Structured Notestag:www.structurednotes.co.uk,2010:/632009-04-08T14:28:19ZMovable Type Enterprise 4.32-enFruit shaketag:www.structurednotes.co.uk,2009://63.1571732009-04-08T14:14:38Z2009-04-08T14:28:19Z"When is an Apple an Orange?" was the rhetorical question posed in a speech made early this year by one of London's more prominent structured products bankers. The answer is, of course, never. You can't dial up friends or surf...Richard Jory
"When is an Apple an Orange?" was the rhetorical question posed in a speech made early this year by one of London's more prominent structured products bankers. The answer is, of course, never. You can't dial up friends or surf the internet on an orange. You can't store all your phone numbers; you can't write yourself notes; you don't even have a calendar on an orange.
You can do all these things and more on an Apple, and its snazzy i-phone. And impressive as all the phone, writing and storage applications are, you have to be overcome by a phone that now doubles up as a spirit level. Probably quite useless to almost all, but what a gadget.
So why can't you trade on exchanges using the phone and, more to the point, why can't you buy an application that creates whatever structured product you would like. Well you can, or you could, if the creators spent a little less time inventing spirit levels and clever advertising campaigns.
It is not a myth in any way. There are banks - and UBS is prominent among them - that have design your own structured products packages. In terms of technology we are streets ahead of where we were 10 years ago. When this all comes about, the man next to you may not be texting his mum, playing dingbat death or solitaire, he may be constructing his very own structured product. Only qualified investors need apply, and the only people that need to be worried are the bankers that the world's latest widget will make redundant.
The right to win, and the right to losetag:testblog.structurednotes.co.uk,2009://63.1268152009-01-14T12:46:14Z2009-01-21T05:05:49ZA recent snapshot of investors undertaken by an amalgamation of regulatory bodies in Canada will do little to raise the spirits of the structured products industry. The survey was issued by the Joint Standing Committee on Retail Investor Issues (JSC)...Richard Jory
A recent snapshot of investors undertaken by an amalgamation of regulatory bodies in Canada will do little to raise the spirits of the structured products industry. The survey was issued by the Joint Standing Committee on Retail Investor Issues (JSC) last Autumn, which is made up of the Ontario Securities Commission, the Ombudsman for Banking Services, the Investment Industry Regulatory Organisation of Canada and the Mutual Fund Dealers Association. Since spring 2008, the committee has been trying to spot potential snares for retail investors, so they decided to quiz investors themselves on product suitability.
The call went out to a number of consumer organisations – the Canada Association for the 50plus, the Shareowners Association and the Small Investor Protection Association. A mere 24 investors responded by the deadline. Even such a tiny straw poll, however, managed to find a few SP nemeses. While the majority believed that all investment products should be made available to all investors, some of the few dissenters were quick to point a finger at principal protected notes (PPNs), putting them in the same basket as special-purpose acquisition companies, and conversely, high-risk ventures.
One investor simply responded: “Principal protected notes: the industry ought to be ashamed.” Another respondent said ominously, “I had an advisor until recently. He sold a hybrid structured product to my parents… he represented it as being more similar to a fixed-income investment than it really was… I would have preferred that he inform us upfront of the fees embedded, including the amount he gets as a trailer.” Some took a more blanket approach – despite no products being specifically named in the question, the investor stated: “Absolutely, these investments should be banned.”
Hedge funds, labour-sponsored funds and deferred service charges were also subject to lengthy criticisms.
But financial market liberals remain, as evidenced by the conclusion that investors should be able to select whichever products they like. “All investment products should be available to all investors. To my mind anything short of this is a form of discrimination which I didn’t think was allowed under the Charter of Rights and Freedoms,” said one. Stirring stuff indeed.
Euphemism euphoriatag:testblog.structurednotes.co.uk,2009://63.1268142009-01-05T14:25:01Z2009-01-21T05:05:49ZWhen kids’ TV starts reporting on the ‘credit crunch’ with the kind of authority that would make children believe that the world’s biggest and finest financial crisis is one great calamitous cock-up, it’s time to analyse exactly what it is...Richard Jory
When kids’ TV starts reporting on the ‘credit crunch’ with the kind of authority that would make children believe that the world’s biggest and finest financial crisis is one great calamitous cock-up, it’s time to analyse exactly what it is that we are all suffering from.
