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    Usury Law: Not Too far From the Madden Crowd National and international markets have long been accustomed to the fact that various states in the United States have their own usury laws. Still, litigation in the 2d Circuit, arising out of New York, may have a substantial impact on credit markets and their derivatives.

    A recent decision by a three-judge panel of the 2nd Circuit Appeals Court, one that arose out of an application of New York State’s usury laws, may have important consequences for the securitization market. Accordingly, some of the big names of the Wall Street bar have entered the appellate picture representing “friends of the court” such as The Clearing House Association LLC and the Financial Services Roundtable. They want the same court to grant a rehearing, either by the panel or en banc. The contention of the amici is that the decision threatens “the long-standing and settled expectations of the credit markets” and threatens in the process “to cause significant harm to those markets, the banking industry, and the millions of families and businesses they serve.” The case is Madden v. Midland Funding LLC : To begin at the beginning: in 2005 a New York resident, Saliha Madden, opened a credit- card account with Bank of America. Bank of America later transferred this account to FIA Card Services, and by 2008, at ...

Featured Post


The Skorina Report: The Best, The Rest & Our Pick for Public Endowment CIO of Decade

Charles Skorina looks at the top public endowments and discusses performance with Erik Lundberg.

This month we are pleased to bring you our annual survey of endowment performance at the Public Ivys, including many of America’s biggest, most prestigious, and best-endowed public universities. We think the performance of these endowments ought to be of interest not only to the endowment and foundation community, but to the investment world at large.  They include some extremely talented people getting results which rival investment organizations anywhere. And, they are important clients for many for-profit money managers all over the ...


The Skorina Report: Another try at herding Gotham’s five-headed fund

Guest columnist Charles Skorina looks at the five-headed NYC pension system with its new leader, Scott Evans.

By Charles Skorina In July, Scott Evans reported for duty as Chief Investment Officer in New York City's Bureau of Asset Management, where he'll manage $160 billion in employee pension funds. Traditionally the city's CIO is replaced when the political wheel turns, which it did last fall. Retiring Mayor Michael Bloomberg was succeeded by William De Blasio; and Comptroller John Liu, the independently-elected custodian of the city's pension funds, was replaced by Scott Stringer. Mr. Stringer beat back a last-minute primary challenge from disgraced ...

Guest Posts


The Skorina Report: The Best, The Rest & Our Pick for Public Endowment CIO of Decade
Charles Skorina looks at the top public endowments and discusses performance with Erik Lundberg.

This month we are pleased to bring you our annual survey of endowment performance at the Public Ivys, including many of America’s biggest, most prestigious, and best-endowed public universities. We think the performance of these endowments ought to be of interest not only to the endowment and foundation community, but to the investment world at large.  They include some extremely talented people getting results which rival investment organizations anywhere. And, they are important clients for many for-profit money managers all over the ...


Intellectual Property

SCOTUS on Copyright Means a Win for Fences: Loss for the Noosphere
An idea for the hierarchical design of a platform's APIs, and a particular expression of that idea, walk into a bar. What's the punch line?

The end of the Supreme Court’s latest term made a lot of news. There were lots of politically contentious decisions: two biggies just on the death penalty; one on gerrymandering; one on a tug-of-war between Congress and the executive branch over whether the U.S. should recognize Jerusalem as part of Israel; the latest litigational assault on Obamacare, and … you may have heard about the gay marriage ruling somewhere. Amid all those bombs going off, even careful observers may have missed the final resolution of at least the first stage in ...

Virtual currencies

Bitcoin and Kin: The View from Europe
Bitcoin's price charts nowadays seem to have settled into an equilibrium between $240 and $220 per. But ESMA, and the authorities in Sweden, are both paying attention.

The European Securities and Markets Authority has issued a “call for evidence” on virtual currency and distributed ledger technology. For the uninitiated, that means they want to know what stakeholders think about bitcoins, other cryptocurrencies, and the use of block chains. Brief Value History Some of our readers may be wondering what has been happening to bitcoins of late. They were all the rage at the end of 2013 and the start of 2014. Has the whole industry gone radio silent? No. As a matter of value, there was o course a great ...

