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October 21, 2016  

Piper Jaffray Prop Team Resets Emphasis

Two Piper Jaffray staffers have turned their focus away from mortgage-bond purchases and toward arranging securitizations for clients.

Luke Jackson and lieutenant Grant Whitehorn had been buying mortgage-backed securities since arriving at Piper Jaffray in 2007, tapping a combination of proprietary capital and hedge funds run by the firm under its Piper Jaffray Investment label. But they largely have unwound those positions in recent months.

Instead, Jackson and Whitehorn are talking to mid-size lenders about helping to fund receivables including auto loans, auto leases, motorcycle loans and healthcare loans by assembling and distributing asset-backed bond deals. They also are in discussions with mortgage originators and buyers about shedding exposures to their accounts, either by selling risk-transfer bonds or by offering whole-loan portfolios.

The initiative follows a move in which fixed-income services and investment chief Brad Winges recently gave Jackson a broad mandate to reshape his activities with a focus on those two lines of business. The reason: Piper Jaffray appears to have recognized that a market-wide slowdown in mortgage-bond trading was stymieing its investment efforts, at a time when larger banks have been leaving asset-finance opportunities on the table in response to regulations including the Bank for International Settlements’ Basel 3 accord.

The new project would complement the work of an existing securitization-underwriting team at Piper Jaffray, with Jackson also playing a leadership role in that business.

The scale of the effort remains uncertain. Piper Jaffray has run the books on just two asset-backed bond deals so far, one secured by loans written by Monex against precious metals in 2013 and the other underpinned by motorcycle loans from ThunderRoad Financial this April. But sources insist the firm is devoting more resources to the sector, and to that end will hire more bankers to work with Jackson in the coming weeks.

On the distribution front, Jackson and Whitehorn would rely on an existing staff of 125 fixed-income sales professionals who already handle a range of products.

The Minneapolis-based duo’s exit from the investment side, meanwhile, appears to have largely ended Piper Jaffray’s presence as a buyer of private-label mortgage paper. The shift also sparked rumors that Piper no longer would broker trades in that market, something insiders there characterize as untrue. Instead, they describe the trading desk as remaining active under the leadership of Dan Roddy, with assistance from agency mortgage-bond specialist Dan Dujmic.

Roddy stepped up to his current post following the February exit of Bruce Graham, who had been in charge of mortgage-bond trading since 2014. Graham has yet to resurface.

Jackson worked at GMAC before joining Piper Jaffray, with Whitehorn coming from Associated Bank. They initially took advantage of heavy asset sales by mortgage-bond holders that saw quarterly trading volume peak at $136 billion during the final three months of 2012, according to Finra’s Trade Reporting and Compliance Engine. Since then, the flow of secondary-market offerings has tapered off to an average of $60 billion per quarter.

In light of that reduction, other broker-dealers including Amherst Securities, KGS-Alpha Capital and Mesirow Financial have broadened their mortgage-bond businesses to encompass products such as derivative contracts and agency securities.