February 24, 2012
PIMCO Makes a Push into Equities
Bond behemoth PIMCO is making a push into the equities space with the hire of Geoffrey Johnson as an executive vice president and global equity portfolio manager. He will begin with the firm in April and will be based in the Newport Beach office.
At PIMCO, Johnson will establish and lead a global long/short active equity strategy. This will be PIMCO's fourth active equity product since it established its equity investment platform in April 2010 following the launch of its global deep value strategy, Pathfinder, in April 2010, global emerging markets strategy in April 2011, and global dividend strategy in January 2012.
"Geoffrey is an extremely talented equity investor with an established track record of success in the global long/short equity space," said Neel Kashkari, managing director and head of global equities for PIMCO. "His addition to our team is another important step in PIMCO's build-out of our global active equity investing platform."
Prior to joining PIMCO, Johnson served as managing partner of Catamount Capital Management, a boutique investment management firm where he also served as portfolio manager. Catamount manages several investment strategies, including a long/short equity hedge fund which was established in 2003.
Credit Suisse Suspends High Volatility ETN
Due to internal company limits on the number of exchange traded notes it can have circulating in securities market, Credit Suisse said it has temporarily suspended issuance of the high volatility product VelocityShares Daily 2x VIX Short-Term Exchange Traded Notes.
According to one expert on exchange-traded funds, Morningstar analyst Timothy Strauts, the decision is tied to Credit Suisse's concerns over hedging tied to such an extremely volatile, highly leveraged product.
"This is, on a daily basis, one of the most volatile products available in the market today-with sometimes 10-20% movement in a single day," he said. "You make a mistake in hedging all of this risk things can go very bad very quickly."
In the case of the VelocityShares Daily 2x VIX Short-Term ETNs, that product is designed to produce twice the daily volatility of the S&P 500 VIX Short-Term Futures Index ER, minus an investor fee.
In return, though, the funds are also extremely risky. ETNs don't reflect ownership of any debt instruments. Such notes are "designed to track the total return of an underlying market index or other benchmark, minus investor fees," according to NYSE Euronext.
SEC Widens Probe of ETFs
U.S. securities regulators have widened their inquiry into the trillion-dollar market for exchange-traded funds, according to a person familiar with the matter.
Prompted by a delay in a big trade at a popular ETF, the U.S. Securities and Exchange Commission is taking a closer look at a possible connection between high-frequency traders and hedge funds jumping in and out of ETFs, and instances where ETF trades fail to settle on time, this person said.
The SEC's inquiry is part of a wider probe that began last year and focused on complex ETFs that allow investors to magnify returns or bet against stock indexes.
U.S. and UK regulators are concerned that so-called settlement fails could contribute to volatility and systemic risk in financial markets. The main focus is on illiquid ETFs, but regulators are now also examining popular ETFs and failed trades, according to the person.