Wertheim & Co. was an investment firm founded in 1927 by Maurice Wertheim and Joseph Klingenstein, who met when they worked together at Hallgarten & Company.
The firm engaged primarily in the merchant-banking business; it invested (in companies and real estate primarily for the benefit of its own partners and a small number of investment-advisory clients) from its formation until the deaths of Wertheim and one of his senior partners (Edwin Hilson) in 1950 and 1952, respectively.
After 1950, control of the firm passed to co-founder Joseph Klingenstein. He was a brilliant investor in stocks, and under his leadership the firm created one of the first professional research departments on Wall Street. In the mid-1950s, the firm became more active in underwriting, and subsequently attained major-bracket status in both equity and debt securities.
Although its size and visibility did not keep pace with those of fellow major-bracket firms such as Goldman Sachs, Morgan Stanley and Lehman Brothers, the firm expanded significantly in the early 1970s. Under the leadership of Klingenstein's son Fred, Wertheim & Co. expanded its services (research, sales, and trading) to institutional investors and increased its asset management business. As of 1970, the twenty partners and approximately 200 employees generated annual revenues of around $40 million (not including gains recorded in the personal accounts of partners and clients).
By 1986, when the Klingenstein family sold its fifty percent interest in the firm to Schroders, a British merchant bank, Wertheim had 38 managing directors, 51 associate managing directors, a total staff of almost 1,000, annual revenues over $200 million, five offices in the U.S. and three in Europe. The name of the firm was changed to Wertheim Schroder in 1986 after Schroder's initial investment, and to Schroder Wertheim in 1994 after Schroder acquired the remaining fifty percent interest in the firm. In 2000, Schroders sold its global investment-banking operations (including Schroder Wertheim) to Salomon Smith Barney, a subsidiary of Citigroup.
History
1886–1929
Maurice Wertheim was born on February 16, 1886, to Jacob Wertheim and his wife, Hannah A. Morgenthau Wertheim. Jacob Wertheim was a founder of Wertheim & Schiffer (later Kerbs, Wertheim & Schiffer), one of several domestic cigar-manufacturing companies which were combined in 1902 to form the United Cigar Manufacturers Company, of which he became president. Jacob was also at one time director of the General Motors Corporation, a director of the Underwood Typewriter Company, and a director of several large real-estate concerns. He was also a founder of the Federation for the Support of Jewish Philanthropic Societies.
In 1891, Joseph Klingenstein was born into an immigrant family who operated a dry-goods store on the Lower East Side of Manhattan.
In 1908, Maurice went to work for his father's company (United Cigar Manufacturers Company) after graduating from Harvard University with a B.A. degree in 1906 and an M.A. degree in 1907. In 1909, he married Alma Morgenthau—daughter of Henry Morgenthau Sr., a prominent banker, diplomat (Woodrow Wilson’s Ambassador to Turkey) and philanthropist. Alma's brother, Henry Morgenthau Jr., would become Secretary of the Treasury under President Franklin D. Roosevelt in 1934. Three daughters were born from this marriage, one of whom, Barbara W. Tuchman, became a Pulitzer Prize–winning historian (Tuchman authored The Guns of August and A Distant Mirror). The Wertheims lived at 176 East 75th Street and in Cos Cob, Connecticut, at an estate known as Wyndygoul.
In 1911, Klingenstein joined Hallgarten & Co. after receiving a B.A. degree from Columbia University and completing one year of Columbia Law School. Neil Finch graduated from West Point, and became a colonel during World War I. Four years later, Maurice joined Hallgarten & Co., becoming a partner in 1919. The following year, Klingenstein left Hallgarten to join Arthur E. Frank. Jacob Wertheim died on November 21, 1920, leaving an estate appraised in December 1921 at $7.3 million gross and $6.0 million net (including $2.1 million in Liberty bonds, $860,377 in Underwood Typewriter common stock, $738,675 in Sears Roebuck common stock, and $560,000 in real estate). The following year, Neil Finch joined Bankers Trust. In 1924, Klingenstein purchased a membership on the New York Stock Exchange (NYSE) and became a floor broker.
In 1927, Maurice formed Wertheim & Co. (W&Co.) with Klingenstein, Finch and Henry Hottinger with offices at 57 William Street. Hottinger had been Jacob Wertheim's secretary; in 1935, he began what would become the Henry Hottinger Collection of rare violins. In its first deal (announced the week it opened), W&Co. acquired a controlling interest in the Underwood Typewriter Company, merging it with the Elliot-Fisher Company to form one of the largest office-equipment companies of its day. In its early days, W&Co. established one of the first investment-research departments on Wall Street, originally to help the firm's partners invest their own capital. As late as 1971, its well-known reports were produced on onion-skin paper with a gold staple in the corner. In 1928, Herb Goldstone joined the company. The following October, the stock market crashed after a period of rampant speculation; W&Co., out of the market before the crash, was not hurt.
1929–1945 During the Depression, W&Co. bought Nedick's (a New York restaurant chain famous for its hot dogs) for $46,000; after paying $3 million in dividends over the years, it sold the restaurant chain for $4.5 million in 1951.
Its investment-banking clients included Continental Baking, Bristol Myers, Spiegel and Underwood Typewriter.
W&Co. partners liked to take long winter vacations in Cuba, which was then a playground for Americans seeking a break from the constraints of the later Prohibition era. Cuba was also the headquarters of some of the biggest sugar companies in the world. Before long, W&Co. had an interest in a number of sugar growers and refiners; Maurice bought a home in Cuba, and visited there regularly.
