Our point of view on the Volcker Rule is that it reduces liquidity all over the world,says Peter Kraus,Alliance Bernstein CEO.Investors want to trade securities at a price that's fair;at the end of the day,the Rule reduces liquidity.Our view reflects our clients' views.
The Volcker Rule,part of the Dodd-Frank financial reform legislation,takes effect in July.It bans proprietary trading by financial institutions.Big banks will be required by the Rule to maintain a staff of 50-60 people to comply with it.
That the Rule applies to foreign institutions as well has increased the criticism of it.Complaints have been rolling in from around the world.
The changes on Alliance Bernstein's business will not be particularly large,Mr.Kraus added,but it will crimp our clients' returns.It will hinder the sale of mutual funds.If you buy securities from a seller,you must sell at the end of each day,making it difficult to price the sale.The Rule is very complex from both the compliance and the structural point of view.
As for the overall investing environment,we certainly understand the flow of funds is still into fixed income.That makes it an interesting time to consider tilting back into equities,Mr.Kraus explained.
Mr.Kraus' colleague at AB,Vadim Zlotnikov,observes that some of the positives from the U.S. and China should be able to overcome the problems in Europe.To the extent Greece defaults,and there is no contagion,I don't think it would be a big enough event.
Mergers and acquisitions economically would make a lot of sense.The financial availability is improving;the deals are looking attractive.It could be April or mid-year before conditions deteriorate,in Mr.Zlotnikov's estimation.
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