(Updates with founders’ comments in fourth paragraph, Cummings’s in fifth.)
July 8 (Bloomberg) -- KGS-Alpha Capital Markets LP, the bond brokerage that expanded into corporate credit last year, said it’s getting out of that business.
Two-thirds of the firm’s 15 investment-grade bond traders and salesmen will be let go, with the other five reassigned, said Emily Tracy, a spokeswoman for the New York-based firm. KGS-Alpha, which has 150 employees, will focus on trading and originating mortgage-backed securities and other structured products, the company said today in a statement.
KGS-Alpha hired Robert Cummings as co-head of corporate credit in July 2013 and said at the time it was planning to expand that business by adding 15 bond traders and salespeople. It raised $65 million in debt in December to boost trading. The company expects to post a record first-half profit, according to today’s statement.
“You have to evaluate your businesses in terms of performance and whether they’re capable of meeting their targets,” Dan Goldman, one of KGS-Alpha’s founders, said in a phone interview. Levent Kahraman, his co-founder, added that corporate bonds never grew to be more than a small part of their business.
Cummings, a co-founder of StormHarbour Securities LP and a former managing director at Citigroup Inc., said in a phone interview that he resigned yesterday to take another job. He declined to say where he’ll be working.
KGS-Alpha started with about $80 million from a group led by Arsenal Capital Partners LP, a New York-based private-equity firm, and raised an additional $75 million in 2011. It outlasted some competitors that started bond-trading businesses after the financial crisis. Chapdelaine & Co. and LaBranche & Co. shrank or closed as bigger competitors recovered.