Stick It to the Hedge Fund Managers!

by James A. Bacon

One of the voices urging reform of the Virginia Retirement System (VRS) is a semi-retired University of Virginia economics professor, Edwin T. Burton III, who served 18 years on the board. He argues that the VRS pays too much in management fees to outside investment firms that pursue labor-intensive strategies and should rely on low-overhead funds that index stock and bond markets.

In fiscal 2016, the VRS generated a 1.9% return but lagged the 3.99% return on the S&P 500. The year before, the VRS generated a 4.7% return compared to a 7.4% return for the S&P. “We haven’t come close” to the 7% rate of return assumed by the VRS in reaching its calculation of $22.6 billion in unfunded liabilities, he told Michael Martz with the Richmond Times-Dispatch.

Getting a higher rate of return is the best way to boost the financial health of the state retirement fund. Of course, that’s easier said than done. Everyone would like to boost returns on their financial investments, but very few investment managers have outperformed the market consistently. While pension funds can tinker with their portfolios, shifting funds between stocks, bonds, real estate, private equity and hedge funds, often chasing yesterday’s hot categories, they can’t control their returns. But they can control how much they pay outsiders to generate those returns.

As it happens, the VRS paid $362 million in management fees in 2015, according to its 2015 Comprehensive Annual Financial Report. (The 2016 report is not yet online.) That sum is divvied up between ten major investment categories such as U.S. and foreign equities, fixed-income, real estate, hedge funds and other alternative investments.

Hedge fund managers stick out like a sore thumb — they collected $87 million in management fees. Hedge funds delivered outstanding returns for many years, which justified their sky-high management fees, but they have stubbed their toes in recent years. With some 10,000 funds playing in the sandbox, typically betting on movements of currencies and commodities, competition has squeezed industry profit margins to nothing. After years of sub-par returns, there is no justification for the overly generous fee structure.

VRS also paid exceptionally high fees to “alternative investment” managers and for its “strategic opportunities portfolio.” Taxpayers might wonder if those fees are worth the returns they generate.

Remarkably, the VRS staff, which manages one third of the portfolio, cost one-tenth that of the hedge-fund and alternative-investment managers.  If the entire portfolio were managed that efficiently, management fees would have cost only $81 million in 2015 — a savings of about $280 million! Over the years, that could amount to billions of dollars.

So, why don’t we fire the hedge fund managers?

It gets complicated. First of all, you don’t mind paying higher fees to managers who outperform the market averages. Unfortunately, the VRS annual report doesn’t tell us the performance of its individual funds, and even its discussion of investment categories (stocks, fixed-income, hedge funds) doesn’t match up with the categories listed in its table of management fees. So, there’s no way the public can tell if the management-fee differentials are worth it or not.

Second, you shouldn’t judge a fund manager based on one year’s performance. Even the best can have a bad  year. What most interests me is the internal VRS performance. Does its track record over the years equal that of other fund managers? If so, why we paying the other fund managers?

Third, there is a benefit to diversifying a portfolio. The idea is to limit exposure to wide swings in any single investment category. Strong performance in one category offsets weak performance in another. A pension portfolio that invested only in stocks and bonds would be distressingly volatile.

Still, Professor Burton has a point. The VRS may be paying way more than it needs to. Saving $280 million a year won’t bail out a pension fund with $22.6 billion in unfunded liabilities (probably an optimistic assessment), but it sure would help, creating less pain for Virginia’s public-employee pensioners and taxpayers. The idea is definitely worth a closer look.

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18 responses to “Stick It to the Hedge Fund Managers!

  1. The big kahuna of pension funds, the California Public Employees’ Retirement System (CalPERS), yesterday reported a meager 0.61% net return on investments for the 12-month period ended June 30, 2016.

    Its fellow plan, the California State Teachers’ Retirement System (CalSTRS), ended its 2015-2016 fiscal year with a 1.4% net return, while the New York State Common Retirement Fund earned a 0.19% return on investments in the state fiscal year that ended on March 31, 2016.

    Smaller pension funds across the U.S. have also been posting weak overall results and mixed real estate results.

    The Pennsylvania State Employees’ Retirement System posted an overall 0.7% in the first quarter of this year, with real estate returns also coming in at 0.7%.

    The $20 billion San Francisco City and County Employees’ Retirement System gained 1.36% in FY 2015-2016. Real assets, which includes real estate, posted a 3.69% return.

