Investec Guinness Flight Wireless mutual fund started to raise money last week, picking up $2 million from investors on the first day, said Jim Atkinson, managing director.
The Pasadena-based fund will invest in wireless technology, particularly if related to the expected burgeoning use of palm pilot-type devices.
Examples of what lies ahead? The day may come soon when you get off of an airplane, head for the car rental counter, and “your palm pilot will automatically tell the agency you are on your way, and your credit card information will be automatically downloaded,” said Atkinson, 42. “The car will be prepped and waiting when you get there.”
With $480 million under management, the Investec Guinness Flight mutual fund already runs one Internet index fund, the “Wired” mutual fund (in alliance with the tech magazine of that name), and several Asian-oriented funds.
With high hopes for the new Wireless fund, Atkinson wonders how investors would react if and when the tech boom ever fizzles or delivers only great returns, not eye-popping double- or triple-digit killings. In 1999, the Wired fund was up 68 percent, and the Internet index fund, started on July 30, was up 62 percent by year end.
In the money management industry of the past several years, “every year we tell (clients) it can’t last, and then every year we beat the year before,” said Atkinson. “It can’t last forever.”
Internet bonds
Murray Finebaum’s ambitious plan to change, or at least significantly supplement, the ways that bonds are traded appears to be chug-a-lugging forward. “Everything is moving ahead. We just announced a strategic alliance with Credit Suisse First Boston,” said Finebaum, who last year started up Santa Monica-based Trading Edge Inc.
CSFB, a New York-based brokerage, will take an equity stake in the Trading Edge; terms of the deal were not disclosed.
The Trading Edge operates Bond Link, essentially an online dating service for junk bond buyers and sellers. Just like online daters, bond traders in the $1 trillion high-yield market can list their bids and wares anonymously, and see who bites (also anonymously).
When both sides feel it is right, identities are disclosed and the deal is consummated.
It’s a far cry from the current bond trading system (which has persisted since the Civil War), in which bond owners trade through brokerages, whose expert traders keep tabs on who is buying and selling and, of course, put themselves between transactions, to take a cut. But the Internet seems designed to crush middlemen by allowing thousands of buyers and sellers to see each other’s bids and offerings at once.
Finebaum said he is closing in on a fourth round of fund-raising, which will be “much bigger” than an earlier round of $23 million, but south of $100 million.
The volume of junk bonds traded through Bond Link continues to rise, said Finebaum.
Barrington hires
Fed chief Alan Greenspan spooking the market? Deals getting stalled?
Don’t tell it to Jim Freedman, founder of Barrington Associates in West Los Angeles, perhaps the most active middle-market M & A; shop in California.
The press of business upon Freedman has been so great that he has taken to hiring in platoons. Barrington has signed up eight new associates in this year’s round of hiring from such schools as Stanford, Berkeley and Yale. Freedman, who started Barrington 18 years ago, now has 30 investment bankers on board, and is targeting 40 by year’s end. Barrington’s stock in trade is helping companies buy, sell or merge, in deal sizes ranging from $20 million to $400 million. Typically, Barrington structures the deal, and seeks financing.
Freedman probably needs the eight new bodies and more now that the Internet is going through a shakeout, companies are merging.
“We are just about to close our first Internet deal,” said Freedman. “There looks to be more behind it.”
Bad news for local law firms, whose ranks are already depleted by dot-com hire-aways: Freedman is hunting for lawyers too and he can pay more. “Yes, I know first-year associates can make $140,000 a year. But a banker here can make substantially more than that, and get in on the deal business as well,” he said.
Barrington, which has offices in Irvine and San Francisco, will soon open up in San Diego.
Arbitration lawyer
There was a time when investors brought arbitration complaints against stockbrokers and brokerages when they lost money. Now, with the bull market raising expectations all around, they’re bringing complaints merely if they haven’t made enough money, says Michael Abbott, 27-year veteran at Jones Bell Abbott Fleming & Fitzgerald in downtown Los Angeles, whose career has been spent defending the securities industry.
“It used to be that complaints were that a broker put a client into stocks that were too risky,” said Abbott. “But now we face complaints from investors who say their brokers did not put them into Internet stocks.”
Such complaints are compelled by binding arbitration clauses into hearings run by the National Association of Securities Dealers, featuring three-member ruling panels.
With the boom in online trading, and clogged execution orders when volume surges, Abbott said he is also seeing a steep rise in complaints from investors who say their trades were wrongly stalled, inflicting losses. “Some investors don’t understand when volume gets very heavy, there may be several thousand people trying to sell the same stock,” he said. “You get in a queue.”
Does arbitration, won by the industry in the late 1980s, work? Abbott says, “I have no problems with it.” Due to recent rule changes, two out of the three NASD panel members must be “non-industry,” which means they cannot have ties to the brokerage business, said Abbott. That has reduced charges of industry bias. Additionally, in arbitration, there are no depositions, cases are largely heard in six to nine months, and there are no appeals all translating into lower legal bills for both plaintiffs and defendants, when compared to civil trials, said Abbott.
Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at [email protected].
