listened to Alistair Darling this morning telling us about the credit crunch and the financial crisis and he was asked about Hedge Funds.
Just a quickie for your readers . In order to be able to sell short a hedge fund still has to make delivery of stock to the market in settlement, so they borrow the stock.
Now who do they borrow the stock from, why the Investment Banks who manage the assets of Pension Funds. So, when you are a Trustee of a Pension Fund and you are asked will you permit any of the assets of the pension fund to be 'lent' then just say no.
The Investment Banks cannot do anything without the approval of the Trustees, so just say no. So, Alistair pass legislation immediately to prevent any stock lending.
There are implications because the Investment Banks pay interest on the value of the borrowed stock but that is far outweighed by seeing the value of the pension fund assets fall in value.
So, to assist the Chancellor, stop stock lending and disallow the activity which is known as Contracts for Difference, which avoids the need to settle with physical stock within the Settlement period.
I do not expect any financial aid from the Chancellor for my contribution but if he does this right away he will have the gratitude of all of us. By the way please note that Pension Funds cannot 'trade' their assets, that is they cannot just buy and sell because they are meant to invest for the long term, not just short term speculative gains.
The Economy
listened to Alistair Darling this morning telling us about the credit crunch and the financial crisis and he was asked about Hedge Funds.
Just a quickie for your readers . In order to be able to sell short a hedge fund still has to make delivery of stock to the market in settlement, so they borrow the stock.
Now who do they borrow the stock from, why the Investment Banks who manage the assets of Pension Funds. So, when you are a Trustee of a Pension Fund and you are asked will you permit any of the assets of the pension fund to be 'lent' then just say no.
The Investment Banks cannot do anything without the approval of the Trustees, so just say no. So, Alistair pass legislation immediately to prevent any stock lending.
There are implications because the Investment Banks pay interest on the value of the borrowed stock but that is far outweighed by seeing the value of the pension fund assets fall in value.
So, to assist the Chancellor, stop stock lending and disallow the activity which is known as Contracts for Difference, which avoids the need to settle with physical stock within the Settlement period.
I do not expect any financial aid from the Chancellor for my contribution but if he does this right away he will have the gratitude of all of us. By the way please note that Pension Funds cannot 'trade' their assets, that is they cannot just buy and sell because they are meant to invest for the long term, not just short term speculative gains.