Oh No, Not Again
As Global Finance was going to press this month, revelations were emerging of serious misconduct in the US fund management industry.New York State’s Attorney General, Elliot Spitzer, announced that he was expanding his investigation into the mutual funds management industry after finding a New York City-based hedge fund, Canary Capital Partners, had been trading illegally with the help of, among others, Bank of America and the troubled mutual funds firm Janus.
The revelations couldn’t have come at a worse time. Investors, scared off by the past two years’ corporate and financial scandals, had just started dipping their toes in the markets again.The world’s economies were beginning to show signs of life, stoked by the tentative recovery in the United States. If this new scandal shakes investors’ confidence, as it surely will, the repercussions will be felt across the globe.
As usual, it is the smaller investors, not the institutions, who suffer the most.Those who put their faith in Bank of America must feel most deeply betrayed.Throughout this year the bank has been touting its sense of responsibility to its customers, with its often-repeated catchphrase ‘better standards.’
As Spitzer points out, mutual funds are “the quintessential vehicle for mom-and-pop investors.”And the industry has made much of its spotless reputation.Now that these investors are discovering their fund managers might not have had their best interests at heart, they will be wondering, once again, if they wouldn’t be better off simply tucking their savings under the mattress.
The world’s central bankers are not generally a high-profile bunch. Aside from a few exceptions, they receive little attention and even less praise for their efforts to manage the world’s economies.Yet the work they do affects the lives of billions of people, and in many cases they struggle against appalling odds to instill or maintain stability and prosperity in their countries’ economies. Each year,we rate the performance of these custodians of the world’s currencies.And this year,more than any other, it is their success that stands out. It seems that at least one group of players in the world’s financial markets truly understands the meaning of the phrase ‘better standards.’They should be congratulated.