Monday, March 31, 2008

SEC Chairman Cox on the "Blueprint for Financial Regulatory Reform"

"Statement of SEC Chairman Christopher Cox Regarding Blueprint for Financial Regulatory Reform
FOR IMMEDIATE RELEASE
2008-53

Washington, D.C., March 29, 2008 — Securities and Exchange Commission Chairman Christopher Cox today issued the following statement regarding the Blueprint for Financial Regulatory Reform being proposed by the Treasury Department:

'Recent events have provided further evidence, if more were needed, that financial services regulation in the United States needs to be better integrated among fewer agencies, with clearer lines of responsibility. Just as systemic risk cannot be neatly parceled along outdated regulatory lines, the overarching objective of investor protection can't be fully achieved if it fails to encompass derivatives, insurance, and new instruments that straddle today's regulatory divides. The proposed consolidation of responsibility for investor protection and the regulation of financial products deserves serious consideration as a way to better address the realities of today's markets.' "

We agree. As we have said before, Cox is perhaps the best financial market regulator appointment made by this administration.

Saturday, March 29, 2008

"Treasury Dept. Plan Would Give Fed Wide New Power"

According to the New York Times, a Treasury Department plan released (over a weekend to the press and selected insiders only) would give substantial new power to the Federal Reserve Board. "The Treasury plan would let Fed officials examine the practices and even the internal bookkeeping of brokerage firms, hedge funds, commodity-trading exchanges and any other institution that might pose a risk to the overall financial system." This would be a significant expansion of the central bank’s regulatory mission.

We are not, at this point, opposed to this effort. We noted, in an October 2, 1998 filing with the DC Circuit of the US Court of Appeals (Case Number 98-1459), our belief that the Fed should be designated a "Super-regulator, with broad responsibility for overseeing the activities of banks, thrifts, pension funds, insurance companies, mutual funds, brokerage firms and investment banks.

We believe social investors need to review the plan carefully. The Times stated:

"The proposal is part of a sweeping blueprint to overhaul the nation’s hodgepodge of financial regulatory agencies, which many experts say failed to recognize rampant excesses in mortgage lending until after they set off what is now the worst financial calamity in decades." (This is, of course, false. Financial regulatory agencies recognized "rampant excesses in mortgage lending" (see: Irrational Exuberance) but were unable to take the steps required to protect the financial system.)

Treasury's plan calls for the consolidation of "banking and securities regulators into a powerful trio of overseers responsible for everything from banks and brokerage firms to hedge funds and private equity firms."

Further, "the plan does not recommend tighter rules over the vast and largely unregulated markets for risk sharing and hedging, like credit default swaps, which are supposed to insure lenders against loss but became a speculative instrument themselves" and it "reduce the power of the Securities and Exchange Commission" while merging the S.E.C. with the Commodity Futures Trading Commission.

Thursday, March 27, 2008

Subprime lender used "significant improper and imprudent financial practices."

According to a report described in the Washington Post, "New Century Financial, the subprime lender that was one of the first casualties of the housing crisis, had a 'brazen obsession' with risky home loans that spurred it to engage in 'significant improper and imprudent' financial practices, according to a report released yesterday.

The long-awaited report examines what went awry at New Century, the second-largest subprime lender before it raced into Chapter 11 bankruptcy protection in April 2007, and says shareholders could recover a small fraction of the billions of dollars they lost in the process by suing companies and individuals who may have exacerbated the debacle.

Michael J. Missal, the lead investigator, acting at the behest of the Justice Department, pointed the finger at audit firm KPMG, which he said contributed to New Century's problems in 'troubling and puzzling' ways. In some cases, KPMG may have recommended departures from accounting standards, overruled the judgments of in-house specialists and caved under pressure from corporate executives, the report says."

Wednesday, March 26, 2008

Rating Agency Reform

Recently, California State Treasurer Bill Lockyer "has been leading a national effort to persuade the rating agencies to change the way they rate municipal bonds. Munis are held to a much higher standard than corporate bonds, as the rating agencies' own default studies demonstrate. This unjustifiable system has cost taxpayers billions of dollars." This "also helped trigger (a) meltdown..when several (municipal) bond insurers suffered downgrades below the minimum ratings required for money market eligibility." See: States and Cities Start Rebelling on Bond Ratings.
Also see:
http://www.sec.gov/rules/proposed/s70405/wcunningham9442.pdf

"Three weeks ago, the Treasurer took the lead in writing a letter to the rating agencies requesting that they change the way they rate municipal bonds. The letter was signed or endorsed by 13 state treasurers, as well as four other state and local municipal issuers across the country." Other institutional investors..or issuers have backed the effort," including the nation’s largest public pension fund (the California Public Employees’ Retirement System)."

Moody’s has issued a "Request for Comment" on its plan to change the way it rates munis. The firm requested that "feedback..be emailed to cpc@moodys.com any time before April 15, 2008."

According to Mr. Lockyer, "It is important that a wide range of market participants make it clear to the rating agencies that the current system is unfair to taxpayers and detrimental to the market" and he "urges (institutional investors) to respond to the Moody’s request for comment. We also urge you to make your opinions known to the other rating agencies."

We agree.

Tuesday, March 25, 2008

Emerging Managers Summit & Awards Luncheon

Emerging Managers Summit and Awards Luncheon
May 14-16, 2008
Chicago Marriott Downtown Magnificent Mile

Last year we attended the Emerging Managers Summit and Awards Luncheon, an event that provides a unique opportunity to meet a diverse group of money managers and managers of managers. This year, we are a media sponsor for the event.

This year's event will take place at the Marriott Downtown on Chicago’s Magnificent Mile, and will feature the 2008 Emerging Manager Awards Luncheon, recognizing the leading emerging manager, emerging fund of funds, emerging hedge fund, emerging private equity manager, emerging consultant and the top emerging manager strategy.

Topics of Discussion at the Summit Include:
• Implementing an Emerging Managers Program into an Institutional Portfolio
• Private Equity Investments and Strategies
• How are Emerging Managers Creating Successful Styles and Strategies
• Manager Selection
• Emerging Managers in Alternative Investments

To register, visit www.opalgroup.net or email register@opalgroup.net

The full agenda follows:

Wednesday, May 14, 2008

7:30a - Exhibit Setup
11:00 - Registration Desk Opens
1:00p - Co-Chair Welcoming Remarks
1:55p - Consultants Roundtable
Panelists:
CLONTARF CAPITAL
MERCER INVESTMENT CONSULTING

3:15 - Refreshment Break

3:30 - Compliance in a Regulatory Environment

Emerging managers often do not have the resources to hire experts in the important area of compliance. These panelists will share insights into getting ready for an SEC exam.

• Policies and procedures
• Books and records requirements
• SEC current hot topics
• Implementing the new office of the chief compliance officer
• Annual review of compliance program

Panelists:
FULBRIGHT and JAWORSKI L.L.P
LEVENFELD PEARLSTEIN

4:15 - Meet the Emerging Managers

This session will consist of emerging manager firms each with eight minutes to speak. There will be no power point presentations during this session. The eight firms will discuss their background, strategy, methodology and performance of their funds. There will be a session leader carefully watching the time limit. After each firms has presented, we will open the floor to questions from the audience.

Panelists:
CARDINAL POINT CAPITAL LLC
GLAZER CAPITAL MANAGEMENT LP
OAKBROOK INVESTMENTS, LLC
MIDWEST ASSET MANAGEMENT
HARRISON STREET REAL ESTATE CAPITAL
PRISMA CAPITAL PARTNERS LP
HUBER CAPITAL MANAGEMENT
PARADIGM CAPITAL MANAGEMENT GROWTH ADVISORS

5:30 - Investing in emerging managers - What does the research really show?

• Equities
• Private equity
• Hedge funds

Moderator: Chief Investment Officer, TEACHERS' RETIREMENT SYSTEM OF THE STATE OF ILLINOIS

Panelists:
NORTHERN TRUST GLOBAL INVESTMENTS
PERTRAC FINANCIAL SOLUTIONS

6:30 - Cocktail Reception

Thursday, May 15, 2008

7:15a - Continental Breakfast
Sponsored by: CLEAR ASSET MANAGEMENT, LLC

7:40a - Co-Chair Welcoming Remarks

9:00 - Private Equity Investment Styles and Strategies; Do Emerging Managers have an Edge?

• Can emerging private equity managers continue
• performance in multiple funds?
• What to look for in an emerging private equity manager
• Which fast-growth areas of emerging domestic markets exist for private equity investors
• How does an emerging private equity managers performance differ from an established manager in the event of a capital cycle downturn?
• Where to look for the best talent

Panelists:
CRESTVIEW CAPITAL PARTNERS
CHANNEL MEDICAL PARTNERS

What do Emerging Fixed Income Managers have to offer that sets them apart?

• Successful fixed income strategies to attain success
• Distressed debt
• High yield
• A case for an emerging fixed income manager
• What should investors be looking for in a emerging fixed income manager and what to avoid

Panelists:
SIMRAN CAPITAL MANAGEMENT LLC
STONEBRIDGE ADVISORS LLC
LM CAPITAL GROUP, LLC

10:15 - Fund of Funds - what impact have they have had on emerging hedge funds and can they sustain current performance?

• What do fund of funds look for in an emerging hedge fund?
• How does an emerging hedge funds performance compare to that of a non emerging fund?
• Can fund of funds continue identify emerging managers capable of out-performing across market cycles?
• What are realistic return expectations for fund of funds that allocates heavily to emerging hedge funds?
• Funds of emerging managers

Equity Investment Styles and Strategies

• What equity strategies are emerging managers using to stay ahead of the curve?
• Large Cap, mid cap, small cap. Where are the best returns coming from?
• Where to find the best value and growth managers and what to look for

Panelists:
MILLER HOWARD INVESTMENTS
FRANKLIN STREET PARTNERS
NOSTRADAMUS FUNDS, LLC

11:30 - Refreshment Break

11:45 - How are Emerging Managers making their Styles & Strategies Successful in today’s competitive environment? Which ones are outperforming the rest and which will work best for the future?

• Venture capital
• Hedge funds
• Socially responsible investments
• Domestic equity – small/mid/large cap
• Emerging managers in emerging markets
• International investments
• International equity
• How to best analyze their performance

Panelists:
CITIGROUP/SMITHBARNEY
PROFESSIONAL TRADERS MANAGEMENT
CHANNING CAPITAL MANAGEMENT
JEFFERIES and COMPANY, INC.

Pallet of Venture Capital Investment Styles and Strategies:

• How to best capitalize on the risk-adjusted return on capital invested
• Seizing the market opportunity offered By small, first-time Funds
• Employing unique and innovative strategies to maximize returns unavailable to investors engaged in more established strategies
• How do emerging venture capital managers handle deal sourcing, harvesting and sales

1:00p - Luncheon

2:15 - Manager Selection, “What every investor should know”

• Identifying Emerging Managers and Beginning the Process

Moderator:
MERCER INVESTMENT CONSULTING

Panelists:
NORTHERN TRUST GLOBAL INVESTMENTS
EACM ADVISORS LLC

3:30 - Refreshment Break

3:45 - "Financing Options for Emerging Managers"

• Best methods for incubating and seeding
• Synthetic investment strategies
• Unique financing alternatives
• How to best raise capital

Panelists:
NATIONAL BANK OF CANADA FINANCIAL INC.

What Are the Best Asset Classes and investment styles for an Emerging Manager? An Emerging Manager’s perspective.

• Equity volatility as an asset class
• A closer look at mid cap versus small cap
• Is it time to consider alternative investments?
• International investing: Is it time to look at India?
• How can real estate fit in your portfolio?
• Niche investment strategies

4:45 - Emerging Managers in Alternative Investments

• How has this groups performance compared to other groups in the alternative investment classes?
• What to look for in an emerging manager in terms of capacity agreements, fee sharing/discounts and transparency
• How to choose the accurate mix of emerging alternatives managers for your institutional portfolio
• Emerging hedge funds
• Emerging Fund of Hedge Funds

Panelists:
INDIGO ASSET MANAGEMENT

"Simultaneously Running and Doing the Business"

Institutional investors hear “pitches” at least five to ten times a day. How can you get your firm to stand out? Should you hire a third party marketer or have an internal marketing person? What should you highlight about your team and your fund? What kinds of things should you avoid discussing on a first meeting? What is the best way to ensure a second and third meeting

• How to market your fund
• Business challenges that face leaders today

Panelists:
LEVENFELD PEARLSTEIN
PROCTOR INVESTMENT MANAGERS LLC

5:45 - Pallet of Real Estate Investment Styles and Strategies:

• What it the difference between core-plus, value and opportunistic real estate?
• Direct real estate vs. REITS
• Examining the potential for retail, industrial, office and residential sectors
• Changing definitions of what are acceptable real estate investments
• Urban land development

Emerging Brokers and their evolving role

• How do brokers add value
• Expertise in institutional trading with creditable client references
• Global trading capabilities
• When do you need to hire
• Membership in a national or regional exchange
• Access to new issue products
• Access to liquidity
• When does a broker meet the requirements emerging?
• Adequate capitalization
• Investment in technology
• Market structure changes and the impact on US equity strategies

Panelists:
TERRA NOVA FINANCIAL LLC
RBC GLOBAL PRIME SERVICES

6:30 - Cocktail Reception

Friday, May 16, 2008

7:15a - Continental Breakfast

7:40 - Co-Chair Welcoming Remarks

7:50 - What is the current state of emerging manager programs? How do institutional investors who have Emerging Managers programs define “Emerging Managers?” What are some of the statutory or investment policy implications for institutional investors in developing Emerging Manager mandates? Can Emerging Managers generate excess performance and provide institutional investors with greater exposure to the real estate markets? Should investors take proactive steps to create a next generation of real estate investment managers? Is greater gender and ethnic diversity an appropriate objective? Are the characteristics of an emerging manager changing?

8:40 - “Why Small is still Beautiful” The benefits of “Keeping it Little” Manager Economies and Diseconomies of Scale

• Why keep from emerging?
• True or false: small = innovative creativity and big = bureaucracy. Does this still hold true?
• Alignment of interests
• Depth of resources
• Business risk: what is the best way to manage it?
• Screens?
• Fund of funds managers
• Fund infrastructure
• The cost to trade

10:00 - Investing in Domestic Emerging Markets/ETI

• Learn how public plans and other institutional investors are adopting economically-targeted investing (ETI) strategies
• Utilizing industry benchmarks to track financial performance of ETI
• Evaluating ETI strategies from both financial and community impact perspectives

11:00 - Manager of manager, fund of funds, consultants round table

11:45 - Co-Chair Closing Remarks

Tuesday, March 11, 2008

Racial Divide In Mortgage Mess: Carver Federal on CBS Evening News

Carver Federal Savings Bank was featured on CBS Evening News on Sunday, March 9th at 6:00 PM. They discussed their approach to helping subprime lending victims. To see the video, click below:

Racial Divide In Mortgage Mess

http://www.cbsnews.com/sections/i_video/main500251.shtml?id=3920203n

CBS News Online