The Man Who Wanted to Ground the Executive Jets

No haircuts for us, growls Roy Vermos.

Roy Vermos' career is nothing short of brilliant. At age 39, meaning he's still considered "young," Vermos leads Psagot, one of the biggest brokerages in Israel. He controls more than NIS 110 billion of the public's assets, in provident and mutual funds and ETFs. He rules over 700 workers and is involved at every level of the company.

Last year was a hard one. As the crisis unfolded, Vermos was under terrific strain. Psagot itself had heavy debt, from borrowing more than NIS 800 million to buy provident and mutual funds before the crash. Everything seemed to be collapsing. Clients were fleeing, fees were vanishing and the very model of brokerages suddenly seemed questionable. Vermos, a man who hates risk and sees dire scenarios, feared the worst.

Twelve months later, it proved to be a great year for Vermos and Psagot. From a large company, Psagot turned into a virtual gorilla. It slammed into fund management, buying Gadish from Bank Hapoalim and later provident funds with NIS 19 billion in managed assets from the collapsing brokerage Prisma. Psagot became the biggest provident fund manager in town, with NIS 45 billion in managed assets.

In retrospect, it turns out that Vermos hit the jackpot. The prices Psagot paid for funds in 2007 and 2008 seemed appropriate at the time, but proved to be too high. Buying Prisma's funds was a dramatic move, but mainly, Vermos pulled it off at a low price and also got rid of some debt by buying the funds for stock.

Unlike his peers, Vermos realized that while the banks may have been forced to sell their provident and mutual funds, they kept power to route clients to funds. Psagot therefore focused its marketing efforts on the investment advisers at the banks, not the general public. Since Psagot's funds also outperformed their peers, he gained tens of thousands of new clients.

He was also careful not to get into conflicts of interest with the banks, and to focus on asset management for the public. He eschewed launching a dealing room because of the potential conflict with the banks and closed Psagot's underwriting business for fear of conflicts of interest with clients.

No, he didn't foresee the crisis, and Psagot's clients hurt like everyone else. But Vermos rose to greatness in the local scene by spearheading the attack on tycoons who hoped to give their bondholders a "haircut," or at the least, to postpone repaying their debt.

"If a company can't repay all its debt, we will demand shares," Vermos stated. "We will demand that the owners sell their executive jets and do all they need to inject capital. Anybody who doesn't return the money, including interest and linkage, won't be able to recycle debt with us."

Vermos doesn't shy from the spotlight and he's repeated that theme several times. The result has been to force his rivals into taking the same aggressive position, including investment managers who'd rather have preserved their cuddly relations with the big businessman of Israel.