Alice hears the evidence
`They told me you had been to her,
And mentioned me to him:
She gave me a good character,
But said I could not swim.
I gave her one, they gave him two,
You gave us three or more;
They all returned from him to you,
Though they were mine before.’
These verses from Lewis Carroll’s Alice in Wonderland are usually thought to be meaningless (Alice didn’t believe there was an atom of meaning in it), but they might not be a bad representation of fund management’s stock lending programmes.
I'm with Mr Stupid
Is there a difference between a transactional business culture, like that of investment banks, and a fiduciary culture, such as asset managers are supposed to have?
According to one hedge fund manager of my acquaintance, this is a key distinction when selling products, because the fiduciary responsibility means you’re going to have to put up with your clients for the life of the investment.
“The very last thing you want is an investor who doesn’t understand what they’re getting. They’re the ones who are on the phone to you every week with all sorts of stupid questions.” Since this manager is deeply intolerant of stupidity, he has been careful to ensure his products were only ever sold to people who really understood them.
This does not seem to have been a guiding light for many investment managers, however. Are they more tolerant of stupidity or have they simply failed to understand the implications of their fiduciary responsibility?