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Hovde's research chief says company looking to add equity coverage

Depository equity research analyst Kevin Fitzsimmons is no longer with Hovde Group LLC, but the company is planning to expand its coverage universe, not shrink it, according to Head of Research Joseph Fenech.

Hovde announced in a May 26 research report that the companies Fitzsimmons covered were being transferred to other analysts. Fenech declined to comment on Fitzsimmons, but said Hovde would like to add to its equity research team.

"We're looking for two people at this point," he said in an interview.

Hovde, a bank and thrift-focused investment bank, has three publishing analysts: Fenech, Brian Zabora and Kevin Swanson. Fenech noted that the company recently promoted Swanson to a lead analyst role. Fitzsimmons was a managing director and veteran analyst who had more than 20 years of experience.

The current environment has been a challenging one for equity research. Many veteran analysts are being forced to leave the industry, accept pay cuts or take positions at reduced salaries and more compensation tied to equity sales revenue, said Barry van Roden, founder of the recruiting firm van Roden Associates. Though he was not familiar with the Hovde situation, van Roden said broker/dealers in general have been examining their cost structures and cutting back on equity research.

"There are very few firms that are adding people in research," he said in an interview.

Within the last year, companies such as CLSA Americas LLC, Avondale Partners LLC and BB&T Corp. have shut down their equity research offerings. In general, equities businesses have been struggling as they deal with declining trading commissions and volume. One challenge is that their core buy-side clients are losing market share to passive asset managers.

Some companies still believe they can have success in equity research and are still hiring. Fenech said Hovde's equity research offering has been doing well, and the company is committed to the business.

"We're not dropping coverage of any names or shrinking the size of the platform," he said. "We're looking to expand the size of the platform."

Hovde expanded its equity research team in 2016 with the addition of Zabora, who was previously with Stifel Financial Corp. unit Keefe Bruyette & Woods Inc. Swanson joined in 2015.

Fenech and Fitzsimmons moved to Hovde from Sandler O'Neill & Partners LP in 2014 to help launch the equity research effort. The two were co-heads of research, but Fenech became the sole head of research earlier this year.

A May 3 news release from the company noted that Fenech was part of a four-person operating committee that also included Head of Investment Banking Kirk Hovde, Head of Capital Markets Michael Hedrei and Head of Legal and Compliance David Magli. The committee reports to Hovde Group Chairman and CEO Steven Hovde and Senior Managing Partner Nick Barbarine.

During the last three years, Hovde more than doubled in size thanks in part to the expansion of capital markets, equity research and sales and trading, according to the news release. The operating committee is responsible for the company's day-to-day operations and will help with the next phase of growth, Hovde said in the release.

When it comes to additional hiring, Fenech said the company will remain opportunistic.

"We're always on the lookout for good talent," he said.