John P. Costas (business)

John P. Costas
Born January 27, 1957
Education Tuck School of Business (1981)
University of Delaware (1979)
Occupation Investment banker, Hedge funds
Employer PrinceRidge Group
Dillon Read Capital Management (2005-07)
UBS (1996-2005)
CSFB (1981-96)
Known for CEO of UBS Investment Bank, Head of Dillon Read Capital Management

John P. Costas is an American businessman, banker and trader. He is the former Chairman and CEO of UBS Investment Bank where he oversaw the growth of the Swiss bank's investment banking franchise in the U.S.from 2000 to 2005. From 2005 through 2007, Costas was the Chairman and CEO of Dillon Read Capital Management, a UBS proprietary trading unit and alternatives management company.

In August 2012, Costas retired from the PrinceRidge Group, a boutique securities firm he founded in 2009. He now is the managing member of Costas Family Holdings, a private investment firm.

Career

Early career

John Costas graduated from the University of Delaware in 1979 with a degree political science and received his MBA from the Tuck School of Business at Dartmouth College in 1981 with a concentration in finance.

Costas began his career in 1981 as a fixed income sales person at First Boston Corporation, later Credit Suisse First Boston. Having joined as an trainee, Costas rose through the ranks and eventually became Co-Global Head of Fixed Income and a member of the Investment Bank's Executive Committee.

UBS Investment Bank

In 1996, Costas left Credit Suisse First Boston to join the Union Bank of Switzerland as head of North American fixed income.[1] A year later, Costas was named head of Global Fixed Income Trading at Union Bank of Switzerland, a position he held first at Warburg Dillon Read (later UBS Warburg then UBS Investment Bank) after the bank's merger with Swiss Bank Corporation created UBS in 1998.

In December 2001, Costas was appointed CEO of UBS's investment banking division, at the time known as UBS Warburg.[2][3] Costas' mandate was to turn UBS Warburg into a major Wall Street investment banking firm in the U.S. and compete with the largest bulge bracket American firms.

As UBS had already tried to build a business through takeovers, Costas shifted the growth strategy from acquiring entire firms toward hiring individual investment bankers or teams of bankers from rival firms.[4] Costas had followed a similar approach in building out the UBS fixed Income business hiring over 500 sales and trading personnel and increasing revenues from $300 million in 1998 to over $3 billion by 2001. SBC had built up its investment banking operations through the £860 million ($1.6 billion) acquisition of S.G. Warburg in 1995 and the $600 million purchase of Dillon, Read & Co. in 1997.[2] Costas hired more than 30 senior U.S. bankers from 2001 through 2004 to jump start the growth of the bank as UBS was looking to UBS take business from incumbent U.S. firms in their own market.[2] It was estimated that UBS spent as much as $600 million to $700 million hiring top bankers in the U.S. during this three-year period.[5]

Costas pulled off a major coup by recruiting former Drexel Burnham Lambert investment banker, Ken Moelis. The hire of Moelis drew focus on UBS's efforts to increase its presence in investment banking. Moelis joined UBS from Donaldson Lufkin & Jenrette in 2001, shortly after that firm had been acquired by Credit Suisse First Boston. In his six years at UBS, Moelis ultimately assumed the role of Costas' lieutenant as president of UBS Investment Bank and was credited, along with Costas, with the build-out of UBS's investment banking operation in the United States.[6] Among the bank's other major recruits during this period were Olivier Sarkozy, Ben Lorello, [7][8] David Tcholakian, and Jeff McDermott.[9] From 2002 to 2004, when Mr. Costas took over as Chief Executive of the global investment bank, pretax profits surged 47 percent, to $3.6 billion.[10]

Dillon Read Capital Management

In 2005, Costas was succeeded as CEO of UBS Investment Bank by Huw Jenkins, the former head of the Equities division.[10]

Costas was offered the opportunity to start a new hedge fund within UBS. The hedge fund, named Dillon Read Capital Management, recruited a team of 120 trading and support professionals that were formerly involved in the proprietary trading businesses within the Investment Bank.[11]

Dillon Read Capital Management, after having posted profits of $1.2 billion annually in both 2005 and 2006(30% annual returns), was closed in May 2007 after losing 3% in the UBS proprietary accounts in that year’s first quarter created friction within UBS (the outside fund was profitable throughout the period). Costas has said that Dillon Read’s hedge fund, which was capped at $1.1 billion, delivered a six-month net return of 16% after fees.[12][13]

PrinceRidge

Costas' next venture would be a start-up securities firm, The PrinceRidge Group LLC, he founded with former DRCM executive Michael Hutchins.[13] Costas launched PrinceRidge with $25 million in working capital and 50 employees in 2009.[14] PrinceRidge has since grown to over 90 employees by August 2010. The firm's main lines of business are structured and credit sales and trading. PrinceRidge also employs approximately 25 investment bankers providing advisory and capital raising services to over 200 middle market clients. Lastly, PrinceRidge provides secondary market making support to over 500 fixed income securities via a proprietary electronic trading platform. On April 19, PrinceRidge Holdings LP announced a merger with Institutional Financial Markets Inc. (IFMI) where IFMI invested $45 million in PrinceRidge Holdings LP in return for a majority ownership stake.[15] IFMI will also contribute over 60 sales, trading and banking professionals to the new PrinceRidge. Costas sold his interest in the company to IFMI and retired from PrinceRidge in August 2012. Today he actively manages the Costas Family Office with varied investment interests and 12 employees.

Charitable work

Costas is a national board member of A Better Chance, which is focused on supporting the higher education of minority students. He has also established the Costas Family Foundation with a similar mandate of supporting education for disadvantaged youth primarily in the United States.

References

  1. ↑ John Costas' New Horizons. Derivatives Strategy, May 1997
  2. 1 2 3 Costas Sees UBS Eclipsing Goldman, Citigroup as Top Fee Earner. Bloomberg, March 1, 2004
  3. ↑ Costas Seeks to Seize Middle Ground. Financial News, May 3, 2010
  4. ↑ How Banks Chased a Mirage. New York Times, May 26, 2002
  5. ↑ Higher Fees And Trading Help Double UBS Income. New York Times, May 5, 2004
  6. ↑ Moelis Is Leaving UBS. New York Times, March 19, 2007
  7. ↑ Jefferies nabs one-time critic from UBS from Dow Jones Financial News 25 June 2009
  8. ↑ Health Scare: Calculating UBS’s Loss of Banker Benjamin Lorello from The Wall Street Journal, 26 June 2009
  9. ↑ Top UBS banker founds private equity firm. Financial News, June 29, 2007
  10. 1 2 From UBS's Suite of Power to the Sweat of a Hedge Fund. New York Times, September 9, 2005
  11. ↑ UBS’s Hedge Fund: A Post-Mortem. New York Times, June 4, 2007
  12. ↑ "UBS Scraps Costas's Hedge Fund After Mortgage Losses".
  13. 1 2 UBS/Dillon Read Vets Start Over At New Firm. Investment Dealers' Digest, August 7, 2009
  14. ↑ Life After UBS: Costas’s New Boutique. New York Times, August 11, 2009
  15. ↑ "IFMI Announces $45 Million Investment in PrinceRidge Holdings". Princeridge.com. 2011-04-20. Retrieved 2011-10-07.
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