2003, providing for increasing emphasis on projects corresponding to the Lisbon Council objectives. At the same time, EIB braced itself for a new boom in its lending portfolio as the EU embraced ten new members in 2004. As the world's largest bank, and as the lending institution backing one of the world's major markets, EIB remained a powerful force in the global economy in the new century.
European Investment Fund (60.5%)
World Bank; International Monetary Fund; European Bank for Reconstruction and Development.
- European Investment Bank (EIB) is established following the Treaty of Rome, which created the European Community (EC).
- EIB makes its first loans outside the EC.
- The adoption of a new regional policy more closely aligns EIB with EC policy objectives.
- EIB begins lending to "Club Med" states (Spain, Portugal, Greece).
- EIB begins providing loans to small and mid-sized enterprise (SME) and industrial markets.
- The bank begins lending to eastern European countries.
- EIB tops the World Bank in lending for the first time.
- Libson European Council establishes new long-term objectives, including development of Europe into the world's largest knowledge-based economy.
- EIB drafts a new policy, Innovation 2010 Initiative, in support of the Lisbon council objectives.
- The bank's capital is increased to EUR 162 billion after ten new countries join the European Union.
Brown, Paul, "EIB Governors Are Urged to End Secrecy," Guardian, June 1, 2004, p. 14.
Colomer, Nora, "Uncharted Financial Territory Lies Ahead for New EU members," Asset Securitization Report, April 19, 2004.
"EIB: Enlargement-related Changes Explained," European Report, May 8, 2004, p. 103.
Fleming, Stewart, "Low Profile, High Aims," Business Week, October 20, 2003, p. 70.
"Investment Bank Takes New Role in EU Growth Plan," Irish Times, October 31, 2003, p. 59.
Lankowski, Carl, "Financing Integration: The European Investment Bank in Transition," Law and Policy in International Business, Summer 1996, p. 999.
Milner, Mark, "European Investment Bank Seeks to Spread Its Wings outside the Union," Guardian, October 25, 1999, p. 20.
Norman, Peter, "The Catalyst of Europe," Financial Times, February 7, 2001, p. 16.
Robinson, Karina, "Laying Europe's Building Blocks," Banker, May 1, 2004.
Tremlett, Giles, "EIB: Brussels Is Trying to Spike a Damaging Report on the World's Biggest Bank," Observer, March 7, 2004, p. 4.