    The $12.2 billion Maine Public Employees Retirement System posted a 0.1% return fiscal year to date.

  2. As Larry points out, many state pensions are doing poorly.

    This is primarily due to the fed’s actions in artificially keeping interest rates down. Bonds make up a lot of the portfolios and their rates are at historic lows.

    To give an idea how much the fed has hurt the VRS, if interest rates were 3 % higher (which would still be very low historically), the fund would earn almost $2 billion more per year. To say the least that is significant.

  3. the interest rate thing is going on – worldwide – and it’s governments RESPONDING to rates that are low in the economy.

    There is almost no demand to borrow money right now and the Feds have actually lowered rates to try to tempt them to borrow it anyhow.

    and it’s not working…

    just like aggregate demand – you cannot create demand for something and that includes money and labor if there is no demand for for goods and services and in turn the capital used to expand production facilities. Demand is down for goods, services and the capital to expand production.

    China sneezed and the it’s demand for products and services went down and every else caught cold.

    even then – the stock market is UP and funds that are invested in stocks have done well… but the pension fund managers got destroyed in the sub prime disaster and are very wary… and risk adverse.

    You can real all about this in places like Wall Street Journal and IBD, etc… or you can go read Zero Hedge to get the conspiracy theory version.

    • “the interest rate thing is going on – worldwide – and it’s governments RESPONDING to rates that are low in the economy.

      There is almost no demand to borrow money right now and the Feds have actually lowered rates to try to tempt them to borrow it anyhow”

      In the first sentence governments are RESPONDING o rates. In the second sentence the Fed has actually lowered rates. Hmmm …

      No demand to borrow money? Hmmm…. How about no interest in lending money?

      “Rate hike hopes dashed: The most glaring problem is that rock-bottom interest rates are likely to stay there for some time after the shocking U.K. referendum to leave the European Union. Economists and investors are already dramatically scaling back the odds for the Federal Reserve to raise interest rates this year.

      That’s really discouraging for banks, which make money on the difference between the amount of interest they pay out depositors and what they charge borrowers. Anemic rates leave little room for profits.”

      D’oh! The Fed lowered the interest rates to encourage lending and it actually discouraged lending.

      Actually, the Fed knew full well what would happen. The rates are low to minimize the serious pain of our absurd level of national debt.

      • re: ” No demand to borrow money? Hmmm…. How about no interest in lending money?

        “Rate hike hopes dashed: The most glaring problem is that rock-bottom interest rates are likely to stay there for some time after the shocking U.K. referendum to leave the European Union. Economists and investors are already dramatically scaling back the odds for the Federal Reserve to raise interest rates this year.

        That’s really discouraging for banks, which make money on the difference between the amount of interest they pay out depositors and what they charge borrowers. Anemic rates leave little room for profits.”

        Don – there is little demand for loans .. from business…. why?

        Mortgages are now at what interest rate – why? How about that home ownership is at one of the lowest levels in decades?

        people still get mortgages but far, far fewer and there is a ton of money available for’s a simple supply and demand…when there is too much money the interest rate drops.

        You have to ask yourself why people are not borrowing money in the volume they used to – not just consumers but businesses…

        Between Amazon and big boxes what is left for mom/pop businesses?

        cars are now being leased by apparently a lot of younger buyers rather than bought on loans.

        local banks have fewer and fewer opportunities to loan money and most local banks are now bought up and owned by bigger regional and national banks

        I don’t pretend to have in depth knowledge of all that is gong on – but I do read -and what I read basically is what I’ve just related above.. that demand for money is low…. and massive changes have occurred in the things that used to want to borrow money.

        Even the Hedge fund people are playing a role in this by essentially betting that companies fail and that has resulted in only the largest ones surviving and then dominating local markets .. and even they are getting pounded by online sales.