Legislation/Court rulings

Dead Hand Proxy Puts: A Case Study
The creation of a so-called Dead Hand Proxy Put in the Healthways matter was especially egregious because it took place immediately after the board had agreed, under considerable shareholder pressure, that it would de-stagger its elections. The appearance then was that after giving up one defensive moat, the incumbents with the help of lenders immediately created for themselves another.

There are a number of respects in which corporate law is moving, slowly but perceptibly, in the direction of shareholder sovereignty, against the various schemes by which incumbent boards have entrenched themselves. The consequences of this trend for the search for alpha are, as usual, unclear. In general, the trend may well be on the side of market efficiency, and efficiency is by definition bad for alpha. But the road is a bumpy one, and there will be a lot of exploitable inefficiencies along the way. Consider in this regard the ...

Performance, Analytics & Metrics

The Core Satellite Model: How to Cut Hedge Fund Fees in Half Part II
Andrew Beer continues his discussion on slashing hedge fund fees without burning yourself or your clients.

By Andrew Beer A recent article discussed a potential solution to excessive hedge fund fees, the Investor Aggregation Model, but highlighted near term obstacles, including industry structure and agency issues. This note discusses a more realistic alternative: a Core-Satellite Model that builds on the experience of the traditional asset management industry and recent developments in delivering hedge fund returns at low cost and with liquidity. Twenty years ago, an institutional investor might have allocated to a dozen different mutual funds in order to get exposure to US equities. Each fund would charge ...

Technology

PwC Looks Ahead to 2020: Offers a Roadmap for Alternative Investment Managers
PwC offers a glimpse of a 'day in the life' of a typical compliance analyst in 2015 and again in 2020. As these authors tell it, the day is filled with data, darkness, and drudgery at present, but it will be airy, alliterative, and analytical in another five years.

PricewaterhouseCoopers, in a new report, predicts that the next 5 years will be transformative for the alternative investment industry, given technological change, the growth in assets under management, the changing nature of the investor base behind those AuM numbers, and increasingly intense public attention. It has prepared a new report designed to help managers through these years. The report, “Alternative asset management 2020: Fast forward to center stage,” says among much else that data and the ...

Risk management

Rogue Trader Adoboli’s Return to Freedom: Down Memory Lane
Perhaps the fate of Kweku Adoboli, whose roguish trading at UBS' expense came to light in September 2011, can serve now in the summer of 2015 as a caution for some in the European elite contemplating the long stand-off between Syriza and the Troika.

One of the photos in the gallery of memorable “rogue traders” of recent years is that of a man who has just walked out of prison a free man, after serving roughly half of his seven-year sentence. I personally extend my congratulations to him as he rejoins the world outside: and I thank him for this excuse to travel Memory Lane looking for lessons. As of mid-June, Kweku Adoboli, the son of a Ghanaian diplomat, and ...

Smart Beta

European Investor Satisfaction with Smart Beta ETFs
Two authors at EDHEC remind us that 15% of the assets in any ETF or ETF-like products for European investors were in smart-beta indexed products as of August 2014, and that this amount is growing. They discuss the extent to which investors are pleased with their results.

A new study by the EDHEC-Risk Institute has found that those who have invested in smart beta exchange traded funds are on the whole, pleased with the results. That is a statement that demands a bit of definition. Although the familiar sort of ETF is a passive instrument designed to track the performance of a financial index, often through the use of a capitalization/weighting scheme, the “smart beta” ETFs adopt a variety of alternative approaches to ...

Regulatory

Fractional Reserve Banking: From First Premises
Banks are in the liquidity transformation business, and that is a critical role. But the ossification of the institutions that perform that role, by tradition, assumption, and concomitant regulation, is a threat to its success.

Three quite recent stories bring forcefully to mind certain basic facts about banks, fractional reserves, and lenders of last resort. I propose looking at these issues from first premises, and I may suggest in due course some conclusions that matter greatly to the world of non-bank financing, including the hedge funds in that world. Bulletin: Dennis Hastert’s Indictment The first of these recent stories, jogging my quest for first premises, is the indictment of Dennis Hastert. Hastert ...