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Alternative Market Briefing

Culross` FoHFs manager Blanshard forecasts `very severe` GDP slowdown (1)

Thursday, November 27, 2008

Benedicte Gravrand, Opalesque London: Nigel Blanshard, portfolio manager at London-based fund of hedge funds Culross Global Management, believes the credit crunch’s origins can be found 26 years ago (in the Reagan-Thatcher era) with the ascent of home ownership, financial deregulation and free market.

All this went out of control, partly due to greed, misplaced confidence in risk control, governments’ overconfidence and lack of management. “There were no systemic risks put into the system,” he added.

Securities exchanges There was a very rapid growth in CDOs and an explosion of CDSs from nothing in 2001 to a multi-trillion market by end-2007. And regulators should start caring “when an activity becomes big enough for it to be called a market place,” he argues. Once this activity is identified, it should come on to an exchange, and issue standardisation of contracts for transparency and liquidity.

In Europe, exchanges were monopolies until Mifid deregulated and allowed the creation of new exchanges. “And so we go from famine to feast,” he noted. There are indeed numerous talks of creating exchanges for CDS, debt derivatives.

Government intervention “back with a vengeance” Governments should control competition so that there is enough but not so much that the market becomes fractioned.

“We can look forward to a market that is very fractioned with a Da......................

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