        20-30 years ago Mom and Pop could run corner grocery and hardware stores – look around you right now and try to find a true mom & pop operation beside strip mall Asian/Mexican/specialty restaurants and nail salons….etc.. even then commercial building vacancies are common.

        the bigger company supply chains have gotten enormously efficient… Every Subway is served by a distribution center which gets it’s inventory on tractor trailers…ditto McDonald’s and virtually every other fast food operation. Local meat and supply distributors are getting squeezed out by large company regional distribution centers.

        what this has done is severely limit realistic opportunities for new business expansions of virtually any kind… the ones that typically need loans. The large companies don’t do expansion money the way they used to… they are more often than not – only expanding to the extent that they can self-fund from their existing revenue streams…. because expanding more than there is demand for – is a recipe for disaster – ask the national companies like Circuit City (now gone), best buy, staples, Macy’s, Target, even WalMart that are closing areas where demand cannot support a profitable operation and in closing they’re not opening up opportunities to mom & pops because local shoppers still are usually close enough to the big boxes that are still near enough to them .

        these changes are driven by automated warehouse/shipping and electronicized supply chains – that are instantaneously connected worldwide supply-chains so that the inventory at Walmart is essentially reordered from China electronically… by a series of electronic transactions that go from store to regional distribution to national distribution to international distribution i.e. globalization.

        in essence – the way we do commerce has dramatically changed and it has, in turn, changed the way that money, capital and labor work.

        and we are still not fully understanding it – and the way that central banks work may well have to change also – or they may become irrelevant….

        to blame all of this on govt – is about as sound-bite as you can get.

        • There’s plenty of demand for credit. Why wouldn’t there be when debt is almost interest free. The problem is that the spread between what banks can get by lending and what they pay for deposits is too narrow. That’s what happens when interest rates are near zero – the spread is also near zero. Banks can’t afford credit risk. Even a modest level of default leaves the bank with an aggregate loss. So, they only lend money to people and companies with almost no risk of default. In other words – if you need money you can’t get it and if you don’t need money you can.

          This exacerbates the wealth and income gap.

          As a member of the rich old white guys’ guild I’ll let you in on a secret. Low interest rates make rich old white guys even richer.

          Here’s an example:

          1. Rich old white guy and his wife have a portfolio of $40m.
          2. Rich old white guy gets divorced in 2004.
          3. Ex-wife becomes a rich old white woman by getting $20m of the $40m.
          4. Newly single rich old white guy needs a house.
          5. Rich old white guy buys a house for $2m in cash.
          6. Rich old white guy has a bright idea – mortgage the house.
          7. Rich old white guy borrows $1,1m against the house and pledges his investment portfolio as secondary collateral. The bank has no real risk and lends him the $1.1m at Libor + 0.5%. Let’s say that’s 3% in total back in 2004. The loan will float with a reset every 18 months based on the current Libor rate.
          8. Rich old white guy pays $33,000 per year in interest on the loan. However, it’s tax deductible so he really pays something like $19,000.
          9. Rich old white guy took economics in college and remembers the professor saying that when interest rates are low stocks go up. So, he invests the $1.1m in an S&P index fund.
          10. Rich old white guy never sells the index fund (which re-invests dividends).
          11. By the end of 2013 rich old white guy has a pre-tax gain of one million dollars (after paying the $19,000 in net interest every year).
          12. By 2020 rich old white guy can pay off the loan, sell the index funds, pay the capital gains and state taxes and clear $1.6m.

          Pretty neat trick. No work. No real risk (rich old white guy would sell the index fund if the market got hinky). Average after-tax gain of $100,000 per year.

          All brought to you by low interest rates.

          Thanks President Obama. By trying to cement a Democratic dynasty through deficit spending and amping up government benefits you had to drop interest rates to the floor which opened the door for rich old white guys to just get richer. Meanwhile, the poor are no better off.

          Side note: The rich old white guy in my example is fictional. However, that approach to finance is widely practiced.

          • Done – simple question – why don’t the banks charge more for interest if there is plenty of demand?

  4. LarrytheG,

    You are very close to the truth. The gov’t doesn’t have any ability to artificially keep interest rates this low for this long. If there was a market for credit, the Fed’s policies wouldn’t be “working.”

    There just isn’t a big demand for credit right now. There are a lot of factors that play into the lack of demand, but I think it’s the worldwide phenomenon of globalization. As I’ve posted before, we’re headed for a 10-90 or 20-80 economy. This isn’t going to just be in the States. Between 10 to 20 percent of the population will lead very good lives (the top 1% lead unfathomable lives) and the bottom 80 to 90 percent will simply subsist. If you have the cognitive abilities to have skills to place you in the top 10-20 percent, great! If not…eh. And I think this is reaching credit markets as well as business formation (another favorite topic of this blog). Quite frankly, with wealth and talent so concentrated, I don’t think our old assumptions are applicable any longer…..look around us, every day there’s another data point that leads to concentration of wealth and talent…..that’s the world we’re headed towards. I think we’ll see a lot more private lending, venture capital, etc.

