Europe Failing Over The Euro, Says Fink05.25.2012
Lord Stanley Fink, widely known as the ‘godfather’ of the UK hedge fund industry, has questioned whether European governments are doing enough to solve the escalating eurozone crisis.
Lord Fink, who is chief executive of International Standard Asset Management (ISAM), a modestly sized commodity trading adviser based in London, says ongoing European sovereign debt troubles, with Greece at the epicenter, are being exacerbated by weak political leadership and the single currency lacking a true central bank to impose order on the market.
“I’m not sure how you can have a system where you have all different economies trying their own versions of fiscal management, some with more austerity than others, with no fiscal transfers and no general guarantees but somehow keep all the currencies in one lock step but with some people’s euros being borrowed at 6%-7% and other people borrowing for free—it’s not a realistic position,” Lord Fink told Markets Media.
“Realistically, what we will end up with is some members of the eurozone splitting off or we’ll end up with a much greater degree of harmony involving either fiscal transfers or joint guarantees of euro bonds.”
Fink says that solving the Greece conundrum is the first major problem that needs tackling, as debt worries over other much larger southern European states such as Italy and Spain come more into focus.
“The inability of European governments to sort out the Greek problem is causing people to get really rattled about the eurozone and is stifling growth in the eurozone,” said Lord Fink.
“If you look at the GDP of Greece, it’s absolutely trivial to the size of Europe or even of Germany. And if you view Europe like a bloc and compare it to the US, the overall financial position of the eurozone is probably as healthy in terms of trade balances as the US dollar is. But the problem with Greece is it is a working example of one of the structural weaknesses in the eurozone mechanism.”
Lord Fink, treasurer of the UK Conservative Party and one of the country’s most generous supporters of good causes, thinks the eurozone crisis will not affect ISAM, which turns over a profit, despite CTAs, in general, finding market conditions tricky over the past few years. CTAs are professional investment managers who seek to profit from movements in the global financial, commodity and currency markets by investing in futures and options contracts.
“I’m not sure it will really have a huge impact on our industry because we don’t have to care which way markets move we just have to care that they do move,” said Lord Fink. “So, the one thing you can be sure about the euro is that it is going to move. In a way for us it would be nice if it were a one-way move and a trend, not if it were a gyration and a fix then a brief rally and then a worry. For us, it’s the way that it moves in response to the crisis which is important. But for us, it’s one market out of 50 or 60 we trade so it’s not fundamental.”
The title of ‘godfather’ to the UK hedge fund industry was acquired from his time at Man Group. Lord Fink helped turn Man, the agricultural trading business, into a FTSE 100 company and the world’s largest hedge fund house before leaving his post as chief executive in 2007. In 2008, he came out of retirement to head up ISAM.
Net sales registered net outflows of €3bn, compared to €42bn in March 2022.
European financial markets would benefit from a well-functioning fixed income consolidated tape.
European government bond trading volumes increased 17.5% year-on-year in the first quarter.
Net sales turned negative for the first time since March 2020.
The EU needs to implement a consolidated tape across Europe to compete as a global player.