Road Less Traveled Financial Stocks

After the crisis of 2008, many financial companies were undervalued. You could make good money holding a bunch of well-known names. It is tougher now after a prolonged up market. Although you still see big companies like Goldman Sachs and asset manager Legg Mason in portfolios, there is a move to look elsewhere for the next financial trade.

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Resilience Despite Japan, Mideast Crises

Chidem Kurdas

There were dramatic reversals in hedge fund asset growth over the past five years in response to certain incidents, as documented in the new capital movement index series from fund administrator GlobeOp.  Have recent events – political turmoil in the Middle East, nuclear threat in Japan after the earthquake and tsunami – affected hedge funds?

To Separate or Not to Separate

Chidem Kurdas

Separately managed accounts looked like the way to avoid unexpected suspensions of redemption as happened in the 2008 crisis, as well as rip-offs. Separate accounts, unlike shares in a fund, remain in the investor’s control. But there are downsides, both for  managers and their clients. You hear more about the negatives now.

John Phinney Jr., chief operating officer of Apollo Capital Markets, says managed accounts have unintended

Investors Examine Each Other

Chidem Kurdas

Fund clients are showing greater concern about fellow clients. This is a consequence  of the redemption frenzy of 2008-2009, when some investors withdrew from funds in a bad market because they had an urgent need for money, often to meet margin calls. This forced funds to sell at losses that could have been avoided by waiting. Other investors were harmed. Many managers suspended redemptions.

“The investor base is very important to us,” says Lorrie Landis managing director of credit investments at Tulane University. “We want funds to be very stable, don’t want to be hurt by whatever is going on with another investor.”

Fund managers also are paying more attention to the kinds of clients they get.  Suzanne Murphy, head of strategic development at credit fund manager Claren Road Asset Management, said Claren Road’s investors used to be almost all a single type—95% were funds of funds.

Administrators Explain What They Do

Chidem Kurdas

Transparency is a term that’s been used a lot for fund managers. But increasingly you hear it applied to fund administrators as well.

Administrators lacked process transparency, says Mike Greenstein, a PricewaterhouseCoopers partner who leads the alternative investments practice. If people understand what administrators do, they will have more trust, so there is a move toward process transparency for administrators, he said, speaking at a conference.

What does process transparency involve? Vernon Barback, president and chief operating officer at GlobeOp Financial Services, an administrator listed on the London Stock Exchange, suggested basic questions from a fund’s investors to its administrator.