  5. pretty gloomy view… and maybe warranted….

    globalization has clearly had impacts that we’re still trying to understand and the idea that if one works hard that they will be rewarded may well be exposed as myth.

    we agree – the premise of central bank was that they could goose the economy by making money cheaper which, in turn, would encourage people to borrow money to expand and sell more widgets but widget makers are now not convinced making more widgets when demand for widgets is not strong -is a smart thing to do with their money nor money they’d borrow for cheap.

    and I think the pace of innovation is also a “threat” because investing in something today – can be made almost worthless overnight with the advent of some new way of doing something.

    just look at something like hard drives – getting replaced by solid-state drives… that’s just totally wreaking havoc for companies that were invested in hard drives…

    the pace of technology evolution is now so fast that putting your marbles in something today could get you bankrupt in a heartbeat and people are rightly leaving this up to the big boys with deep pockets.

    manufacturing – putting your money in a new plant today is just as risky… some guy builds a new robot and your new plant is toast.

    blockbuster video was felled by red vending machines in the lobby of Walmart and those boxes are getting replaced by streaming to your home router…

    I think globalization has turned the world of commerce into an ocean of sharks… and if you’re not a shark – you’re food….

    so no.. you can’t even give money away these days… it’s like going to the gambling casino and playing roulette!!!

    so yes.. the whole concept of borrowing money to invest – has turned into loathing… unless you’re willing to endure extreme risk.

  6. The Fed identifies the problem in the economy:

    • good article CR…

      and the obvious question is why the “economy” is lagging? What is the “economy” – aggregate demand – for goods and services. People who don’t have full time jobs or are fully employed at the level of their skill or are paying down student debt, health insurance and their cell phone… don’t have much left over.

  7. tough read? habhaahahahdhhdhf

    it’s complete gibberish …!!!

    the author basically has a viewpoint – and he knows
    how to use graphing software but beyond that …in reading his
    commentary – he’s deep into questioning motives and slinging data so I have no clue if he really knows what he is talking about but I’m always suspicious when one goes overboard on the explanation as he does.

    so I have a simple question – who is this guy, what is his credentials and is he respected by others in this field of inquiry?

    he makes this statement in another blog post:

    ” Social Security and Disability Insurance are bankrupt…A 29% reduction in Benefits are Already In the Cards…More Cuts to Come”

    which is patently untrue unless one believes that the govt is like a business that gets taken apart and sold to satisfy creditors when it reduces payouts to people getting govt entitlements.

    Social Security is not Social Security Disability – he combines the two …. which is not true.

    and using “bankrupt” to describe a program that brings annual revenues of almost a trillion dollars a year – year in and year out and will not need cuts until 2030 is not accurate.

    Social security disability -yes it will require cuts in expenditures to match it’s revenues but in doing that – it means that program continues on forever… just with reduced payouts.

    that’s not “bankrupt” as the program was always designed to NOT pay out more than it took in… and the folks who receive benefits are NOT creditors who will receive their share of the dissolved assets.

    this is why I do not put much stock in zero hedge to start with – it’s more commentary and opinion – often tuned to anti-govt viewpoints and ideology.

    but here – go read the wiki write-up – and you’ll see what I mean:

    • Actually it’s not gibberish at all. The author writes in a somewhat confusing manner but the skeleton of facts is there.

      It’s been a long time since I took the Money and Banking course in college but here goes …

      1. Banks take in deposits and use that money to make loans.
      2. The government sets reserve minimums that prevent the bank from lending all of the money it takes in so the bank will have adequate funds to pay depositors who want to make withdrawals. The difference between what banks take in and what they lend is called a reserve.
      3. These reserves must be held in either physical currency or be on deposit with the Fed.
      4. A bank may elect to reserve more money than the regulated minimum. If they do so they create excess reserves.

      So far, so good?

      In 2006 banks held almost no excess reserves. The actual figure was about $2b in excess reserves. By Sept 2008 that number grew to $59b as banks began to fear there would be a run by depositors. Today, the amount of excessive reserves help by banks is $2.4T.

      Ponder that number … $2.4 trillion.

