News & Analysis

Alternatives to the rescue

Bulge brackets Merrill Lynch, Citi and Morgan Stanley are looking for leadership and growth from a formerly obscure niche – alternatives, writes Amanda Janis.

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Amanda Janis

Heads are rolling on Wall Street as some of the world’s largest investment banks suffer massive third quarter losses. Merrill Lynch chief Stan O’Neal was the first casualty last week in the wake of multi-billion dollar write downs courtesy of credit and mortgage market losses. And Chuck Prince stopped dancing at Citi on Sunday – just three months after declaring Citi would “keep dancing” so long as the buyout band played on, and predicting that liquidity in the market would not be affected by the US subprime mortgage crisis.

As the banks search for new leadership, they are turning to executives with non-traditional backgrounds as alternative investment fund managers. In these executives they see proven abilities to build, adapt and expand successful, cutting-edge financial-services platforms throughout market cycles.

Laurence Fink has reportedly been offered the top spot at Merrill, which owns a non-controlling 49.8 percent stake in BlackRock, the publicly traded investment management firm Fink co-founded after spinning out from The Blackstone Group.

Meanwhile Alberto Cribriore is caretaking Merrill during the search. Cribriore has been a director at the bank since 2003. He made his name as founder and managing principal of Brera Capital Partners, a private equity investment firm. Before founding Brera he was co-president of Clayton, Dubilier & Rice from 1985 to 1997.

While Fink’s name has also been mentioned as a possible candidate for the Citi CEO post, the head of Citi Alternative Investments, Vikram Pandit, has also been named as a possible successor to Prince. Similar to Merrill’s investment in BlackRock, Pandit, too, built up an alternative investment business, which was purchased by Citi. The bank purchased 100 percent of Old Lane Partners.

With private equity and other alternative investments seen as having energy and momentum, it is no wonder that big, established conglomerates like Merrill, Citi and Morgan Stanley are hoping to infuse these qualities into their businesses.