Not a New Year hangover, for sure. It is tough to analyse the parlous financial state that we are in without at least reflecting on what people think that state is. Rather than kids’ newsreaders, it seems appropriate to talk to a variety of investors, analysts and financial market experts. As Bank of New York Mellon has already hauled together a group of such commentators, it is expedient to take a look at their language to uncover the state we are in.
The bank leads off with an anecdote which culminates in a prominent financial services executive announcing that his company was exiting the investment banking business because, “I have had about all the fun I can stand”.
Pile driving into the nitty gritty, we start with this little niblet, from Michael Ho, chief investment officer, Mellon Capital Management Corp, who tells us that things are not great: “Historical analysis demonstrates that turning points of stock markets typically start during recessions…”
John Truschel, chief investment officer, The Boston Company Asset Management adds more sparkle and lustre: “We believe the financial crisis is reaching a crescendo… We have reached the capitulation stage where the enormous policy responses from Washington are likely to reverse the tide.”
Oliver Buckley, chief executive officer and chief investment officer, Franklin Portfolio Associates, thinks today’s times are altogether tamer: “We believe it prudent to expect the US economy to contract over the next several quarters … we hope and expect the “modest downturn” scenario to unfold.”
Drama returns, this time from Hugh Hunter, head of global emerging markets, WestLB Mellon Asset Management, who paints a colourful picture of a disaster that has taken us over: “Fear and total risk aversion gripped investors in the face of credit market paralysis in the developing world, banking sector collapses or rescues.”
For Hugh Simon, chief executive officer, Hamon Investment Group, we have to contend with the dangerously vivacious, “present market turmoil”.
Equally calm and almost muted is Kent Wosepka, chief investment officer, Standish Mellon Asset Management’s, “A healthy credit can rapidly get sick if it cannot refinance upcoming bond maturities”.
Before somnambulism takes hold, Mellon’s Michael Ho reminds us of the words of Franklin D Roosevelt: “the only thing we have to fear is fear itself”.
That fear is then downgraded by Todd Briddell, Chief Investment Officer, Urdang Securities Management, who starts a review of Alternative Investments - Real Estate with: “While the current financial crisis is troubling…”
Another comment on alternative investments, this time hedge funds, from Peter Noris, chief investment officer, Ivy Asset Management Corp, provides an equally, almost ambivalent view of the current chaos: “We are now in a period of industry consolidation, where today’s losers will be sorted out from tomorrow’s winners.”
It gets better the more alternative investment outlooks you read. For commodities, Robin Webbe, vice-president, The Boston Company Asset Management appears almost unconcerned when observing, “Our longer-term case for commodities must be made with full understanding that the global economy has entered a cooling phase.”
The honest truth is left until the end of BNYM’s report on 2009, when Philip Maisano, chief investment strategist, BNY Mellon Asset Management sums it up with gusto, some accuracy and more woe. Entitling his edge of the clifftop thoughts ‘Where and when will this end?”, Maisano just about catches the right mood. “What began as a credit ‘event’ related to sub-prime mortgages issued since 2004 has exploded into a full blown ‘crisis of confidence’ in all securities and the entire financial system.”
Answer only two questionstag:testblog.structurednotes.co.uk,2008://63.1268132008-12-22T09:39:07Z2009-01-21T05:05:49ZWill any one sell a structured product now that all the banks are rated single A?...Richard Jory
Will any one sell a structured product now that all the banks are rated single A?
The simple answer is yes, of course they will. Ratings have ceased to have any impact on the market (as demonstrated by the downgrading activity last week). There are only a few important factors that need to be taken into account.
Is the issuer key to one of the world’s largest economies?
If it failed would that economy be decimated?
If the answer is yes to both of these questions, central banks have made it clear that they will pump money in and remove assets from these entities ensuring their survival. If this fails, a shot-gun marriage is always available (irrespective of the monopolies they may create), or perhaps neo-nationalism as the sale of bank equity increases to governments the world over...
