A former JPMorgan
Chase & Co. employee is suing the firm on behalf of retirement plan
participants who lost money after the bank reported a $2 billion trading loss.
Gregory
Scrydloff accused JPMorgan Chase of making misstatements about its financial
health that allowed the company’s stock to trade at inflated prices between
April 13, when the company reported earnings, and May 10, when Chief Executive Jamie
Dimon disclosed the trading loss, Bloomberg News Service reported.
The trading
losses came on synthetic credit products, which are derivatives tied to credit
performance. In disclosing the $2 billion loss on transactions he said were
intended to manage risk, Dimon cited “egregious” failures by the
bank’s chief investment office.
An Arizona
trust filed a securities-fraud lawsuit last week seeking to represent all
investors who lost money on the stock as a result of alleged misstatements by
the bank about its losses, according to Bloomberg. In another case, an
individual investor asked for damages on behalf of the company from Dimon, the
bank’s board and other executives.
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Once institutions integrate ETFs into their standard manager
transitions or cash equitization processes, they quickly use the funds for
additional things such as liquidity management, according to a recent study by
Greenwich Associates. (See “Institutional
Investors Find New Uses for ETFs.”)
Seventy-eight percent of asset managers and 44% of pensions,
foundations and endowments use ETFs for cash equitization. Sixty-one percent of
asset managers and 55% of institutional funds use ETFs for manager transitions.
Daniel Gamba, head of Americas iShares Institutional
Business at BlackRock, said during a media briefing that the “stigma” of ETFs
being a passive instrument is diminishing.
Although institutions generally use ETFs to secure passive
exposures, the study found that significant numbers of institutions are using
the products to obtain tactical active exposures in a variety of asset classes.
More than one in five asset managers who use ETFs report employing them for
active exposures in domestic equities and commodities, and about 17% said they
use them for active exposures in international equities.
“This is no longer an active versus passive debate,” said
Loc Vukhac, head of the iShares Asset Management and Hedge Fund Group.
Thirty-one percent of institutional funds and one-third of
asset managers are now using ETFs as part of an ETF overlay to add liquidity to
a portfolio and/or reduce implementation and trading costs, compared with one
in 10 among both groups in 2011.
“The marked increase in the use of ETFs for liquidity
management is a significant development, reflecting sharper focus by
institutions to assert control over their operational abilities during periods
of irregular market conditions,” said Liz Tennican, head of U.S. Institutional
Sales for iShares.
(Cont...)
As institutional investors use ETFs
more strategically, they also apply the funds to portfolio completion. This
year, 28% of asset managers and 42% of institutional investors use ETFs for
portfolio completion. Last year, approximately one in five institutional
investors used them that way.
The study also found that the
average institutional holding period for ETF investments expanded. In 2012,
about half of institutional funds using ETFs reported average holding periods
of one year or more, with 36% reporting average ETF holding periods of more
than two years. Last year, only 36% of institutional funds reported average ETF
holding periods of a year or longer.
About 14% of U.S. institutions
currently use ETFs in their portfolios, according to Greenwich’s 2011 U.S.
Investment Management Study. Among current ETF users, 40% of institutional
funds and one-third of investment managers expect to increase allocations to
ETFs in the next 12 months, while 22% of institutional funds and 14% of asset
managers plan to trim ETF allocations.
“While the share of institutions
using ETFs was stable from 2011 to 2012, the results of the more recent ETF
study suggest that institutional allocations to ETFs will increase to at least
some extent in the coming year as investors find new ways of employing them in
their portfolios,” said Andrew McCollum, Greenwich Associates consultant.