O’Shaughnessy says warned on Bear leverage
NEW YORK (Reuters) Star stock fund manager James O before leaving Bear Stearns in early 2007, said he had warned the canada goose clearance sale investment bank executives that some of its investment funds were taking too much risk.
By the middle of last year, O was at his own firm managing $8.8 billion of assets, while his former employers were struggling with high profile Canada Goose Coats On Sale losses canada goose factory sale generated by two highly leveraged mortgage securities funds.
did express, at some point, my concern about the use of leverage and was politely told to mind my own business, O said at the Reuters Investment Outlook Summit in New York.
O who left Bear on amicable terms, stressed that the firm was hardly alone in using lots and lots of debt to amplify returns made trading illiquid instruments, canadian goose jacket such as some subprime mortgage backed bonds and collateralized debt cheap Canada Goose obligations.
had been on record for a long time saying that was among the most stupid canada goose store things you could do, he said.
Indeed, canada goose uk outlet he said piling up excessive leverage is the Canada Goose Online root of every financial crisis, including the one that High Quality Canada Goose ultimately forced Bear Stearns out of business in March this year.
O and his team of quantitative stock fund managers had left Bear in 2007 to form O Asset Management. He left after eight years as part of Bear Stearns Asset Management and canada goose coats before cheap canada goose uk BSAM highly leveraged mortgage funds began to raise doubts about Bear ability to navigate the building credit crunch.
don think canada goose clearance Bear Stearns was doing anything any different than the other investment banks, as we saw, O said. from my perspective, was there a systemic failure on Wall Street? Yes, there was. They were using too much leverage.
During the past year, investors have put pressure on canada goose Wall Street banks to reduce their use of borrowed money from more than 30 times equity to less than buy canada goose jacket cheap 20 times. O who personally carries no debt, believes any leverage ratio above Canada Goose Outlet 4 times equity is too much.
that happens, you take risks, he said. think that my desire to not play in that game is what led to me rolling back out of Bear Stearns.
Recently, O firm https://www.canadagooseoutleta.com repurchased a 10 percent equity Canada Goose sale stake in the firm Canada Goose online from JPMorgan, he said.
Beyond letting leverage levels rise too high, O Canada Goose Parka said Bear failed buy canada goose jacket to manage its risks across its fund groups.
BSAM way of doing things was in silos. We had an equity team. There was also a value team and a growth team. And then there were the hedge funds: Ralph canada goose coats on sale (Cioffi) and uk canada goose outlet his team. Melissa Ko and her currencies team, he said. didn have canada goose uk black friday a lot of interaction with the hedge fund guys.
That hands off approach allowed two Cioffi led uk canada goose mortgage funds to build up positions that became difficult to sell when markets canada goose uk shop began to tighten up in late 2006. By the middle of 2007, Canada Goose Jackets the funds were in the red and ultimately collapsed into bankruptcy.
Bear Stearns leaders like Chief Executive James Cayne canada goose black friday sale and Warren Spector, as well as executives at other firms, have been more forceful on risk management, O said.
In the end, he said, Bear Stearns was just the first ship to get hit by the financial storms of the past year.