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ANNUAL REPORT 2020Equities Division

Year in Review

The relative calm and quiet of the January-February period led us to the high volatility and steep declines induced by the COVID-19 pandemic. In those early months, most market participants were intently focused on portfolio re-alignment ahead of what was expected to be a complicated year heading up to the November 2020 U.S. presidential election. The pandemic in March, therefore, caught most off guard as the world finally took notice of the pandemic and its spread to major population centers. The dramatic 35 percent collapse in stocks—reminiscent of the 1987 crash—followed by an epic recovery throughout the year, was accompanied by an equally dramatic rise in volatility. Volatility had been muted for an extended period, and wild swings and surges in volume accompanying its recurrence was new to many participants. Rapid rotation, as investors sought to identify the winners and losers in a stay-at-home environment, as well as attempts to parse the longevity and stickiness of those trends, occupied many players for much of the year. Adding to the relative confusion was a historic plunge in 10-year yields (from ~2 percent to 0.3 percent) fed by the actions of the Federal Reserve, and a collapse in oil to briefly negative prices as the oil industry adapted to an immediate decline in travel as the population was ordered to stay at home. 

Quotation from Aenean Pretium

Generating $168 million in top-line revenue, an increase of 56 percent, the business turned in the best performance since the financial crisis.

Equities stats
Equities stats

Beginning in mid-March, a rapid pivot on the part of virtually all of our Equities staff, including sales and trading teams, to the unfamiliar challenge of working from home—a new normal. Despite this new working experience, Equities experienced an unparalleled surge in productivity as we and our client base re-organized to adapt to the virtual world. Throughout the year, 93 percent of Equities staff worked exclusively from their homes. In addition to front line business adaptations to serving client emerging needs, our teams completed a massive trading system conversion retiring FIS (BRASS) and 6 other vendor trading systems to realize ~$2.2 million in annual savings beginning fiscal year 2021.

Generating $168 million in top-line revenue, an increase of 56 percent, the business turned in the best performance since the financial crisis. Virtually all business lines participated with revenues driven by a combination of higher volumes across the board, increased volatility, significant growth of new issue business, and the added contribution from our sales and trading desk, corporate access, and research staffs.

Core U.S. Agency revenue increased 27.9 percent and we achieved an outstanding 20 percent revenue growth with our top 100 client segment (from $32.6 million to $39.2 million). Within this segment, strong trading performance with our Long Only client base drove a 36 percent increase (from $22.7 million to $30.8 million). Especially noteworthy was efficiency of our trading staff due to enhanced trading expertise, improved risk management from trading desk leadership, and improved client relationships throughout.

Industry Expertise

Oppenheimer’s highly regarded Research professionals kept up an astonishing cadence of primary research coverage, industry conferences, events and key opinion leader meetings throughout the year with all of the latter being in a virtual format to provide a seamless and accessible flow of value add content throughout the year.

Our long-tenured and experienced convertible bond desk had an outstanding year, benefiting from a shift in strategy towards Agency business, and improved depth and breadth in market liquidity from a record in new issuance; Oppenheimer participated in sixteen transactions, and as book-runner on four. Revenues of ~$15.5 million are up over 148 percent versus fiscal year 2019, while inventory levels were down by 50 percent reflecting our strong risk aversion in a volatile environment.

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Oppenheimer completed 73 book run or lead managed equity deals. Equity revenues are more than double fiscal year 2019 at ~$53 million. At 31.6 percent of total revenue for the division this year, equity new issuance is firmly re-established as a core driver of business contribution and profitability. 

Finally, an impressively executed pivot by all of our professional staff towards the virtual environment allowed for a strong increase in corporate access investor meetings, especially in our Technology and Health Care verticals, and this continued to be a key driver of business. Non-deal roadshows and other events increased 12 percent with over 8,500 investor meetings. Overall client participation was up 74 percent.

Equities highlights
Equities highlights

Looking Forward

Looking ahead to 2021, we expect volatility to stay somewhat elevated and the major themes such as stay-at home/back–to–work, low interest rates, and contrary views on the pace, scale, and velocity of economic recovery will continue to drive volumes as market participants navigate through necessary portfolio re-positioning. As we did with great success in 2020, Oppenheimer’s Equity teams will continue to ensure daily content, product, and service remain topical, relevant, and impactful to serve the needs of a diverse client base.

In perhaps the most significant development in 2020, building on the success of the last three to five years, Oppenheimer has achieved a superior level of recognition and visibility with important clients (both Long Only and Hedge Funds) in the core Agency business line. Compelling leadership and a disciplined and focused effort to identify and target key clients where the ability to interact and engage in highly sensitive and significant liquidity events has elevated Oppenheimer’s profile with some of the largest Institutional asset managers in the world. With a truly remarkable effort from research analysts and our Corporate Access team to generate a constant flow of Agency content to compliment the Banking effort and our block trading, the firm’s profile has never been stronger. The convergence of Agency with Banking as deal flow product has evolved upstream towards larger deals, bigger market capitalizations and (especially) more managed transactions is a trend we believe will continue. 

Lastly, for the first time in a decade we have seen all of the above come together in such a way that all of the major Equity business lines were able to participate together in the success that was 2020, and because we are now accessing major clients mind and wallet share with multiple product categories: Cash Equity Liquidity/Research/Corporate Access; Convertible Bonds; Derivatives and Event-driven strategies, we have achieved a critical mass of penetration with major clients that has lifted us into the ‘strategic partner’ realm.

Business Unit Year in Review