In a highly technical address by Guy Usher, the head of derivatives and structured finance group at Field Fisher Waterhouse, in the opening session of the Investment Summit, one particular point should make fund management groups stand up and take notice.
Discussing the impact of the credit crisis on counterparty risk, Usher said many fund managers are “off the pace” when it comes to assessing such risk. Fund groups could face a wave of claims from disgruntled investors if there is a large default on such a counterparty.
He said a big problem facing the Investment Management Association (IMA) is that many groups did not have adequate terms of business documents regarding their bond trades.
Usher’s solution was for groups to address acceptable minimum standards and best practice. It is a topic which may well be one to follow.