University of Rhode Island business alumni discuss banks' troubled futures during panel

04/24/09 - A panel of three University of Rhode Island alumni gave presentations in Lippitt Hall's auditorium yesterday afternoon on the current and future global economy.The discussion was part of the second Vangermeersch Endowed Lecture series hosted by the URI College of Business Administration.

The event, "Banking on the Future," brought in an audience of professors and students who filled every seat in the fourth floor lecture hall. Mark Higgins, Dean of the College of Business Administration and URI professor of accounting, acted as the moderator for the program.

William Eigen III, managing director of Absolute Return and Opportunistic Fixed Income strategies for JPMorgan Asset Management and an active member of the Global Macro Strategy Team, was the first panelist to speak.

"With pain comes opportunity," Eigen, a 1990 URI finance graduate, pointed out throughout his speech. "It's been a rocky ride ... it's tough out there right now," he said in reference to today's global economy.

Eigen III strongly advised all students to look toward the future and absorb as much they can about today's economy so they can grow from it.

"We have a big, big problem right now with employment," Eigen III said. "I actually think this will stabilize soon."

Eric Andreozzi, a 1989 URI finance graduate, the last presenter, agreed with Eigen III's statement.

"It's a struggle right now," Andreozzi, the managing director and co-founding partner of McColl Partners, said. "Everyone in our industry is laying off."

According to Eigen, $12 trillion has been invested in government programs within the last 18 months. "We really have some interesting things right now," Eigen said. "Traditional fixed income has been historically vulnerable to rising interest rates, which are currently near all time lows," he added.

He also said the financial crisis is based upon six components and other finance terms including leverage, rising housing prices and equity extraction. Eigen listed tactics for the United States to economically recover, including more bankruptcies, modest consumer recovery, inventory reductions in housing and an increase of lending.

The continuously fueled economic rut is explained by weakening balance sheets, deleveraging, downgrades, redemptions and shifting attitudes toward risk, according to Eigen.

"People have become very complacent toward high-risks," he said.

The result? Higher rates, increased regulations, slower economic growth and an overall tougher credit for Americans.

Using two graphs in his PowerPoint presentation, Eigen III depicted the trend that has resulted in a significant funding gap between loans and deposits since 2002 in EU-15, the United Kingdom and Switzerland and the overall access to wholesale funding.

According to the European Environment Agency, the EU-15 comprises Austria, the UK, Belgium, Finland, Germany, Denmark, France, Italy, Greece, the Netherlands, Ireland, Portugal, Sweden, Finland and Spain.

Scott Carter, a 1989 URI finance graduate, was the second to present. Carter, the managing director and North American head of Global Prime Finance Sales and Hedge Fund Capital for Deutsche Bank Securities, Inc, gave a PowerPoint presentation entitled "Hedge Funds Uncovered."

According to Bloomberg, hedge funds are "investment pools that can bet on falling as well as rising asset prices."

The New York Institute of Finance associated nine traits with the definition of hedge funds. The traits included regulatory exemptions, limited liquidity and transparency, management "co-investments," high minimum investments, performance fee compensations and short sales along with the usage of derivatives.

Carter also noted how today's economy has affected the Hedge Fund industry.

"The Hedge Fund industry shrank approximately 38 percent to $1.25 trillion from its original $2.0 trillion value in 2008," according to his PowerPoint presentation.

According to a data table in Carter's presentation, Hedge Fund Manager James Simons of Renaissance Technologies brought in $2,500,000,000 as compensation in 2008 alone.

"It's one of the best Hedge Funds in the world," Carter said.

"Students, you should learn all you can about as much as you can," Eigen III said. "Remember, the market is evolving - don't stick yourself in a [job] niche."

Carter also advised students to keep an open mind and continue to educate themselves about the economy. He said students should get a summer job in order to best prepare them and ensure a fighting chance at getting a steady job.