So what about the UK banks? Well, it looks like RBS and HBOS/Lloyds are both still in a big mess. They are going to need more capital in the next three to six months and then they will be either 100% or close to 100% owned by the UK government. How about Barclays? Well it has managed to get through this year without reaching out to the government, but will it manage to hold on? Almost certainly if it can convince the Middle East investors that owning more of Barclays is a good thing because the bank will need more capital in the coming months. If Barclays does go to the UK government the senior bods there would be in a real mess. So it’s job preservation for them.
Should retail investors be concerned? Well pick your issuers well and make sure they all come up with a yes on the two questions above...
To be suretag:testblog.structurednotes.co.uk,2008://63.1268122008-11-27T11:35:30Z2009-01-21T05:05:49ZIt is always hard to give any credence to articles that include typographic mistakes – or we could just call them typos. It is equally difficult to understand some of the structured products that are released into the market. But...Richard Jory
It is always hard to give any credence to articles that include typographic mistakes – or we could just call them typos. It is equally difficult to understand some of the structured products that are released into the market. But it is hardest of all to have any faith in an article containing coruscating assertions about structured products that has two typos in the headline.
The famed and hopefully much-loved Accountancy Ireland publication has helped us out on all counts, with a thought piece about Derivitives (sic) that asks whether the financial product that decorates this grotto of complexity is a Villian (even sicer).
We don’t ask for much, but we receive a lot when we make any mistake, and for good reason. The human condition will not allow us to accept mistakes in print – let’s leave the internet and its bulging blogosphere to one side for the sake of this argument. More than that, when you finally pluck up the courage to vent your spleen in print, then the golden rule of no typos is more important than ever.
What does Accountancy Ireland have to say about structured products? Definitely worth a look, the mistakes appear to have all been made in the headline!
Pinnacle investors duped by ratings agenciestag:testblog.structurednotes.co.uk,2008://63.1268112008-11-14T12:29:53Z2009-01-21T05:05:49ZAnother day, and into the limelight comes yet another credit-linked note whose underlying collateral was a synthetic collateralised debt obligation. And once more, it is Singapore’s battered retail investors that are reeling following a principal writedown on Series 9 and...Richard Jory
Another day, and into the limelight comes yet another credit-linked note whose underlying collateral was a synthetic collateralised debt obligation. And once more, it is Singapore’s battered retail investors that are reeling following a principal writedown on Series 9 and 10 of Pinnacle Performance Notes. Expected return to investors is, you guessed it, zero.
The pain inflicted is a variation on a familiar theme, with the new debacle offering a fresh spin. Lehman Minibonds may have been included a similar first-to-default credit note as well as a CDO as underlying collateral, but the product defaulted because swap counterparty Lehman went bankrupt. And while that was happening, unfortunately little or no attention was paid to the value of the underlying collateral, but more on the risk disclosure of what would happen should the swap counterparty go bankrupt.
Pinnacle notes defaulted because entities in the CDO underlying the product experienced credit events. The reference entities that defaulted were the Federal Home Loan Mortgage Corp, Federal National Mortgage Association, Lehman Brothers, Kaupthing and Landisbanki. An impressive selection. One might be tempted to assume that a CDO containing these entities might be rated say BB or B. Not so, this CDO was in fact given a double-A rating from S&P, a level that was somehow maintained despite wildly differing levels on offer this year on these names in the CDS market.
The cold hard truth of the matter is that investors were duped by ratings that should have known better. Would the same investors have bought a product with a B rating? No. Would distributors have sold the product with the same rating? Unlikely at best.
The Pinnacle Notes default should reignite the finger pointing at the ratings agencies and deservedly so.
The blogging blame gametag:testblog.structurednotes.co.uk,2008://63.1268102008-10-30T15:58:26Z2009-01-21T05:05:49ZThe Minibond debacle engulfing both the Hong Kong and Singapore structured products industries has provoked a flurry of blogging activity from the Asian region. Blog subjects have ranged from outright attacks on product issuers, distributors and regulators condemning the selling...Richard Jory
The Minibond debacle engulfing both the Hong Kong and Singapore structured products industries has provoked a flurry of blogging activity from the Asian region. Blog subjects have ranged from outright attacks on product issuers, distributors and regulators condemning the selling of the financial instruments to retail investors. Other blogs have taken aim at regional publications which have posited that the blame should not rest on product providers’ and distributors’ shoulders alone but with investors too. The ‘unbiased’ blogging blame game certainly has no shortage of villains.
