82,891
edits
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
Line 1: | Line 1: | ||
{{a|contract| | {{a|contract| | ||
[[File:Fidgety phillip.jpg|450px|thumb|center|What happens if you do not concentrate on your debt extinction language]] | [[File:Fidgety phillip.jpg|450px|thumb|center|What happens if you do not concentrate on your debt extinction language]] | ||
}}Of a {{tag|contract}}, that | }}Of a {{tag|contract}}, that a debtor’s obligations under it are limited to a defined pool of assets. You see this a lot in [[repackaging]]s, [[securitisation]]s and other structured transactions involving [[espievie]]s. [[Security]] and [[limited recourse]] are fundamental structural aspects of contracts with [[Special purpose vehicle]]s and [[investment fund]]s. | ||
===The basic idea=== | ===The basic idea=== | ||
Line 31: | Line 31: | ||
====The manager is an agent==== | ====The manager is an agent==== | ||
So firstly, the [[investment manager]] is an [[agent]]. An [[agent]] isn’t liable ''at all'' for ''any'' of its [[principal]] | So firstly, the [[investment manager]] is an [[agent]]. An [[agent]] isn’t liable ''at all'' for ''any'' of its [[principal]]’s obligations. It is a mere [[intermediary]]: the [[JC]] have waxed long and hard enough about that elsewhere; suffice to say the concept of [[agency]] is one of those things we feel [[Legal concepts all bankers should know|''everyone'' in financial services should know]]; this is not one to drop-kick to your [[legal eagle]]s: it is fundamental to the workings of all finance. | ||
So why would an agent seek to limit its principal’s liability to the particular pool of assets that principal has allocated to that agent? Probably because the principal has said, I don’t trust you flash fund manager types, with your [[Sharpe ratio]]s and your [[intelligent beta]]. If I am not careful you could put on some [[Amaranth Advisors LLC|insanely cavalier spread play on the seasonal convergence of natural gas futures]] and blow up my whole fund. I don’t want you to do that. I am only prepared to risk the assets I give to you, and that is the end of it. | So why would an agent seek to limit its principal’s liability to the particular pool of assets that principal has allocated to that agent? Probably because the principal has said, I don’t trust you flash fund manager types, with your [[Sharpe ratio]]s and your [[intelligent beta]]. If I am not careful you could put on some [[Amaranth Advisors LLC|insanely cavalier spread play on the seasonal convergence of natural gas futures]] and blow up my whole fund. I don’t want you to do that. I am only prepared to risk the assets I give to you, and that is the end of it. |