Institutional Investor's Alpha Magazine - December 2008 / January 2009 - (Page 12)

the stock they hold is being shorted). The respondents also favored an outright ban under certain circumstances and said recent restrictions imposed on short-sellers didn’t last long enough. More than half of those surveyed said short-selling should be outlawed once a stock declines more than 10 percent; 85 percent favored reinstatement of the “uptick” rule, requiring that a stock be on the rise before it can be shorted, which was abolished by the Securities and Exchange Commission in 2007. Nearly everyone said fund managers should be required to publicly disclose all short-selling activity (an effort to enforce disclosure during the ban was defeated because of objections by hedge funds). Big-company executives argue that shorting hurts shareholders. But smallcap ﬁrms (those with capitalizations of $750 million or less), whose stocks are more vulnerable to rapid price swings, seem to have the strongest antishort sentiment, according to the poll. Jeffrey Resnick, the U.S. group president of Opinion Research, explains that corporate leaders “want regulators and exchanges to apply more circuit breakers and disclosure to protect companies and shareholders.” The most recent ban, imposed by the SEC on September 19 and lifted on October 8, affected ﬁnancial sector stocks and came on the heels of complaints by such companies as Morgan Stanley and now-defunct Lehman Brothers Holdings about the alleged impact of short-sellers on share price. Citigroup has said it will petition lawmakers to reinstate the ban. The Financial Services Roundtable, a consortium of U.S. banks, brokerage ﬁrms and insurers, also wants renewed restrictions. In reality shorts may not be to blame for the recent market turmoil. Short Alert Research, a North Carolina ﬁrm that tracks troubled companies, says short-selling activity has fallen by nearly 40 percent since July. And during the 19-day autumn ban, the Dow Jones industrial average shed nearly 3,000 points, led by ﬁnancial sector declines. — Dave Simons Security: The Ex-Files M aking sure laid-off workers don’t walk off with more than they’re supposed to has become a growing security issue lately as tens of thousands of financial sector employees lose their jobs. The list of recent layoffs is long. Well-known alternative-asset management firms that have trimmed their workforces include London-based GLG Partners (100 layoffs) and Gartmore Capital (70); Chicago-based Citadel Investment Group (40); New York’s Highbridge Capital Management (35); and Dallas-based Highland Capital Management (30), which closed two funds. Back-ofﬁce providers have also slashed positions. Global hedge fund administration giant Citco Fund Services is letting 1,000 people go. The trend raises two security concerns: first, that assets or intellectual property may be stolen; second, that breakdowns in compliance may occur when one or two people are left doing the work of several. “Investors want to know what kind of controls a hedge fund has in place when it has to show people the door,” says Kenneth Springer, a former FBI agent who is now president of New York–based Corporate Resolutions, a business investigations ﬁrm. During the boom years, Springer helped funds of funds vet potential managers. Now hedge funds have him setting up hot lines that welcome tips about executives who might be planning a preemptive departure or forming rival outside partnerships. In this environment, Springer notes, behavior standards have been tightened. “In the past few years, investors would tolerate a manager who was partying, taking drugs or doing things not typically considered acceptable,” he explains. “Now they won’t, and they look to us to collect reconnaissance on a manager so they can be ﬁred cleanly, without lawsuits or fuss.” Springer says his ﬁrm helps investors avoid the unexpected. “There is way, way more to consider than an employee leaving with a laptop or a box of files,” he says. “It’s a different world, and both investors and managers need to realize it.” — M. Corey Goldman Aiming To Score L ooking for a recession-proof commodity? Try music. So suggests London-based alternativeinvestment manager Bramdean Asset Management, which aims to proﬁt Illustration by Joshua Gorchov 12 • INSTITUTIONAL INVESTOR’S ALPHA • DECEMBER 2008/JANUARY 2009

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - December 2008

Institutional Investor's Alpha Magazine - December 2008 Contents Letter from the Editor Longs & Shorts Inside the Trade Pension Corner The Good Guys Interview: Stanley Fink Cover Story: The New Regulatory Reality United States: The Usual Suspects Europe: Flirting with Unity Asia-Pacific: What Asian Contagion? In Theory In Focus Strategies Research Center Alpha Bytes Unhedged Commentary

Institutional Investor's Alpha Magazine - December 2008

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