There are a number of issues that need clearing up. Firstly, this blog agrees with the majority of other posts out there that products with such a risk to capital should have been sold to retirees only under the strictest of circumstances. Selling any type of investment, where the risk of capital loss is high, to a pensioner is immoral and laughable. However many distributors have, admirably, decided to implement a compensation programme for vulnerable investors, although the definition of a vulnerable investor is a bit too exclusive (The definition in Singapore: if an investor was over 62 years of age at the time of purchasing the product and only has a primary school education). The compensation scheme is an admission of guilt and the regulators have done well to assuage institutions in admitting fault and rectifying the situation.
Secondly, if distributors, as is claimed by some investors, sold products under the pretence that the investments were similar to deposits there is no doubt of misselling and appropriate action should be taken. But here is where the ultimate problem lies. Investors should have read the full prospectus of the products, where every risk is explicitly stated. In every Minibond prospectus there is an explanation of what would happen to the product should the swap counterparty, Lehman, go bankrupt. Anything short of a comprehensive read is wilful ignorance on the investors’ part. Yes some investors were duped and may not have been given the product prospectus, but the majority of investors should have known better. Unless of course investors were banking on the Fed saving Lehman, then the blame should settle firmly with US Treasury Secretary Hank Paulson.
Thirdly, investors have most cause to complain over the fact that many Minibond issues used supposedly triple-A rated CDOs as underlying collateral. In the next few weeks the value of these collateral tranches will be revealed and it has to be said that market participants are not expecting high percentages. Investors cannot be blamed for buying a product with triple-rated collateral. But who is to blame? The ratings agencies of course. Even if Lehman had not gone bankrupt some of the Minibond products would have redeemed well below 100%. It is likely investors will soon take aim at the rating crew.
Stop the press: Investors lose money as stock prices falltag:testblog.structurednotes.co.uk,2008://63.1268092008-10-02T10:19:48Z2009-01-21T05:05:49ZAs if structured products weren’t suffering enough bad press already this week, a story appeared in the Financial Times this morning firing another bullet at our embattled quarry. The article, ‘Clouds gathering around Blue Sky structured product’ alerts readers that...Richard Jory
As if structured products weren’t suffering enough bad press already this week, a story appeared in the Financial Times this morning firing another bullet at our embattled quarry. The article, ‘Clouds gathering around Blue Sky structured product’ alerts readers that a product launched by Blue Sky Asset Management (BSAM), The Accelerated Recovery Plan, which is linked to five UK banking stocks, is close to breaching its 50% soft protection barrier following the plummet taken by HBOS equity. The plan was launched in April, with BSAM trumpeting that the “RBS rights issue and central bank action signal beginning of the end for bank crisis”.
As market participants well know, genuine crisis was something which actually lay a few months down the line. “The last time a retail structured product broke the barrier was with the precipice bond scandal in the bear market of 2001-03, which resulted in a number of financial advisers going out of business,” the article woefully reminisces.
‘Scandal’ is rather a strong word to be used in the context of this product. The stock basket (which also includes HSBC, RBS, Barclays and Lloyds TSB) still has five years to recover, which means that unless we are facing the ultimate decimation of the banking system (in which case we have slightly bigger problems to worry about), investors can not only receive back principal but a leveraged return on their capital too. The product is performing exactly as outlined – investors took a view that the banking sector would recover, it hasn’t (yet) and that is the risk of their investment, which BSAM will have been under Mifid-obligated pains to disclose when investors signed up. It’s unlikely in the extreme that articles will now be written tutting over the fact shareholders in HBOS are going to lose money, but they bought that stock on the same premise that someone would buy a structured product linked to the shares. Unlike precipice bonds, these structured products are not leveraged on the downside, which is what made the 2001-03 so painful for most holders.
