Famed investor Platt wouldn't touch this asset class 'with a barge pole'

Famed investor Platt wouldn't touch this asset class 'with a barge pole'
Hedgie says European banks' assets a disaster; Greek fate awaits all countries on the continent
JAN 25, 2012
Michael Platt, the founder of the $30 billion hedge fund BlueCrest Capital Management LLP, said most of the banks in Europe are insolvent and the situation will worsen in 2012 as the region's debt crisis accelerates. “I do not take any exposure to banks at all if I can avoid it,” Platt, 43, said today in an interview on Bloomberg Television's “Inside Track With Erik Schatzker.” If European lenders had to mark their books to markets every day in the same way hedge funds do, most would be proven “insolvent,” he said. BlueCrest is pouring money into U.S. Treasuries and short- term German debt because of concerns about market volatility and counterparty risk, Platt said. BlueCrest Capital International, the fund he personally manages in Geneva, has risen about 5.6 percent in 2011, posting gains when hedge funds broadly are on pace to have their second-worst year ever. The Bloomberg Europe Banks and Financial Services Index (BEBANKS) has slumped 35 percent this year on concern over lenders' holdings of government debt. France's BNP Paribas SA, Royal Bank of Scotland Group Plc and Deutsche Bank AG have been paring sovereign bonds and yields on Italian, Spanish and Portuguese debt have risen to euro-era highs. RELATED ITEM Most livable cities in the world? Eight are in Europe » Platt said he's disappointed in the measures that came out of last week's meeting of European leaders, saying they were too focused on budget cuts. Austerity will ultimately lead to slower growth in Europe, making the region's debt woes even worse, he said. A solution will come when the European Central Bank pumps significant amounts of money into economies, something it lacks a mandate to do, Platt said. The situation in Europe is “completely unstable” because countries have negative economic growth at the same time they are paying higher yields to service debt, Platt said. The region is heading into a recession that “can turn all the countries of Europe, given enough time, into Greece,” he said. The debt crisis began two years ago in Greece and has spread to Ireland, Portugal, Italy and Spain. At last week's meeting in Brussels, European leaders proposed their fifth attempt at a solution since May 2010, agreeing on a closer fiscal union and a willingness to add 200 billion euros ($260 billion) to International Monetary Fund coffers. Hedge Funds Decline While hedge funds have had bearish views on Europe, they've struggled to make money on the crisis. Global market volatility has prompted hedge funds to decline 4.4 percent on average this year through November, according to Chicago-based Hedge Fund Research. The industry lost a record 19 percent in 2008. Hedge funds have struggled because there hasn't been an obvious trend and there have been periods of bullishness that have confused traders, Platt said. “The process has been unfolding over two years,” he said. “It has been extremely gradual and there's been a lot of optimism that a solution will be found.” Platt's BlueCrest International fund hasn't had a down year since he started the company in 2000 after leaving a proprietary trading desk at New York-based JPMorgan Chase & Co. (JPM) The fund, which has produced an average annual return of about 13.8 percent, mainly bets on movements for currencies and interest rates. The firm's BlueTrend Fund, which uses computers to try to spot profitable trades in futures contracts tied to currencies and commodities, is down about 2.7 percent this year. BlueCrest has avoided buying assets put up for sale by banks that are trying to deleverage because of concerns about liquidity, Platt said. The financial meltdown of 2008 showed how quickly holdings can become hard to sell at the same time hedge fund investors are forcing sales by trying to pull their money out of the industry, he said. “I would not touch them with a barge pole,” he said. “The major opportunities will come post-blowout.” --Bloomberg News

Latest News

Ex-Edward Jones advisor gets three-year prison sentence for stealing from widow
Ex-Edward Jones advisor gets three-year prison sentence for stealing from widow

John S. Winslow, 57, was indicted just over a year ago for his scheme to steal from an elderly client.

Vestmark, Hamachi push AI further for advisor portfolio intelligence
Vestmark, Hamachi push AI further for advisor portfolio intelligence

Hamachi's new model portfolio partnership and an industry-first solution from Vestmark join the growing wave of AI tools for wealth managers.

Advisor moves: Cetera's enterprise channel draws experienced Osaic duo in California
Advisor moves: Cetera's enterprise channel draws experienced Osaic duo in California

Meanwhile, LPL attracted a five-advisor team managing $380 million in Kansas, while a veteran with stripes from Morgan Stanley, UBS, and Fidelity has joined Prime Capital Financial.

Dynasty CEO teases 'Virtual Shirl' as RIA execs debate AI's workforce impact
Dynasty CEO teases 'Virtual Shirl' as RIA execs debate AI's workforce impact

At Goldman Sachs’ RIA conference, Dynasty’s Shirl Penney said an AI clone trained on his emails and speeches could be the first of “hundreds of digital employees.”

Captrust adds $1.25B Pennsylvania firm in latest push into private wealth
Captrust adds $1.25B Pennsylvania firm in latest push into private wealth

The top-ranked RIA by total AUM continues to scale its wealth management arm, bringing its Pennsylvania presence to five offices.

SPONSORED Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management

SPONSORED Durability over scale: What actually defines a great advisory firm

Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline