There’s no shortage of ill will towards bankers at the moment.

But some executives in the private equity and hedge funds industries feel they are getting beaten with the same stick by politicians and the public, despite feeling relatively blameless in this crisis.

BC Partners managing partner Andrew Newington, speaking at the Reuters Hedge Fund & Private Equity Summit in London today, explained.

“There is clearly no political goodwill towards financial services in general and everyone within financial services is being lumped into the same bucket,” he said.

“So whether you’re an investment bank, whether you’re Fred Goodwin, whether you’re a private equity firm or hedge fund, it doesn’t matter, you appear on a placard at Canary Wharf with a noose around your neck, which isn’t a very pleasant prospect.”

Few can claim to have ever gotten very rich betting against Goldman Sachs. The bank is reported to be cutting its stake in Industrial and Commercial Bank of China and perhaps buying into exchange-traded funds provider iShares.

The Wall Street Journal reports Goldman and ICBC have been talking. Goldman’s 4.9 percent stake in ICBC is worth about $8.5 billion. The timing of a sale seems right, as a lock-up period tying Goldman’s hands ends late next month. The Journal reported Goldman could raise more than $1 billion by selling 15-20 percent of its holding.

Over the last few months, others have also beaten a retreat from China and other points East as risk aversion has grown to dizzying heights. But other financial heavyweights, notably Citigroup, had to repair tattered balance sheets, while Goldman appears to be acting from a position of relative strength. The New York Times reports Goldman plans to pay back the $10 billion it borrowed from U.S. taxpayers last fall — perhaps within the next month.

And a stake sale sanctioned by Goldman’s rocket scientists hardly indicates the direction of the herd. A vocal band of revolutionary economists and financial wizards expects China to take over from the United States as the global growth engine and is adding to bets in the People’s Republic. HSBC recently redistributed some of its wealth into China after cleaning house in the U.S. mortgage-banking market.

Goldman is in talks with Barclays about buying the British bank’s iShares unit, a source familiar with the situation said, adding another name to the growing list of possible bidders. Sources said over the weekend that private equity groups Hellman & Friedman, Bain Capital and TPG had all shown interest in iShares, so a rare bit of pricing power could be emerging for the Barclays unit, which could raise up to $5 billion.

Deals of the day:

* Consulting firm BearingPoint Inc said it agreed to sell a large portion of its public services unit to Deloitte for $350 million.

* Stifel Financial Corp said it would acquire up to 55 branches of UBS Wealth Management Americas to expand across the United States in a deal that will boost the investment bank’s profit in the first year.

* Global energy giants BP, Eni and Shell are eyeing possible bids for Australia’s No.3 oil and gas firm Santos, which one analyst valued at around $7 billion, but a bid from China looks unlikely, dealmakers say.

(PHOTO: The flags of the U.S. and China hang outside of 85 Broad Street, headquarters for the investment bank Goldman Sachs in New York, October 23, 2008. REUTERS/Brendan McDermid)

Two Wall Street veterans, former Bear Stearns investment bankers Denis Bovin and Michael Urfirer, officially launched Stone Key Partners today. The boutique investment banking firm, which has been operating under the radar for nearly a year, will focus on strategic advisory services, including M&A advice.

Stone Key, which has about a dozen people in all right now, plans to focus on technology, aerospace, defense, homeland security and information services. The firm made it to Thomson Reuters’ annual rankings for 2008 for advising on about $5.5 billion in M&A transactions. Bovin and Urfirer, who have worked together since 1994, have been involved in big deals such as Finmeccanica’s $5.2 billion acquisition of DRS Technologies, among others.

Bovin, 61, and Urfirer, 49, are co-chairmen and co-CEOs of Stone Key. Dealzone caught up with the two of them for a Q&A:

DZ: You’ve been operating under the radar for almost a year now. Why the announcement now?

Bovin: We decided both for choice and chance that we would wait to make an announcement. The choice was that we really wanted to have a significant funding source behind us and we wanted to have some deals done. The chance was, it took a lot longer to actually set this up. If you want to set up a boutique that’s going to last for a week-and-a-half, it’s real easy. If you want to set one up that you think you can build into something major, it takes a lot longer. So that chance took us longer than we expected but we did close on our financing and we’ve announced five-and-a-half to six dollars worth of deals, so we thought this was the right timing.

DZ: What was your first year of operations like? It’s an interesting time to launch an advisory firm, what with deal volumes being where they are.