The real story here, which receives a cursory nod in the article’s closing paragraphs, is counterparty risk. Investors in Lehman-issued structured products are the ones who will be most shocked by the impact on their investments of the past month’s events. They face a very real and immediate threat of not getting their capital back, a risk which may well have not been given the attention it deserved when investors handed their money over. Someone losing money as a result of their investment, unless the product has been missold, is an unfortunate but wholly expected, and accepted consequence of speculation, whichever means you use.
It would be nice to do business with you, wouldn’t it?tag:testblog.structurednotes.co.uk,2008://63.1268082008-09-30T08:24:19Z2009-01-21T05:05:49ZThe Swiss dancers in their lederhosen are coming to save us all the way from Paradeplatz, home to Credit Suisse, the bank that has just offered to buy damaged Lehman products from those privy to the Credit Suisse private banking...Richard Jory
The Swiss dancers in their lederhosen are coming to save us all the way from Paradeplatz, home to Credit Suisse, the bank that has just offered to buy damaged Lehman products from those privy to the Credit Suisse private banking network.
It’s great that Credit Suisse is offering to buy back Lehman structured product debt. We are keen to see such a generous and positive response from the investment banking community to the current troubles and would ask only, where are all the others queuing up to buy Lehman debt?
Credit Suisse has a history of such generosity. After the LTCM collapse and the Russian government default, it was the bank that came with a positive message to its investors, offering to buy them out of their distressed debt.
But step back and take a better look and ask the question, AT WHAT PRICE DID THEY BUY THAT DEBT?… In the eye of the financial storm that hit Russia in 1998 the folks at Paradeplatz thought a bid of 17 cents in the dollar was good enough to secure Russian government debt. Two and a half years later that debt was apparently then sold for as much as 80.
Perhaps the smarter damaged investor should wait for administrator PricewaterhouseCoopers to do its thing and see if the recovery value is higher. But, again, thanks for the generous offer...
Combien???tag:testblog.structurednotes.co.uk,2008://63.1268072008-09-18T10:08:31Z2009-01-21T05:05:49ZIf you follow English football – and apparently the whole world does – you may have noticed a striking similarity between what is happening in the financial markets and what is occurring at the football team Manchester City....Richard Jory
If you follow English football – and apparently the whole world does – you may have noticed a striking similarity between what is happening in the financial markets and what is occurring at the football team Manchester City.
Fresh from the latest news of another intervention by the central banks of Japan, the US and Europe, and the bailouts of AIG, Merrill Lynch and Lehmans, we have done some calculations. We were going to do them on the back of a matchbox, but there wasn’t enough space for all the zeros. The rough conclusion to our basic, transparent and easy mathematics is that well over US$300 billion has just been pumped into the ‘free’ financial markets.
Wow! Is the obvious response, yet apparently – at least in the case of the US$85 billion pumped into AIG about 24 hours ago – this 'cash injection' is not enough to rid the markets of risk.
Back to the analogy. One of our groups is made up of a bunch of multinational, overpaid egotists into which benefactors (be it an Arabian oil baron, or the US Federal Reserve and its friends) seem happy to pour endless amounts of cash into a system which they can never beat. However much money they spend, it is becoming clear that neither the dark masters of the financial markets nor Manchester City will never be in a position to control their respective systems.
While the disintegration may mean the players in the world of football will have to sell one or two of their fancy car fleet and their wives or girlfriends may have to manicure less and even give up on hair extensions, those retail investors that play in the financial markets will have to give back their only car and get used to saying the word penury rather than pension.
Showing the moneytag:testblog.structurednotes.co.uk,2008://63.1268062008-09-16T14:13:49Z2009-01-21T05:05:49ZThere is one man left standing at Lehman Brothers and he has money. It’s not Dick Fuld, and it’s not HR or marketing, or even the asset management team. We won’t tell you his name but we will tell you...Richard Jory
There is one man left standing at Lehman Brothers and he has money. It’s not Dick Fuld, and it’s not HR or marketing, or even the asset management team. We won’t tell you his name but we will tell you that he is still spending his money wisely, at last. For a bank that has spewed so much cash into the ether from the swashbuckling boom that preceded the credit crunch, sense has now prevailed.