      That is above and beyond the regulated minimum reserve level. It is money that would have been loaned out 10 years ago but sits on deposit with the Fed today.

      Thus ends the factual segment of this comment. Onto opinion. Why have the excess reserves gone from almost nothing to $2.4 trillion?

      1) Because the Fed decided to start paying interest on a bank’s reserves, bot mandatory and excess.

      2) Because low interest rates shrink the spread between what a bank pays depositors and what it can charge borrowers so there is no profit to be made in lending.

      3) Because post 2008 regulations forced banks into much tighter controls over lending.

      4) Because the stock market rewards “safe” banks more than profitable banks and keeping money in reserve is “safe” while lending that money creates “risk assets”.

      5) Some combination of the above.

  8. Don – with respect to reserves – are you talking about banks that are members of FDIC or financial institutions that are not?

    It was the non-bank financial institutions that got into trouble on reserves and sub-prime loans and very few FDIC banks.

    but again -no one requires the banks to offer loans with low interest – they can charge what the market will bear – the problems is there are far more banks with money to lend than there are people seeking loans and this is why you are seeing car loans and mortgages at 2-3% and yes… if that is all you can get loaning the money out -you’re not going to be paying investors much.

    the demand for money has dropped because aggregate demand for products and services is stagnant and there is no profit in borrowing money to expand operations to sell more goods and services if the demand for them is stagnant…

    this is going on – around the world – not just in the US. It’s been going on in some countries like Japan for quite a while.

    there are changes underway in the economy in the way that commerce is conducted – globalization… and the fact that money can now move electronically in nano-seconds and it can flow without going through govt controlled channels…which evades their measuring of it that goes into their calculations of what to do with monetary policy.

    For months now, Yellen has been saying the time has come to increase rates – and for months now -the indicators she has been looking at to tell her when the time has come – they’re not moving.

    so they delay-…. and continue to delay- because they simply are not seeing the traditional indicators move that they’ve used in the past.

    If there was demand for money – no one would want to buy Treasury notes for almost no interest.. that money would be out fetching high interest rates in the market. Instead – the Treasury notes are in demand because people want to park their money in a safe place even if it earns almost nothing….

    You say 2..1 Trillion in reserves – do you recall how much money the Fed had to bail out the “banks” during the sub-prime crisis? It was several times that number.

    • You’re getting confused again Larry. US banks, in aggregate, have increased excess reserves on deposit with the fed from $2b in 2006 to $2.1t today. That’s a one thousand fold increase.

      A trillion is a thousand billion. A billion is a thousand million. If you put all the increased reserves into piles of $1m each you would have 2.1 million piles of one million dollars. If it takes $1m of invested capital to create one sustainable job then this increase in excess reserves cost America 2.1m new jobs.

      “he demand for money has dropped because aggregate demand for products and services is stagnant”

      If that were true then either we would have to export goods and services to have a growing GDP or we would have a shrinking GDP. Arguably the goods could be going into inventory or US productivity could be skyrocketing. I don’t believe any of those things are true.

      Real GDP:

      2008: -0.3%, $-0.04T
      2009: -2.8%, $-0.6T
      2010: +2.5%, $+0.4T
      2011: +1.6%, $+0.15T
      2012: +2.2%, $+0.19T
      2013: +1.5%, $+0.31T
      2014: +2.4%, $+0.4T
      2015: +2.4%, $+0.3T

      In 1980, the U.S. trade deficit was $32 billion (in 2015 dollars). In 2008, it reached $800 billion (in 2015 dollars). As a result of the global recession, the trade deficit shrank in 2009 to $434 billion (in 2015 dollars), and then it expanded again with the modest economic recovery to $530 billion in 2015.

      Inventories have been expanding of late but the retail sales to inventory ratio is about the same as it was in 2008.

      In 2014 the US economy grew by $400B. We produced goods and services worth $400B. We then were a net importer of goods and services of other countries of about $500B. It was about the same in 2013. So, we put $400B more goods and services into the domestic market in 2014 than in 2013. Inventory did tick up between 2013 and 2014 but not by nearly as much as $400B.

      More goods and services are produced every year. They are not being shipped overseas. They are not piling up in warehouses. They must be consumed (bought) domestically. If the demand for products and services is stagnant where are all these incremental goods and services going?

