Monday, 9 February 2009
Nordea... The Lost Principles
About time to write about Nordea, don't you think?
A bank reputation is mainly funded in trust, trust between the client and its customers. However, lately, it seems that customers are being put on the front line and used as cash machine.
The story is simple, Nordea advertises a Fund, a Money Market Fund which investment model, in principle, is in the safest possible grade.
Imagine, I'm the Nordea fund manager, My name is "Smiley B". Now, here is the customer, let's call him "Lamb Da". So "Lamb" want to give his lifetime deposit to "Smiley", X euro saved throught hard and real work (no "ponzy" bonus here), and trusting that person.
"Smiley" give "Lamb" all the insurance that his money is safe and will get some safe return on it.
Now, Smiley, take that money and lend it on the market, either by purchasing Government Bonds or similar type of very safe investment vehicule (that's the whole idea of the money market fund).
You see, If "Smiley" lend X euro for a specific period to a government, he will get X+Y back, obviously Y will be a small percentage of X (2%-5%). That should be guarantied by the fund.
So you cannot lose, even if interest rates fall, you just wait for maturity to get back your capital and with it some interest.
So "Lamb" is happy since he doesn't want to speculate in the market and is happy to lend his money to government or equivalent that can use his money wisely since he doesn't need it during that period of time.
In Nordea, the reality is diffenrent Since it turns out that in our case, "Smiley" is a crook, and our "lamb" being cooked by the Crook.
A picture is worth 100o words or a billions "Crooks", so let's look at some chart:
Evidence #1 : Money Manager Fund, or "Money Losing Machine"
The red curve is the benchmark, which is here JP Morgan equivalent Fund. As you can see JP Morgan fund has evolved as it should be, a linear progression.
The Nordea Money Manager Fund is a Total Disaster!. Now, how can you trust a Bank that show such performance, especially when you start to discover the goal of such fund (short term lending, they take your money and lend it at fix rate, so in theory you cannot lose money, at worse you don't gain).
From Nordea's mouth :
"The fund is a money market fund with a relatively low exposure to interest-rate risk. A rise in short-term interest rates may temporarily decrease the NAV per fund unit...The fund is suitable for short-term investments: the recommended minimum investment period is 3-6 months."
Evidence #2 : "there is no such thing as a free lunch"
They persist and sign, as currently it is still showing that the fund is a very low risk...Common, the FSA (Financial Supervision Authority), are you sleeping? otherwise soon they should rename themselves as "Financial Super-No-Vision Authority"... Here you can clearly see in action the total failure of the regulatory system. Most probably they were spending their time watching Opera or listening at katainen daily positive speeches on YLE 1, who knows?
"In Finland, the fund management operations and companies are supervised by the Finnish Financial Supervision" , coming again from the mouth of the lion, excuse me.., Nordea?
Evidence #3: "let the lion speak"...
Here is what the "acting" fund manager, as during such situation, you better be seen as acting instead as being the one in charge. (For complete "smooth" talk)
"The year was bleak for money market investors, and the sharp rise in the credit risk premiums for bank bonds crushed the yield on floating rate bonds in particular.
When the investment bank Lehman Brothers went bankrupt, several investors redeemed their units in the fund and we had to sell some of the bonds in our portfolio on a non-existent market.
We have avoided bankruptcy transactions, though."
To have such losses, they might have invested in Lehman or Madoff. In reality we will never know the truth, unless the FSA publicly gives the explanation.
Note as well, that the chart above show clearly that problems started sometime in late 2007.
The conspiracy case:
In the worst case, Nordea used the opportunity to draw funds from the Money Manager Fund, and relating it to the difficult market. That we won't know if it's plausible or not and neither I'm saying that it is the scenario explaining such disastrous performance.
The Non Funny Part:
They have avoided bankruptcy transactions, maybe we should be thankful for that...it's really worrying...
Lesson Never Learned:
Lesson learned for customer, do not trust your smiley banker. Instead investigate and make them sign paper if they promise that it is 100% safe, since later you might be able to sue them and get your money back...though I'm not a lawyer. The other alternative, is each time you open a fund with Nordea, bring a lawyer with you.
Last, read any bank contract small prints as well as the big prints and even maybe take the banker finger prints, just in case....
Disclaimer: Whatever is said above is wrong and does not represent the thinking or the position of the writer. Most probably this article was written by a hacker and was published unintentionally. It is strongly known that Nordea is a great and trusted bank. The view express in this article and in the comments made following this unententionnaly published article, do no represent its authors. Anything forgotten in this disclaimer can be added any seconds. By reading this article you are abiding yourself to this disclaimer.