how do investment houses get money

morganist · Oct 19, 2009

how do investment houses get money. i know you are all going to say the obvious. but what i mean is who in their right mind would invest their money in one.

if you had a few hundred million or billion would you give it to an investment house. i wouldn't i would either buy property, precious metals, shares etc. knowing what goes on in these companies it is a wonder how they get any business.

i know you will say it is not just private investors but some are so why would they trust them.

dealmaker · Oct 19, 2009

Most top end investment houses ( hedge funds) will return in excess of 35% and some over 100%, try getting that out of your house or any other real-estate and note this return is just over one year and not ten or life time. Are you satisfied?

morganist · Oct 19, 2009

Quote from dealmaker:

Most top end investment houses ( hedge funds) will return in excess of 35% and some over 100%, try getting that out of your house or any other real-estate and note this return is just over one year and not ten or life time. Are you satisfied?

but would you invest hundreds of millions or billions. even if you would they are likely to fail. saying that the government will just prop them up.

Martinghoul · Oct 20, 2009

What do you define as 'investment houses'? Hedge funds are, effectively, depositary institutions... The now defunct IBs were public companies, so they had shareholders' equity. Commercial banks, simplistically, have the public's deposits.

morganist · Oct 20, 2009

Quote from Martinghoul:

What do you define as 'investment houses'? Hedge funds are, effectively, depositary institutions... The now defunct IBs were public companies, so they had shareholders' equity. Commercial banks, simplistically, have the public's deposits.

martinghoul i haven't seen you in ages.

in relation to your question i mean investment banks. i know they have equity but they also look after people's portfolio's. i guess what i am saying is why would people trust investment banks to look after their portfolio considering how dodgy they can be.

Martinghoul · Oct 20, 2009

Quote from morganist:

martinghoul i haven't seen you in ages.

in relation to your question i mean investment banks. i know they have equity but they also look after people's portfolio's. i guess what i am saying is why would people trust investment banks to look after their portfolio considering how dodgy they can be.

You mean their asset management arms, like JPM Asset Management, or Neuberger Berman that used to be part of Leh?

The customer assets that these entities manage, as well as the deposits, are not used to calculate any capital ratios and rightly so. The only people that can take a haircut are the equity and debt holders, who, hopefully, should be aware of the risk.