Has this unnamed individual bought a car flashier than any other? No. Has he finally bought that yacht he has been promising himself? No to that too. Has he purchased the kind of country estate that bulge-bracket boys find time to boast of? No again.
Of course, in these straitened times he is not going to extend his credit line all that distance. Those of you that have the right answer will know that the Lehman banker has bought, and paid for a subscription to Structured Products magazine. It happened this morning. Our surprise is presumably his joy.
Asian Minibond misery is put to resttag:testblog.structurednotes.co.uk,2008://63.1268052008-09-15T16:43:08Z2009-01-21T05:05:49ZThe decision by many an Asian distributor to stop using Lehman Brothers as an issuer has proven both prophetic and prudent, even though many of the distributors believed the US Federal Reserve would come to the rescue if the worst...Richard Jory
The decision by many an Asian distributor to stop using Lehman Brothers as an issuer has proven both prophetic and prudent, even though many of the distributors believed the US Federal Reserve would come to the rescue if the worst was to happen. But the worst did come to pass and the Fed, contrary to most people’s expectations and against the Bear Stearns precedent, refused to guarantee a portion of the US investment bank’s losses.
You can almost hear the heavy exhales of distributors’ relief, especially when the prospect of continuing to use Lehman was enticing to say the least. Lehman’s CDS rate skyrocketed to over 400bp a few months ago, which meant the products they issued would have far better terms than other issuers with lower CDS spreads. The temptation was there: better products for your customers coupled with the expectation that hell would freeze over before letting Lehman go bust seems a reasonable rationale to carry on buying the bank’s products.
Perhaps their prudence should be applauded, however, many of these distributors did sell products issued by Lehman prior to discontinuing the relationship. It remains to be seen whether these products, capital guaranteed or not, will give a return (the latest valuation of Lehman’s securities is 60 cents on the dollar) or another investment bank will purchase the products at a significant discount. S&P today downgraded Lehman’s credit rating to selective default, meaning ‘payments may not be made on some financial obligations’. Confidence-inspiring indeed.
Perhaps the one good thing to come of all of this is that investors who purchased Lehman Minibonds, credit-linked products with CDOs forming the underlying collateral of which possessed mark-to-market values of around 30%, have been put out of their misery, the final nail has been hammered home.
Say hello, wave goodbyetag:testblog.structurednotes.co.uk,2008://63.1268042008-09-15T11:08:45Z2009-01-21T05:05:49ZThe investment banking sector received its first slug of good news this weekend, with the US$50bn acquisition of Merrill Lynch by Bank of America. Although BofA’s stock fell, Merrill’s rose. And it’s been a long time since the stock of...Richard Jory
The investment banking sector received its first slug of good news this weekend, with the US$50bn acquisition of Merrill Lynch by Bank of America. Although BofA’s stock fell, Merrill’s rose. And it’s been a long time since the stock of an investment bank has risen on any event in continually trampled financial markets.
As BofA’s stock fell, along with the stock of almost every other bank around, the biggest loser was Lehman Brothers. Accustoming themselves to cheaper mayonnaise in their canteen turned out to be the least of the worries of employees of a bank that has now filed for bankruptcy: the holding company has aimed at Chapter 11; the remainder at Chapter 7.
The filing includes a request to continue paying salaries to employees, part of a series of first day motions that will “allow it to continue to manage operations in the ordinary course”. Whether shareholders, bondholders and investors in structured products will be as fortunate remains to be seen.
Merrill can consider itself lucky. It has long been courted by BofA, but had been suffering a mighty hangover from its sub-prime exposure – as FT research showed in August, the last eighteen months have seen the bank undergo writedowns and credit-related losses of nearly $52bn: half of its profits over the past 36 years. But BofA itself has not been immune to the market crisis, selling its equity prime brokerage division to BNP Paribas in June.
The frantic weekend could have many consequences for the structured products world, not least in the UK, where around 25% of product is understood to have been issued by the now-failed US bank.
