“Confronting real issues”

                                                                    Notes and Website extracts
Are Hedge Funds, Stock Markets secure investments?

Mary Meeker, Morgan Stanley “Queen of the Net”. She and Bankers sold shares in hundreds of companies that should never have gone public

Sunday Times. Business Feature Page 9. Wall Street is caught with its pants down  from book “The Accidental Banker: inside the decade that transformed Wall Street, by Jonathan Knee. Oxford University Press.


Hedge funds borrow, this is the hedge; by so doing it again increases the amount of funds going into Equities. This further exacerbates the bubble effect! Also, hedge to protect investor’s wealth by using derivatives and short selling. Derivatives such as securitized financial instruments which provide a method for banks and other creditors to unbundled the risk involved with real economic activity.---------- By reallocating financial risks, this market activity provides the added benefit of lowering the financial costs shouldered by other sectors of the economy. The absence of hedge funds from these markets could lead to fewer risk management choices and a higher cost of capital.

 Loads of areas for conflicts of interest Page 84

There are no readily available market prices for hedge fund securities. No independent checks on Valuation, a huge problem!

Staff report to the United States Securities and Exchange Commission. Sept 2003


Last year, managers had to take home $130 million to make it into the ranks of the top 25. And there was a tie for 25th place, so there were actually 26 hedge fund managers who made $130 million or more.

Six managers made the top 25 even while posting returns in the single digits. Annual hedge fund investment returns for the past few years are only half of what they were during the 1990s. Nevertheless, more managers are making more money today than ever before, as evidenced by Alpha's fifth annual survey of the biggest earners.

Top hedge fund manager had take-home pay of $1.5 billion in 2005 on 5% fee and 44% of gains

Hedge funds, lightly regulated private investment funds for institutions and wealthy individuals, typically charge investors 2 percent of the money under management and a performance fee that generally starts at 20 percent of gains.

The stars often make a lot more than this "2 and 20" compensation setup. According to Alpha's list, Simons charges a 5 percent management fee and takes 44 percent of gains; Steven A. Cohen, of SAC Capital Advisors, charges a management fee of 1 to 3 percent and 44 percent of gains; and Paul Tudor Jones II, whose Tudor Investment Corporation has never had a down year since its founding in 1980, charges 4 percent of assets under management and a 23 percent fee.

  see also


That said, with hedge funds there are widespread concerns about high charges, opaque strategies and absence of government structures among Pension Fund Trustees.


On either side of the Atlantic, the biggest blow-ups have occurred under the very noses of regulators.


Matching liabilities is what pension investment is about now!


New, complicated financial instruments have made many banks’ risk-measurement tools obsolete. What Alan Greenspan terms the “unconscionable” inability of derivatives traders to introduce the technology needed to keep track of trades is creating risk of unknowable magnitude.

American Account, Irwin Stelzer, The Sunday Times 4th June 2006.


London Briefing:  There was only one topic of conversation last week in the City of London: the £50 million (€74.5 million) man.

In the bars, on the blogs and in an avalanche of envious e-mails, all the talk was of Driss Ben-Brahim, the hotshot head of proprietary trading at Goldman Sachs who is said to have received a £50 million bonus from his grateful employer.

Last week, just before the bonuses were declared, Goldman Sachs reported its most profitable year ever, with a 69 per cent surge in earnings to a record $9.54 billion (€7.22 billion). Earnings in the final quarter all but doubled.


The investment bank said it will have paid out as much as $16.5 billion this year to its 26,500-strong workforce, around 5,000 of whom work in London.


Just a week after Morgan Stanley chief executive John J. Mack scored an unprecedented $41.1 million bonus, there is a new record on Wall Street. Securities firm Goldman Sachs disclosed that it paid Lloyd C. Blankfein, its chairman and chief executive since June, a bonus of $53.4 million in 2006, the highest ever for a Wall Street chief executive.


Bloomberg also put the bonus in context by noting that the heads of the top hedge funds, which are investment pools for institutional investors and the wealthy, can make hundreds of millions of dollars in a given year.



In New York City alone, employees of the securities industry will receive $23.9 billion in bonuses this year 2006, surpassing last year's record by 17 percent, New York State Comptroller Alan Hevesi forecast today.


SEC Charges Former Apple General Counsel for Illegal Stock Option Backdating

Commission Also Settles Claims Against Former Apple CFO for $3.5 Million


Dating Game
Stock-Options Criminal Charge:
Slush Fund and Fake Employees

U.S. Accuses 3 Ex-Executives
At Comverse Technology
Of Long-Running Scheme

Scrambling to Avoid Detection

August 10, 2006


The growing US row over options backdating has already claimed more in-house careers than all the post-Enron collapses combined. Michelle Madsen reports on the scandal that raises awkward questions for corporate counsel

Scandals have become so woven into the fabric of modern corporate culture that in-house lawyers could be forgiven for thinking that dealing with the latest incident of boardroom controversy is all in a day’s work.


There is so much fraud in the USA that investigation authorities can only charge a small percentage JFH


Is Share Options Fraud just a peculiarity to the USA? Holders of Stocks and Shares can be ripped off to the tune of hundreds of millions. It is easy, a small bunch of fellow directors just play dumb. JFH


Auditors reject EU accounts again 25/11/2005 

For the eleventh year in a row, the European Union's annual accounts have failed to gain a seal of approval from the EU's own auditors.  

Does anybody have an idea what is going on? JFH

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