[This entry originally appeared on Clare Lynch’s blog, goodcopybadcopy]
I’m reading a book about finance at the moment and in it I came across a hedge fund called:
The High-Grade Structured Credit Strategies Enhanced Leverage Fund
Quite a mouthful, eh? And quite odd, you’d think, for the fast, efficient world of high finance. Isn’t it the case that the figures we’re talking about here are so large that anything you can do to make your organisation more efficient will shave basis points off your margins and save you billions?
Just imagine how much those extra bits and bytes and pixels and things must be adding to their corp comms budget. Not to mention all that expensive executive talent being expended on longer-than-necessary conversations, like:
Good morning, you’re through to the High-Grade Structured Credit Strategies Enhanced Leverage Fund, how can I help you today? Hello? Are you there?
Or how about:
Hi there, this is Bill over at the High-Grade Structured Credit Strategies Enhanced Leverage Fund. We’re running low on paperclips over here – wondering if you can fix me up with a new batch? Yes, the large ones. We don’t do company memos shorter than 110 pages over here at the High-Grade Structured Credit Strategies Enhanced Leverage Fund.
Hello, tweeps! Just getting started on this Twitter thingy. DM me if you fancy investing in the High-Grade Structured Credit Strategies Enha
Even abbreviated (H-GSCSELF, one assumes) the name reads like a randomly generated, hard-to-hack password.
So why, if you were going to launch a hedge fund, would you not call it something simple and human and, well, short?
I don’t know, like Roger, perhaps?
Hmm. Let’s take a closer look at the name, shall we.
This high-grade stuff they invest in sounds good, doesn’t it? Strong. Pure. Uncut. A little bit glamorous and daring. I’m picturing the financial equivalent of the qualiddy produc’ that Proposition Joe can get his hands on in The Wire.
Well, really, you wouldn’t want your credit unstructured, would you? No, no, no. “The High-Grade Amorphous Credit Strategies Enhanced Leverage Fund” just doesn’t have the right ring to it.
We wouldn’t want you to think we’d give your hard-earned dosh to the first Bernie Madoff that came along. Nope, we’ve got a strategy for doing that – in fact, we’ve got several strategies. All our preferred pyramid-scheme-touting suppliers of financial snake oil are fully vetted by our Compliance team, you know. Due diligence an’ all.
Not improved, you realise. That would imply that Version 1.0, in which we offered unenhanced leverage, wasn’t fit for purpose. Our previous offering was a bespoke best-practice, integrated financial solution. But if you like your investments fortified with extra financial vitamins, you won’t be disappointed when you choose Enhanced Leverage.
So at this point, you’re probably thinking that you’d quite like to invest in the High-Grade Structured Credit Strategies Enhanced Leverage Fund.
Sod it, let’s just call it Bob before I lose any more of you.
Well, dear reader, I hate to disappoint you. But Bob is no more. Nope. He’s disappeared. Kaput. Gone the way of Monty Python parrots.
So who was Bob? And why is he no longer among us?
Well, Bob was a hedge fund with close links to Bear Stearns. The hedge fund, in fact, that collapsed last year, pulling down – in its high-grade, structured, strategically enhanced and leveraged wake – its hapless banking benefactor. And if it weren’t for you and me, the equally hapless tax payer, it would have taken the entire financial system with it too.
So what had the people who worked at Bob been dabbling in that brought it to this dismal fate?
Well, it seems that poor old Bob was merely a conduit for investing in long, complex, opaque chains of investments that bore little connection to the real world and that nobody really understood.
Investments with names made up of equally long, complex, opaque chains of words that bore little connection to the real world and that nobody really understood. Names like:
Structured investment vehicles (SIVs)
Asset-backed commercial paper (ABCP)
Collateralised debt obligations (CDOs)
Asset-backed securities (ABSs)
Collateralised debt obligations of asset-backed securities (CDOs of ABSs)
They’re what Warren Buffet calls financial WMDs.
So you see, Bob – simple, uncomplicated, down-to-earth Bob, with his easy-going manner and his feet firmly on the ground – was never a role model for the High-Grade Structured Credit Strategies Enhanced Leverage Fund.
No, a name like “Bob” just wouldn’t have done at all.