31 January 2012

'Vaporized' MF Global Funds - Insult added to Injury

"The theft of customer funds was bad enough, but the manner in which the exchange, the regulators, the court, the Congress and the Obama Administration have dealt with the aftermath of this is truly despicable." (Jesse's Cafe Americain)

Azentus Fund loses 6.70 % in first year

But assets under management are up. Need we say more? Nothing illustrates the need for careful fund selection more - and this applies to all investment funds, traditional, hedge or private equity.

When lawyers become greedy

A sobering reminder of the problems investors can face when they use a lawyer to get compensation for fraud or misdemeanour they suffer at the hands of a financial adviser. Dealing with a (real or imagined) compensation claim is a complicated affair and people are in most cases facing no option but to trust the legal expert once they have asked for his services.

30 January 2012

Hopes fade on MF Global Funds

A new term enters the financial dictionary: sources state that $ 1.2 Mio in supposedly segregated customer funds may have been 'vaporized'. Just in case you ever thought you could or should rely on financial regulators or their taskmasters the politicians.

27 January 2012

The Twelve Axioms of Investing

Quite interesting summing up of important investment rules. Nothing really new but the obvious cannot be repeated often enough.

Big Brother is after your Gold

We have warned repeatedly that the Western 'Democracies' are on the slippery slope to a totalitarian Superstate that will make anything seen in History like child's play. Latest confirmation is the remark by Paul Volcker about the possibility that intervention in the Gold Market by governments may be justified 'at any critical point'. The next step will be 'interventions' by our trusted friends, the political establishment/congregation of Spenders of Other People's money, who will 'request' that you put your gold at their disposal to help 'needy causes' - such as spendthrifts in Greece or Portugal. Intelligent Investors know that the only way to store Gold safely is in physical form and away from any place where states can trace it or have the access blocked.

25 January 2012

Broker of Investment Adviser?

Often the two terms are used interchangeably but investors are urged to understand the crucial difference between the two terms. While an Investment Adviser may be held to a high standard of fiduciary duty (this does not guarantee that he will make profitable investments!) a broker only has to offer 'suitable' investments. This distinction applies to the USA but similar differences exist in many other countries.

18 January 2012

Hedge Funds had difficult 2011

One of the problems when investing in hedge funds is the asymmetric risk-reward profile that an investor faces. The fate of Eton Park Capital Management illustrates this. While there may be a high-water mark that gives some comfort to the investor who is faced with a loss of 11 pct during the last year, the investment manager is not required to return the performance fee that was charged to the fund during any previous year when the fund made a profit.

16 January 2012

Who is protecting your confidential information?

In times where huge amounts of information can be downloaded by any bank employee with some basic computer skills it is amazing - not to say frightening - that a Swiss bank can treat client data with so little care and respect as happened at Credit Suisse. Not less than 4812 pages of client information were sent to the Swiss Federal tax authorities when only information about 5 named US citizens was requested. Is it really that hard for highly paid Brady Dougan, the chief executive of the bank, to make sure that clients (the original Latin word means 'someone you are protecting') get more care? The fine old tradition of numbered accounts should be considered as a safeguard - this time not to facilitate tax evasion but to prevent unauthorised use of information.

15 January 2012

Pitfalls of Performance-based Money Management Fees

Interesting article about a seemingly fair performance fee. Investors are advised to check the small print though!

Danger of Structured Products - a Case Study

Two investors were recently awarded a multi-million arbitration award by a US court. The case illustrates the danger of putting too much trust in portfolio advisers. Investors should be particulary vigilant when presented with complicated, especially 'structured' investment products. The rule should be: what you cannot explain to your wife or grandmother in a few simple sentencies should not even be touched with the proverbial barge-pole. How many ordinary people - even those working in challenging professional jobs - do really understand municipal arbitrage strategies sold to the investors under the cryptic name ASTA/MAT? Investment Advisers offering such products are nothing else than salesman lured by the fast fees that are usually part of such 'products' and should be treated with a healthy amount of suspicion.

14 January 2012

How safe is your Fund?

The regulation of investment funds is contained in voluminous tomes in most countries. In addition supranational entities like the EU add their own regulations. So should the investor assume that any fund issued by a regulated investment firm is safe from fraud and malpractice? We have repeatedly warned that even investment funds domiciled in 'developed' countries like member states of the EU are not automatically fail-safe. Apart from the question how small countries like Luxembourg, Ireland or Malta could afford to reimburse investors for substantial losses it is by no means clear that the wording of the regulations is such that the rights of the investors are defined in a sufficiently clear way. As ongoing court cases in Luxembourg demonstrate, rubber paragraphs allow to drag on court cases for lengthy times and fund providers try every legal trick to wear down the hapless investors who try to reclaim their savings.

12 January 2012

How much should you rely on a prospectus?

We always advise against excessive reliance on written marketing material. Glossy brochures can be deceiving and should not divert the investor's attention from the crucial aspects of safety and performance. The same can also be said for impressive premises, fancy conferences and well-tailored suits worn by your financial advisers. But some clients may think that a formal prospectus, seemingly approved by the regulators, may be in a different league and give an official stamp of approval on the investment product that is suggested to be put into a portfolio. A recent court judgement in Austria gives a warning in this respect. The regulatory authority there stated that while it checks the formal correctness of an investment prospectus it does not verify the actual facts that contained in it.

7 January 2012

Sauve qui peut!

Financial Fascism is on the march