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We don’t do reader comments on TPM. But here we’ll make an exception since this whole issue of pension fund management is such a complicated one.

Dear TPM: Your comments on Alliance Capital go beyond the realm of facts and
into speculations that are unfair and not true. You ask if Alliance was
buying Enron stock for the account of Florida and other clients while
simultaneously selling for its own account. This is demonstrably not true,
as Alliance, a money management firm, does not own stocks for its own
account.

Having said that, buying Enron shares in October goes under the heading of an
honest mistake. To really understand the impact of Enron on Florida or any
other Alliance Capital client, you would need to know the performance of the
portfolio they were managing. While Enron obviously hurt their performance,
its the return of the whole portfolio that matters.

Your comments this morning are much closer to the mark.

— Anonymous TPM Reader
(Who Works in the Money Management Field)

These are some good points. But as I say below, I still think Alliance has some real explaining to do.

One point particularly seems worth making. For a company like Alliance it seems to me that there’s an easy to make distinction between one of ‘their’ mutual funds (which are obviously made up of clients money) and pension funds like Florida’s which they advise on what to buy and sell.

One other point, a number of readers have argued that it could never be rational for Alliance to have a client blow money on Enron late in the game because Alliance’s reputation and profitability is completely tied up with their reputation for making their clients money, not losing it. True enough. But humans don’t always work in such a mechanistic or logical way. More about this point soon.

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