Limited recourse: Difference between revisions

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 {{a|contract|
 [[File:Fidgety phillip.jpg|450px|thumb|center|What happens if you do not concentrate on your debt extinction language]]
-}}Of a {{tag|contract}}, that the [[obligor]]’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.
+}}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===
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 ====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]]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 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.