      • Don – when you say “bank” do you mean the banks that are FDIC or other “banks” that are not?

        the increased reserves are the direct result of taxpayers having to bail out trillions of dollars of non-FDIC “banks” that cost millions of jobs lost over the meltdown.

        that meltdown severely damaged the US economy – and the increased reserves are to NOT let the financial institutions put the risk and the damage on others instead of themselves.

        Don – we have one of the lowest GDP rates in years, are said to have much higher unemployment than actually reported and the lowest labor participation rate in years.

        Obama is being pummeled by critics over the weak economy, and lack of good paying jobs.

        reports like this are common: ” How slow is US economic growth? ‘Close to zero'” , ” The U.S. Economy Has Stalled, Again | The Fiscal Times”, ” US economy grows at slowest pace in two years as Obama defends “…

        from the Wall Street Journal: ” Seven Years Later, Recovery Remains the Weakest of the Post-World War II Era
        Despite longevity, total growth during this economic expansion is lower than for much shorter business cycles”

        how in the world are you getting a silk purse here?

        you’re confused here … stagnant does not mean the total absence of economic activity – it just means that demand is flat, not robust and growing… and how you deduce otherwise in the face of the overwhelming evidence of a weak economy… geeze guy.

        You make it sound like we have a great economy except for the zero interest rates!!! I say the evidence is pretty clear – we do not have a great economy and weak demand for credit reflects it.

        The typical response from central banks to goose weak economies has been to make credit cheap so people are tempted to engage in more economic production in areas where there might be new demand..for innovation, etc.

        It’s not so simple any more because the big companies accrue money for expansion rather than borrow it and they don’t expand more than they have funds to do it. They are much more circumspect in expanding and do so with a lot more restraint than before. They actually close weaker stores now at the same time they are expanding in other areas.

        Entrepreneurs use venture capital. Companies like Subway are franchise operations that require the operator to put up THEIR money…

        the “blame the govt” folks have been and remain a persistent presence but when they wax conspiratorially like in Zero Hedge -it’s like the ignorati blaming bad events on things they don’t understand that they see in the stars and heavens… rather than what most credible economists are saying… It’s like the financial version of astrology…

        Real economists are saying that things in the economy that they do not yet fully understand are ongoing… and they are saying that what the Central Banks have traditionally done – is not working… and that if we have another recession that lowering interests rates to goose the economy will no longer work.

        the conspiracy folks have heard enough.. it’s the govt’s fault… end of story…

        sorry.. I’m gonna wait for a few more opinions before I leap on that conspiracy wagon…

  9. Reader Judy White Moore passes along this transcript of a 2012 “60 Minutes interview” of Greg Smith, who gained brief celebrity when he resigned from Goldman Sachs after writing a scathing editorial in the New York Times. She shared it on a “for your information” basis, with no comment. But I would invite readers to focus on the passage in bold, and note the implication that the administrators of the Virginia pension fund are among the unsophisticated clients that Goldman has gulled with its garbage financial products.

    Smith’s job was to sell derivatives not the complicated bets that nearly blew up the financial system in the collapse of 2008, but more straightforward, openly traded products like options to buy stock or commodities. The problem, he says, is that inside Goldman’s offices the promotions and big money went to people who sold complex products with unseen risks and hidden fees.

    Greg Smith: So what Wall Street will do is, they will approach one of these philanthropies, or endowments, or teachers’ retirement pensions funds, in Alabama, or Virginia, or Oregon, and they’ll say to them, “We have this great product that is gonna serve your needs.” And it looks very alluring to these investors. But what they don’t realize is that up front, they’re immediately paying the bank two million dollars or three million dollars because of their lack of sophistication.

    Anderson Cooper: So they don’t say to the client: the price you’re paying for us to execute this trade is a million dollars?”

    Greg Smith: That’s a huge part of the problem. Not at all.

    Anderson Cooper: How can it be that the client doesn’t understand what the bank is making?

    Greg Smith: These are very complicated derivative securities which takes a Ph.D. in physics or in engineering to understand. And there are pension funds and mutual funds that represent people’s 401(k)s and retirement savings that are trading the most complex instruments out there without fully understanding them.

    Anderson Cooper: So, did the people you work with want unsophisticated clients?

    Greg Smith: Getting an unsophisticated client was the golden prize. The quickest way to make money on Wall Street is to take the most sophisticated product and try to sell it to the least sophisticated client.

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