Money managers may start to move their business away from Bear Stearns, according to a low-profile manager of a large investment fund. He tells us that he is pulling away from doing business with Bear Stearns and that casual conversations with colleagues indicate that others may be making similar moves.
Bear Stearns has turned off some money managers with what sometimes appears to be a cavalier attitude towards lenders and other counter-parties. Today the Wall Street Journal reported that Barclay’s was suing Bear Stearns after two funds to which the British bank had lent money collapsed, leaving Barclays with holding the bag. Bear’s response—basically that Barclays should have known that it was risky to lend to the funds—has not endeared fund managers to Bear.
“They bragged about not having the firm’s money in the funds that had their name on it, and then told creditors to take a flying leap,” the fund manager said. “They’re a toxic counter-party. I don’t want them involved in any of my trades, in any way.”
Bear also owned a significant minority stake in ACA, the small bond insurer downgraded yesterday by Standard & Poor’s. Although Bear didn’t have a managerial role in ACA, it’s potential collapse does not sit well with some managers already wary of what the fund manager who spoke to DealBreaker called “the Bear curse.”
“To me, the report that their losses weren’t as bad as they might have been is just another stick in the eye to investors in their funds and counter-parties who lost money with these guys. I’m sure their shareholders are happy,” he said. “But let’s see how happy they are when Bear starts to lose business. People think reputational risk is hooey. Well, they’ll see.”
We didn’t contact Bear Stearns about this story because they still haven’t given us a reasonable explanation for why they blocked DealBreaker. So we’re counter-blocking them by not asking them to tell us they won’t comment on the story.
Update: More on the decline of Bear Stearn's prime brokerage business from the Financial Times. "Bear’s decline in prime brokerage began about three years ago and has been accelerated by its recent mortgage-related troubles, including the collapse of two hedge funds run by the bank’s asset management division," write Ben White and Deborah Brewster. "The troubles have raised questions about its financial stability."
Posted by topfloor1NYP, Dec 20, 2007 2:27PM
let's just all reminisce our way back to the LTCM blow-up. My, this sounds awfully familiar...