Risk Management and Valuation Blog Launches

Posted on February 13, 2011 by Susan Mangiero

Recognizing the continued need for actionable information about institutional investment best practices, Dr. Susan Mangiero offers analysis of critical issues affecting the $30+ trillion global buy side industry. This unique investment risk management and valuation blog at www.goodriskgovernancepays.com serves as a resource for trustees, board members, attorneys, money managers and financial advisors with asset allocation, governance, risk management and fiduciary oversight responsibilities.

According to Dr. Mangiero, “Investment risk governance is more important than ever before. As billion dollar losses continue to make headlines, fiduciaries and their counsel continue to be challenged with volatile markets, a slew of new mandates and investment complexity that requires rigorous due diligence. Litigation is increasing at a fast clip and investment professionals must absolutely embrace and demonstrate an understanding of risk management and valuation issues. Post-Madoff and the credit crisis, there is no room for complacency.”

Click here to read the February 10, 2011 press release about GoodRiskGovernancePays.com.

Note to Readers: PensionRiskMatters.com, soon to celebrate its fifth year anniversary, focuses on the many challenges confronting retirement plan decision-makers. GoodRiskGovernancePays.com takes a broader view of the industry and includes commentary, insights and analysis about important issues for pension funds and other types of institutional investment industry participants such as endowments, hedge funds, mutual funds, private equity funds and sovereign wealth funds. The coverage is slightly different and the access is complimentary. Readers are encouraged to get email updates for each of these two unique websites. Visit GoodRiskGovernancePays.com and type your email into the box by the green GO button or click here to add GoodRiskGovernancePays.com to your RSS feeder.

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Dr. Susan Mangiero to Speak at Dow Jones Private Equity Analyst Conference 2009

Posted on July 20, 2009 by Susan Mangiero

 I am delighted to have an opportunity to speak at the upcoming Private Equity Analyst Conference 2009, to be held at the Waldorf Astoria from September 16-17, 2009. With so much focus now on ethics, conflicts of interest and transparency, the panel topic I've been asked to address is near and dear to my heart.

I've reprinted the session description below. Click here to learn more information about the conference in its entirety.

Title: "Avoiding Major Trouble: Why Private Equity Firms Must Spend More Time On Ethics"

Description: Ethics has become one of the key words over the past year, especially given the fallout on Wall Street. And regulations, both in the U.S. and overseas, now place strict curbs on many established business practices in an effort to stem corruption. The consequences for companies, both in fines and damage to reputation, can be significant, which means investors need to pay attention. But as the disclosures earlier this year in New York make clear firms are not doing as good a job as they can adhering to such policies. So what should firms be doing to ensure that they themselves as well as their portfolio companies stay compliant with not only various regulatory codes, but also just doing good business? What is the message that firms can drive home to their partners and their portfolio companies? Our panel provides their thoughts.

Panelists:

  • Barry Gonder, General Partner, Grove Street Advisors
  • Pascal Levensohn, Founder & Managing Partner, Levensohn Venture Partners
  • Susan M. Mangiero, Founder & President, Pension Governance
  • Raymond Svider, Co-Chairman & Managing Partner, BC Partners.
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Insider Trading and Pension Funds

Posted on May 23, 2007 by Susan Mangiero



In a May 23 meeting, open to the public as a byproduct of the Government in the Sunshine Act, the SEC will address a host of issues, not the least of which is a possible relaxation of the Sarbanes Oxley Act. Long awaited relief could help companies with what many cite as "burdensome" and costly compliance requirements. Financial Times reporter Jeremy Grant writes that "Wednesday’s likely approval of a set of guidelines originally proposed in December will provide executives with a clearer idea of how the SEC intends corporate America – and foreign companies listed in the US - to implement Section 404 of Sarbox." (See "SEC set to approve guidance on Sarbox," Financial Times, May 23, 2007.)

Ironically, at a time when regulatory muscle may be giving way to paunch, questions abound regarding transparency. In "Side Deals in a Gray Area," New York Times reporter Jenny Anderson describes a practice known as “big-boy letters” as "typically used when an investor has confidential information about a stock or bond and wants to sell those securities. By signing the letter, the buyer effectively recognizes that the seller has better information but promises not to sue the seller, much like a homebuyer who agrees to buy a house in 'as is' condition."

In "Big Boy Letters: Playing It Safe After O’Hagan," attorneys Wendell H. Adair Jr. and Brett Lawrence write that "big boy letters are designed to limit an insider’s liability under both securities laws and common law" and that a "trader in a company’s debt typically does not assume any fiduciary duty to the company or other security holders, assuming the person is not a member of an official committee or the board of directors and does not hold a similar insider position" unless he or she has signed a non-disclosure agreement.. Click here to read their analysis of U.S. v. O’Hagan, a "seminal case" that implied that a trader in possession of material, nonpublic information could avoid liability under misappropriation theory by disclosing his intention to trade to the information provider without actually disclosing to the trading counterparty the nonpublic information."

While attorneys seem to disagree on the legal exposure attached to big boy letters, the issue may soon be resolved in court. In the aforementioned New York Times article, Anderson describes "a lawsuit set to go to trial next month" in which "a Texas hedge fund contends that it was on the losing end of such a letter in 2001, when Salomon Smith Barney, now Smith Barney, sold more than $20 million worth of World Access bonds to the Jefferies Group, the investment bank, using a big-boy letter."

Not being an attorney (and so relying on the legal expertise of others), institutional investors like pension funds may want to add big-boy letters to the laundry list of "must know" items when evaluating trading practice risk as part of their selection of outside professionals. It is no stretch to see that challenges to statutory requirements all around (SOX, 13F, FASB, to name a few) could impede the flow of information to investors. (A discussion of regulation and information economics is outside the scope of this post.) This in turn could make it more difficult for pension fiduciaries to carry out their duties as informed decision-makers. Of course, mandatory rules can be replaced with industry self-regulation (something most free market economists advocate, including myself). Money managers who volunteer details about their trading practices to existing and prospective pension fund clients should win brownie points for candor.

Until then, one wonders - Are we opening the window to let in more sunshine or introducing darkness?
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