Lehman’s disappearance, although troubling and likely to shake investor confidence over counterparty risk even further, may remove a thorn in the side of structurers at other better rated banks. For months, structurers across Europe have complained that Lehman has frozen primary market volumes, as its lower credit rating enabled the bank to sell products with more attractive coupons. Investors still wanted the same coupon, but not the risk of Lehman paper, which created a much tougher context for other banks selling products. Bear Stearns, a week prior to its collapse, was offering reverse convertibles with a 27% contingent coupon after 18 months, which perhaps proves the same adage – if the deal seems too good to be true, then it probably is.
The ethos of Lehman’s US business was “not all structured investments are created equal.” The slogan has proved a rather sad prophecy for the bank and its structured product investors. By coincidence it also happens to be the tagline for the new ETF i-shares advertising campaign – let’s hope the company experiences the more positive intended consequences of the marketing strategy.
The Merrill acquisition on the other hand, will leave its competitors with little room to relax, creating a banking behemoth worth just over $200 billion. This year’s other monster merger, JP Morgan and Bear Stearns, creates a bank valued at $141.5 billion, leaving Goldman Sachs ($60.73bn) and Morgan Stanley ($41.29bn) looking like mere minnows.
Tomorrow evening will see BofA receive a bevy of journalists at Tate Britain for Francis Bacon: A retrospective, which the bank is sponsoring. Perhaps it is to witness a lap of victory round the gallery by the no doubt jubilant hosts, or simply to gaze upon Three figures for the base of a crucifixion and ponder what lies in store for the now few pure investment banks that remain.
Enforcer FSA catches hedge fund manager using insider informationtag:testblog.structurednotes.co.uk,2008://63.1268032008-09-11T11:01:21Z2009-01-21T05:05:49ZCustodian of the Treat Customers Fairly initiative in the UK, the Financial Services Authority (FSA), has declared its intent by taking a hedge fund manager to task. All well and good, and you might say it was about time these...Richard Jory
Custodian of the Treat Customers Fairly initiative in the UK, the Financial Services Authority (FSA), has declared its intent by taking a hedge fund manager to task. All well and good, and you might say it was about time these clever ex-investment bankers were taken to task.
The hedge fund phenomenon of the last few years has altered the way that financial markets work. Previously hedge funds were viewed as a necessary evil, offering liquidity in times of crisis. Now many of these funds are full scale investors, although they will always be opportunistic.
This Monday the FSA announced that it had broken new ground by taking enforcement action against a hedge fund manager for using inside information to deal in corporate bonds. “This is particularly important to hedge fund managers since it highlights the FSA's determination to take action against insider trading - and hedge funds can expect similar and tougher actions, particularly since last year the FSA published the findings of its visits to Hedge Fund Managers in Market Watch 24 to review the controls in place to mitigate the risk of market abuse and commented that it was ‘disappointed by some of what we saw’,” was the rather lengthy justification for action from the FSA.
Good to see the FSA showing its teeth, but this is surely the tip of the iceberg. Can it really be true that a hedge fund has never transgressed in this fashion? Surely not, but signifying intent is the first step for any regulator, taking action is the second step. Next, the FSA needs to keep up the fishing and get its gnashers ready for more action.
The regulators announcement concluded with: “Would you be interested in an interview or article on what steps hedge fund managers need to take to ensure their business and staff are not breaking the regulations, whether deliberately or inadvertently. This is particularly the case with hedge funds as they regularly receive privileged information.”
Everyone who has ever tried to manufacture a structured product based on hedge funds knows that the transparency of these funds is not always what they would like, which has a lot to with the receipt of privileged information. That will not change, but it may be worth looking out for the filing of presumably hopeful defences that regulations were breached “inadvertently”.
Twin spintag:testblog.structurednotes.co.uk,2008://63.1268022008-09-09T10:20:39Z2009-01-21T05:05:49ZYou can’t miss iShares’ marketing campaign for ETFs if you live in London and take the time to look up as you walk around. The marketing campaign is slapped on the sides of buses and taxis, peers at you while...Richard Jory
You can’t miss iShares’ marketing campaign for ETFs if you live in London and take the time to look up as you walk around. The marketing campaign is slapped on the sides of buses and taxis, peers at you while you ascend tube escalators, and has taken over the front and backside of one of the capital’s free newspapers.
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