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Regulation

Pension Suit Over Canadian Bank’s Subprime Holdings Dismissed

The judge ruled that like many other financial institutions, the bank failed to forecast the meltdown that led to record losses.

(March 18, 2010) – A US federal judge dismissed a shareholder lawsuit filed by a pension fund in 2008 against the Canadian Imperial Bank of Commerce (CIBC) and four executives, including CEO Gerald McCaughey.

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Following the financial crisis, a number of banks have faced lawsuits relating to an alleged lack of disclosure to shareholders about losses. CIBC has already faced a variety of lawsuits in Canada and the US over how it revealed its subprime exposure to shareholders, the Canadian Press reported.

The Plumbers and Steamfitters Local 773 Pension Fund was seeking class-action status on behalf of investors who purchased CIBC shares in the U.S. between May 31, 2007, and May 29, 2008. The fund accused the bank of securities fraud for making at least 14 misrepresentations during that period, claiming the bank minimized the risk associated with owning mortgage-backed securities.

The Manhattan court Judge William Pauley ruled that even though the Toronto-based CIBC, Canada’s fifth-largest bank, possibly lost billions of dollars from its exposure to US subprime mortgage securities following the credit crisis, its actions were not necessarily fraudulent. Furthermore, according to Bloomberg, he ruled the investors’ allegations weren’t specific enough for the case to proceed, referencing the complaint’s lack of internal CIBC documents and confidential sources.

“CIBC, like so many other institutions, could not have been expected to anticipate the crisis with the accuracy [that the] plaintiff enjoys in hindsight,” said the judge in his decision to dismiss the suit, Canada’s Globe and Mail reported.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742
Home > News > Asset Allocation > Investors to Add Billions to Hedge Funds
Asset Allocation

Investors to Add Billions to Hedge Funds

Hedge fund investment is expected to reach up to $222 billion, marking the first time inflows are seen to exceed outward flows since 2007.

(March 17, 2010) – Within the next six months, investors may be pouring hundreds of billions into hedge funds, lifting the industry to $1.72 trillion this year, according to a survey by Deutsche Bank.

 

 

 

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The 2010 Alternative Investment Survey shows investors are expected to add $100 billion to $222 billion to hedge funds. The report follows the industry’s positive returns in 2009, when the average portfolio gained 20% after delivering their worst performance on record the previous year.

 

 

 

Hedge fund assets increased to $1.6 trillion at the end of 2009 up from $1.4 trillion in 2008 when nearly 1,500 funds had liquidated, according to Chicago-based Hedge Fund Research Inc. Although industry assets are still below the 2007 peak of $1.9 trillion “…investors predict continued strength in 2010,” said Barry Bausano, Deutche Bank’s co-head of global prime finance, in a release. “The industry is now predicted to grow further and return to previous highs.”

 

 

 

“The hedge fund industry weathered the global financial crisis and matured as a result,” said Jonathan Hitchon, Deutche Bank’s co-head of global prime finance. “Risk management remains a top consideration for investors when assessing a hedge fund manager, and investors are increasingly using consultants to perform specialist operational due diligence.”

 

 

 

According to the report, volatility arbitrage funds, commodity trading advisors and convertible arbitrage managers are expected to perform the worst. Cash also has a dismal outlook, with survey participants looking to decrease their cash levels by $3.09 billion over the next six months. Of the respondents, 29% reported having at least 10% of cash available to allocate to hedge funds.

 

 

 

Despite the positive news of a possible rebound and investment gains in 2009, investors remain cautious. They have not yet regained losses from the financial crisis, still ranking below thresholds at which they could collect performance fees, usually 20% of investment returns, the Wall Street Journal reported.

 

 

 

The survey by the German lender polled 606 investors who control $1.07 trillion in assets. Respondents included investors representing asset management companies, corporations, foundations and endowments, insurance companies, private banks and private and public pension plans, among others.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

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