Contest no manager could ever wish to win

FS Adam Lewis 160 byline

The funds industry does love a good awards ceremony and luckily for them there are lots of them every year. However in this week’s Scam, the chairman has alerted me to a new competition which all fund management would rather not win; the most dangerous financial product in Europe.

Unlike other award nights where managers and groups take home nice glass trophies or gold bars for their hard work, the prize awaiting the winner of Europe’s most dangerous financial product is being brought to the awareness of the supervisory authorities and the possibility of the product being banned.

As a way of some background the ‘competition’ has been launched by the European Union, masterminded by Sven Giegold, a German member of the European parliament. It has called on the input of EU constituents to submit their proposals for the most dangerous funds and then with the help of an “expert jury” the most dangerous financial product will be determined and brought to the attention of the supervisory authorities.

“We then expect them to scrutinize the product and limit its application or ban it totally from the markets if necessary,” reads the mission statement on its website.

So just who can vote? The statement on the website says the competition is happy to receive contributions from citizens, organisations, corporations, consumer protectors and financial markets. They have until 15 February to get their proposals in, after which a jury which contains among others a German newspaper economic corespondent, a financial markets expert at Weed (World Economy, Ecology & Development), and a professor of international economics at HTW Berlin, will analyse all the proposals. The top three will then be put to an online poll and the ‘winner; will be declared on March 3. That should make for an interesting photoshoot.

So who is up for the gong so far? The website shows you which products have already been proposed and these include shares of listed investment companies, credit default swaps, collaterised debt obligations, water funds and payday loans.

All jokes aside, the danger of opening up such a competition, is that it could lead to disgruntled investors making inappropriate proposals simply for stockmarket losses. However the website does make it clear that dangerous products are not necessarily the most risky ones.

It says: “Often only risky investment decisions can help young companies or technologies to get started. But it is important that risks have to be transparent to the investor, are fairly compensated for and are not effectively shifted to third parties.

Personally, from the current list, I hope the ‘winner’ is payday loans. Not just because of the scandalous APR levels but also to rid the television of the dullard adverts.