Through partnerships (first with Arnold Kirkeby, and later with Jesse Sharp and Spencer-Taylor), W&Co. made many investments in real estate—particularly hotels and office buildings, the market for which was severely depressed because of the Depression. Control of these properties was obtained by buying defaulted mortgage bonds selling for a fraction of their face value. Among the firm's many investments were: 120 Broadway (Equitable Building); One Fifth Avenue; the Madison Hotel; Hampshire House; Brooklyn Towers; The Warwick; the Saranac Inn; the Hotel Nacional de Cuba in Havana; the Blackstone Hotel in Chicago; the Beverly Hills Hotel in Los Angeles; the Ritz Tower and Delmonico's.
At this time, Finch left the company, to be replaced by Richard Bernhard. Bernhard, married to Dorothy Lehman, provided close contact with other major investment-banking firms in New York. Maurice divorced his first wife in 1929; he married Ruth White Warfield, whom he divorced in 1935, marrying Cecile Berlage. The couple moved to a penthouse at 33 East 70th Street.
In 1930, Walter Laband, a German-educated banker, joined W&Co. with responsibility for foreign offices acquired from Colbin & Co. in London and Amsterdam. The company's primary activity was arbitrage in foreign securities.
Two years later, the failure of Hilson & Neuberger brought Edwin Hilson, Milton Steinbach (Klingenstein's brother-in-law) and George Jones to W&Co. Hilson was a self-made man, whose formal education reportedly ended when he was expelled from Exeter at age 16 for adolescent high jinks. He sold cigars to western Pennsylvania coal miners (like Maurice, Hilson's father was in the cigar-manufacturing business), was drafted into the army during World War I, and returned to Wall Street. A friend from Exeter introduced him to Harry Neuberger, who put up the money to start Hilson & Neuberger. Another friend of Hilson from P.S. 6 in New York was Sidney Weinberg, who became head of Goldman Sachs. Steinbach was a product of Andover and Yale; Jones was Hilson's assistant.
During that year, the Dow Jones Industrial Average (DJIA) bottomed at 41, down eighty-nine percent from the 1929 high of 381. NYSE volume declined to 425 million shares, from 1.1 billion in 1929 and 810 million in 1930. The value of a seat on the NYSE fell to $68,000, from $550,000 in 1929. The U.S. unemployment rate in 1933 reached twenty-five percent.
In 1933, Roosevelt proclaimed a bank holiday and embargoed gold; Congress passed the Securities Act of 1933 (the "truth in securities law"). W&Co. moved its funds into Treasury bills before the bank holiday. The following year, Alfred Kleinbaum joined W&Co.; the Securities and Exchange Commission (SEC) was established by Congress under the Securities Exchange Act of 1934.
In 1935, Maurice purchased The Nation (the oldest liberal weekly magazine in the U.S.) when it was on the brink of bankruptcy; his daughter Barbara began to write for the magazine. Two years later, he sold the magazine to its editor.
The same year, Maurice purchased from the Chubb family (of Chubb Insurance) the lease for private fishing on the entire Sainte-Anne River on the Gaspé Peninsula in Quebec. On the river, he built a lodge at the Serenity Pool. In 1969, all leases for private fishing on the Sainte-Anne River were ceded by Cecile Wertheim to the Government of Quebec. In 1936, Maurice began his collection of late 19th- and early-20th-century Impressionist paintings and sculpture (after his death, the collection was given to Harvard University and is housed at Harvard's Fogg Museum in Cambridge). Most of his acquisitions were made during World War II.
As the 1940s began, Steinbach was the firm's investment banker, Klingenstein the stock picker and trader, Hottinger the administrator, Hilson the deal man, Bernhard the contact with other Wall Street firms, and Maurice was increasingly involved in public affairs and personal interests. Banking clients included Continental Baking and Helena Rubenstein; the firm's foreign offices were closed because of World War II. Cuban operations provided shelter from the excess-profits tax during the war years.
In 1941, Maurice was named president of the American Jewish Committee; the following year, he moved to Washington, D.C., as a member of the War Production Board.
1945–2000
In 1946, Maurice led the American chess team as its non-playing captain against the Soviet team in Moscow, in a match played over the radio. Laband retired, making a personal gift of one week's salary to every employee of the firm. Bob Bach joined the firm, after graduating from Princeton and serving in the U.S. Navy. The following year, Maurice donated in Suffolk County to the U.S. Fish and Wildlife Service as a wildlife refuge (the Wertheim National Wildlife Refuge). He and his wife Cecile had previously managed the area as a private waterfowl conservation and hunting reserve. In 1948, Maurice published a book entitled Salmon on the Dry Fly.
In 1949, W&Co. had nine partners: Maurice, Klingenstein, Hilson, Steinbach, Jones, Goldstone, Bach, Hottinger and Allen DuBois (who headed the underwriting department). Wilbur Cowett joined the company, working closely with Hilson. Maurice died in 1950, at age 64. His obituary noted that he was a trustee of the American Wildlife Foundation, a noted fisherman, a tournament chess player, founder and director of the New York Theatre Guild, an equestrian, and director of the Underwood Corporation, the Cuban Atlantic Sugar Company, the Hat Corporation of America, and the Bond Stores Company. He was also a trustee of Mount Sinai Hospital and the Federation of Jewish Philanthropies.