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New York City Speaker Seeks SEC Probe Of Oppenheimer Funds On Puerto Rico
Oppenheimer Rochester funds strike me as high risk funds. What the article describes is the same liquidity trap that ensnared Third Ave Value Focused Credit TFCVX - too much stuff they can't unload (without severely aggravating their problem), and large redemptions.
“In spite of this crisis and overwhelming evidence that the debt is unsustainable Oppenheimer has voiced its staunch opposition in Congress, in the courts and in the media to providing Puerto Rico with access to Chapter 9 of the bankruptcy code,” Mark-Viverito wrote. “Its aggressive opposition to meaningful debt relief will further exacerbate the humanitarian crisis.”
Where does one draw the line between defending the interests of a fund's shareholders and promoting the social welfare? If laws were broken, Oppenheimer should be held accountable. But if all they did was exacerbate Puerto Rico's problems by facilitating clients who saw an opportunity to make money on the bonds and than subsequently defending their clients' interests (thru lobbying and other legal measures), than where's the beef? I want my fudiciaries looking out for my interests.
Oppenheimer is a company that likes to roll the dice a little with some of their funds. Much different corporate philosophy, I suspect, than T. Rowe Price who prefers to err on the conservative side.
From the WSJ (12/8/2008), writing about the Reserve Primary MMF:
in 2006, with the Primary Fund underperforming rivals, it went on a commercial-paper buying spree. It acquired so much of this higher-yielding but riskier asset that by September 2008, the fund's yield was tops in its class. But $785 million of that paper was Lehman's.
What's the difference between that and Rochester funds picking up junk or near junk to look better?
"I don't think there was reaching for yield going on," says Daniel Loughran, head of the Oppenheimer Rochester muni funds, whose Oppenheimer Rochester Virginia Municipal tops Morningstar's list for Puerto Rico holdings, at 33%. ...
Morningstar's Mr. Jacobson cautions investors, however. In a competitive environment, "there is always something you can do to goose the income of a bond fund and pick up those extra sales," he says. "The temptation is always there."
Rochester funds have done this for years (perhaps forever?).
Is that looking out for your interest or facilitating placing a bet? Both are legal.
I'm not sure if "shareholders" (above) is a reference to the fund shareholders or the bond holders (who own bonds, not shares). If the former, it seems to me that they invested knowing they were getting higher than market yield and with that comes risk. More risk than with Reserve Fund Primary MMF.
If the latter, what does "make whole" mean? For vulture investors who purchased the bonds for pennies on the dollar because the bonds priced in risk, does it mean simply recognizing that risk and getting back, perhaps, the same pennies on the dollar? Or does it mean getting $1 back at maturity on a bond for which they paid perhaps 40c?
I'm no Trump, but I do hold a couple of PR bonds and I'm happy to take a haircut along with him to reduce my chances of taking bigger losses later. That might mean accepting lower interest payments (but still expecting principal returned at maturity), or extending the maturity of the bond, or something more substantial. Note that even if I get interest when due and just have to wait longer for the bond to mature does not make me whole.
Love your posts msf - and the subtle humor. I'm a long-ago reformed gambler, having found it highly addictive and usually self-defeating.
But for the life of me, I fail to discern much of a difference between gambling and investing - unless you're a true "dyed-in-the-wool" buy-and-hold type (rare on this board). Both disciplines involve taking calculated risks. However, I think that with investing you're playing on a more level playing field, better regulated, and occupied by a slightly more ethical crowd. And the House's "take" tends to be much lower.
Thank hank. Though I'm a buy and hold type, I agree with you that there's a certain gambling aspect to investing. Which is why as a youngster I would look at people in the market and think "you're putting money where?"
A difference between gambling and investing should be that the former is a zero sum game (or less if one considers the vigorish), while the latter should not be. In fact, if "played" well, investing should maximize the gains for everyone, by putting money to use where it is most productive.
Regrettably, I'm not as sure that the investment crowd is the more ethical one. (I just got back from a talk by an Occupy Wall Street participant, so perhaps I'm a little more jaded than usual.)
msf, I truly have lost the distinction between "luck" and "life". You know, a man starts on the way home with more than one path to choose and cannot know that if he choses the wrong one a hungry Spinosaurus lies in wait.
Comments
http://quote.morningstar.com/TickerLookupResult.html?ticker=OppenHeimer+Rochester&pageno=0&TLC=M
Where does one draw the line between defending the interests of a fund's shareholders and promoting the social welfare? If laws were broken, Oppenheimer should be held accountable. But if all they did was exacerbate Puerto Rico's problems by facilitating clients who saw an opportunity to make money on the bonds and than subsequently defending their clients' interests (thru lobbying and other legal measures), than where's the beef? I want my fudiciaries looking out for my interests.
Oppenheimer is a company that likes to roll the dice a little with some of their funds. Much different corporate philosophy, I suspect, than T. Rowe Price who prefers to err on the conservative side.
http://www.bloomberg.com/news/articles/2016-05-05/donald-trump-says-puerto-rico-bondholders-should-take-a-hit
From WSJ (12/4/2013): Rochester funds have done this for years (perhaps forever?).
Is that looking out for your interest or facilitating placing a bet? Both are legal.
I'm not sure if "shareholders" (above) is a reference to the fund shareholders or the bond holders (who own bonds, not shares). If the former, it seems to me that they invested knowing they were getting higher than market yield and with that comes risk. More risk than with Reserve Fund Primary MMF.
If the latter, what does "make whole" mean? For vulture investors who purchased the bonds for pennies on the dollar because the bonds priced in risk, does it mean simply recognizing that risk and getting back, perhaps, the same pennies on the dollar? Or does it mean getting $1 back at maturity on a bond for which they paid perhaps 40c?
I'm no Trump, but I do hold a couple of PR bonds and I'm happy to take a haircut along with him to reduce my chances of taking bigger losses later. That might mean accepting lower interest payments (but still expecting principal returned at maturity), or extending the maturity of the bond, or something more substantial. Note that even if I get interest when due and just have to wait longer for the bond to mature does not make me whole.
But for the life of me, I fail to discern much of a difference between gambling and investing - unless you're a true "dyed-in-the-wool" buy-and-hold type (rare on this board). Both disciplines involve taking calculated risks. However, I think that with investing you're playing on a more level playing field, better regulated, and occupied by a slightly more ethical crowd. And the House's "take" tends to be much lower.
A difference between gambling and investing should be that the former is a zero sum game (or less if one considers the vigorish), while the latter should not be. In fact, if "played" well, investing should maximize the gains for everyone, by putting money to use where it is most productive.
Regrettably, I'm not as sure that the investment crowd is the more ethical one. (I just got back from a talk by an Occupy Wall Street participant, so perhaps I'm a little more jaded than usual.)
Regards,
Ted