I was at a briefing on Friday – where Insolvency Practitioners were talking about their experiences on the Lehman Administration.
Over the last 9 years I have been warning investment professionals not to ignore the terms which they have signed up to in contracts and pointed out to them the dangers of what they were agreeing to. The response has always been that it was not something to worry about because it would never happen. Lehman has brought home to everyone that not only do these things happen but they have specifically been contemplated for by the lawyers drafting these terms. Accepting these terms has in some instances laid managers open to accusations of dereliction of duty to their investors.
Some in the industry seem to have forgotten that its creation and development was to endeavour towards capital preservation far more than performance. That requires attention to detail and careful consideration of the contractual terms being signed up to. A principle which seems to have been lost along the way by some because of the powerful temptations that performance brought with it. It is only by refocussing on capital preservation with attention being given to the accompanying paperwork that alternatives managers can begin to rebuild the shaken faith of their investors.
©Jaitly LLP