Urfirer: That’s absolutely right. Clearly we’ve all see deal volumes are down. But that being said, we have been fortunate to have been pretty busy. Just taking care of our existing clients has been a full-time job… the sectors that we focus on — technology crossing the government and commercial space — both of these sectors for a variety of reasons are very active and we think is going to get only more active in terms of M&A. You’ve got things like the recent articles about Cisco and HP starting to cross over further into each other’s turf, there’s the IBM-Sun thing percolating that is going to have ripple effects throughout the technology industry. For the most part, large technology companies are well-capitalized, have cash or still have access to capital.

DZ: Will you be focusing on any type or size of deals?

Urfirer: In general we’re not positioning ourselves as an exclusive sale shop or divestiture house or what-have-you. We’re going to stay where we’ve always been — at the high-end with the larger cap, doing the more sophisticated kind of deal.

Bovin: In today’s world in particular, an M&A transaction is really the tip of the spear. There’s usually a huge amount of work and advice that precedes that and what we’re finding is a lot of people calling us up and saying, “we’re in uncharted waters, we need your advice to help us think through where we want to go and how we want to go there.” In particular we’ve gotten a lot of calls from boards of directors saying, “could you come in and help us think about the future and what we should keep and what we should get rid of.” So while the actual deal announcements have been lower, it’s a lot like a duck paddling on water — pretty calm above but there’s a lot of paddling going on below.

DZ: When might some of these conversations turn into deal activity?

Bovin: We expect ‘09 will be an extremely active year with a lot of very important transactions that we’ll hopefully have more than our fair share of. I think Mike and I base that on what our backlog is right now.

Urfirer: It’s clearly weighted to the second half (of the year), and depending on how the whole financial rescue plays out, the timing can obviously change very quickly. It could accelerate or push things out to 2010. But given the overall economic environment, there are a bunch of these situations where companies are going to have to acquire or combine to either to get into a leadership positon or maintain it.

DZ: So what’s your pitch to clients, given what’s happening with the bulge-bracket firms?

Bovin: We rarely sell against our competition. It’s not our style to say they’re not doing a good job. We tend to sell by saying, “Mr CEO or Mr Director, we know more about your business than almost anyone and we have supportable, analyzed, defensible views of what might happen in your industry to you and your competitors over the next several years that you need to think about.” Our pitch is to typically go in and say “here’s what we think your competitors are going to do, and if they do A, B or C, here are the options that are open to you.” So we help our clients deal with a dynamic competitive environment, and to be able to do that you have to have very deep domain knowledge and years of experience. Luckily, we do.

DZ: Are you recruiting right now?

Bovin: We are actively hiring, and we’re particularly hiring at the very, very senior level and the very junior level. There are some very unusual people available in both those buckets that we’re looking in… the bumper sticker is, we’re looking for people who share our passion for excellence.

Urfirer: This environment is a real plus because it gives us the opportunity to attract super high-quality people. We’re not in the race to hire a thousand people and prepare the firm for an IPO when there’s a market out there again.

(Photo 1: Michael Urfirer, courtesy PR representative. Photo 2: Reuters)

Cisco’s $590 million all-stock purchase of Flip video camera maker Pure Digital last week may sound like a nice price for the venture capital-backed company, especially given the non-existent exit market right now.

But Venture Capital Journal editor Larry Aragon writes in a PEHub blog post that the $590 million number doesn’t sound that meaty when you calculate the return on investment for Pure Digital’s venture capital backers. And that’s especially true because some top-notch VC firms like Benchmark Capital and Sequoia Capital have invested in Pure Digital. (Venture Capital Journal and PEHub are part of Thomson Reuters.)

Aragon calculates that if Pure Digital’s VC investors put in about $95 million, and assuming that they own about half the company (since it’s a stock deal), “that’s a return of just over 3x their money.”

Now, Silicon Valley’s brand-name venture capital firms have long been used to returns on investment that are several multiples higher than that, usually around 10 times the investment. We know the dotcom boom days are never coming back, but a selling price that brings back only three times the money invested — that too, over a five-year period, according to Aragon — is cause for concern about how profitable the VC model really is.

Surely, the VCs might have been tempted to hold out for a better return on their investment if the public markets showed any signs of life. But with IPOs of venture capital-backed companies remaining a dream in the current environment, guess the venture capitalists decided that Cisco’s offer was one they couldn’t refuse.

Photo: Pure Digital Website