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Saturday, 24 January 2009

Interest in emerging market funds wanes

FT Alphaville » Blog Archive » Interest in emerging market funds wanes

Rogue traders who went off the rails

In retrospect, it did seem odd that Jérôme Kerviel hadn’t taken any holiday for a couple of years. But so what? The young trader was an affable colleague, diligent to the point of staying late and always courteous to the back-office staff. Being away from work forced him to confront the death of his father, he said. That’s why he came in at weekends, too. He had few friends. He wanted to do well. And so it was that a 31-year-old with a penchant for computing was given the time and freedom to gamble up to €50bn on the stock market. A few more weeks and Société Générale, his employer, might have gone bust.

The risk of an employee going rogue has existed ever since the owners of capital entrusted others with their money, either to safeguard or invest it. The most likely rogue, inevitably, is the one who absconds with funds before the investor realises there is no South Sea plantation, no patented miracle cure. But even more complicated swindles are nothing new.

John Kenneth Galbraith, whose treatise The Great Crash, 1929 is enjoying a depression-era revival, mused that embezzlement in banks and businesses was far more common than suspected. “At any given time there exists an inventory of undiscovered embezzlement in – or more precisely not in – the country’s businesses and banks. This inventory – it should perhaps be called the bezzle – amounts at any moment to many millions of dollars,” he wrote. In good times, Galbraith said, when people are more relaxed and money is plentiful, the bezzle grows. In a depression, it shrinks. As a financial system disintegrates, the capital cushions that mask the bezzle vanish. Or, in the words of Warren Buffett: “It’s only when the tide goes out, you find out who’s swimming naked.”

Premier League bans Emirates NBD fund

The English Premier League has told all 20 clubs they risk breaking rules if they sign players connected to an investment fund launched by Dubai-based bank Emirates NBD.

The Hero Global Football Fund, which has been backed by Alan Hansen and former Football Association executive director David Davies, has been banned by league chiefs.

The fund, which is planning to raise $100 million, was set up by Emirates Investment Services Ltd, a subsidiary company of Emirates NBD, and plans to have a life of five years.

Thain behaviour

What is it that bankers don’t get? Unable to own up to a collective failure, some still display a sense of entitlement that bears no relation to their current status as wards of the state supported by the taxpayer. Step forward John Thain.

Formerly of Goldman Sachs, he was feted just months ago for securing the sale of Merrill Lynch to Bank of America, just as Lehman Brothers crumbled into dust. BofA even paid a 70 per cent premium. Some deal. Some salvation.

It now emerges that Mr Thain brought forward about $4bn in discretionary bonuses, paying them out in the narrow window after the sale of Merrill was agreed but days before the deal was actually closed.

China hits back over renminbi comments

The US and China have embarked on a public row over foreign exchange policy only three days after Barack Obama’s inauguration, with China denying on Friday night it was “manipulating” its currency and saying the allegation would only fan protectionist sentiment in the US.

The Chinese government was responding to claims by Tim Geithner, President Obama’s choice for Treasury secretary, who told a Senate nomination hearing on Thursday that China was “manipulating” the renmnbi.

Rumours Istithmar may sell Barneys

Dubai: Barneys New York's owner, Dubai's Istithmar World PJSC, may sell the retailer less than two years after buying it as the fund struggles with losses and the luxury market slows, two people familiar with the situation said.

Istithmar doesn't want to sell the business for less than the $942.3 million (Dh3.46 billion) it paid in 2007, said one of the people, who declined to be identified because the talks were private. The state-owned fund has had calls from potential buyers and would sell its entire stake, one of the people said. Istithmar Chief Executive Officer David Jackson declined to comment.

The Dubai investment fund has struggled to expand Barneys outside the US after Howard Socol resigned as chief executive in May and the luxury market withered.