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<br /> The Tower<br /> <br /> <br /> <br /> <br /> <br /> 40<br /> CFA MAGAZINE / MAY–JUNE 2011<br /> <br /> © G. Baden/Corbis<br /> Global FX and the liquidity mirage<br /> <br /> Cheers: here's to a truly liquid asset<br /> <br /> Improving transparency for private equity<br /> <br /> What if risk-free assets weren't risk free?<br /> <br /> Frontier markets: beyond the headlines<br /> <br /> A portfolio roundtable with top managers<br /> <br /> <br /> <br /> May/June 2011<br /> <br /> <br /> <br /> SLUDGE<br /> <br /> Is a toxic culture poisoning<br /> your investment firm?<br /> “When you have a lot<br /> of sludge in the system,<br /> you are not going to be<br /><a title="May/June 2011 CFA Magazine page 1" href="http://viewer.zmags.com/publication/4ba2e869?page=1"> Global FX and the liquidity mira</a> Global FX and the liquidity mira<a title="May/June 2011 CFA Magazine page 2" href="http://viewer.zmags.com/publication/4ba2e869?page=2">HARVARD BUSINESS SCHOOL in partnership with CFA I</a> HARVARD BUSINESS SCHOOL in partnership with CFA I<a title="May/June 2011 CFA Magazine page 3" href="http://viewer.zmags.com/publication/4ba2e869?page=3">36May/June 2011COVER STORYSludgeIs a </a> 36May/June 2011COVER STORYSludgeIs a <a title="May/June 2011 CFA Magazine page 4" href="http://viewer.zmags.com/publication/4ba2e869?page=4">May/June 201163Market28</a> May/June 201163Market28<a title="May/June 2011 CFA Magazine page 5" href="http://viewer.zmags.com/publication/4ba2e869?page=5">The right analysis can do wonders for your perspe</a> The right analysis can do wonders for your perspe<a title="May/June 2011 CFA Magazine page 6" href="http://viewer.zmags.com/publication/4ba2e869?page=6">LETTERS Is the Impact of China's Mone</a> LETTERS Is the Impact of China's Mone<a title="May/June 2011 CFA Magazine page 7" href="http://viewer.zmags.com/publication/4ba2e869?page=7">thesets </a> thesets <a title="May/June 2011 CFA Magazine page 8" href="http://viewer.zmags.com/publication/4ba2e869?page=8">IN SUMMARYThe Arena for Thoughtful Action“Eg</a> IN SUMMARYThe Arena for Thoughtful Action“Eg<a title="May/June 2011 CFA Magazine page 9" href="http://viewer.zmags.com/publication/4ba2e869?page=9">RENEWYOURCONNECTIONS“We have thesame la</a> RENEWYOURCONNECTIONS“We have thesame la<a title="May/June 2011 CFA Magazine page 10" href="http://viewer.zmags.com/publication/4ba2e869?page=10">In FocusFinding the Way Forward in Emerging Mark</a> In FocusFinding the Way Forward in Emerging Mark<a title="May/June 2011 CFA Magazine page 11" href="http://viewer.zmags.com/publication/4ba2e869?page=11">CFA Institute: Upcoming EventsJune July </a> CFA Institute: Upcoming EventsJune July <a title="May/June 2011 CFA Magazine page 12" href="http://viewer.zmags.com/publication/4ba2e869?page=12">ViewpointImproving Transparency in the Private E</a> ViewpointImproving Transparency in the Private E<a title="May/June 2011 CFA Magazine page 13" href="http://viewer.zmags.com/publication/4ba2e869?page=13">CREATE MORE VALUEThe Oxford Private</a> CREATE MORE VALUEThe Oxford Private<a title="May/June 2011 CFA Magazine page 14" href="http://viewer.zmags.com/publication/4ba2e869?page=14">ViewpointFrontier Markets: What the Headlines Do</a> ViewpointFrontier Markets: What the Headlines Do<a title="May/June 2011 CFA Magazine page 15" href="http://viewer.zmags.com/publication/4ba2e869?page=15"> Stories like these add up to impressive gr</a> Stories like these add up to impressive gr<a title="May/June 2011 CFA Magazine page 16" href="http://viewer.zmags.com/publication/4ba2e869?page=16">associate it with the holder being analytical, po</a> associate it with the holder being analytical, po<a title="May/June 2011 CFA Magazine page 17" href="http://viewer.zmags.com/publication/4ba2e869?page=17">ViewpointAlgorithmic Trading and FX Market Liqui</a> ViewpointAlgorithmic Trading and FX Market Liqui<a title="May/June 2011 CFA Magazine page 18" href="http://viewer.zmags.com/publication/4ba2e869?page=18">trades, and HFT is only one type of algo strategy</a> trades, and HFT is only one type of algo strategy<a title="May/June 2011 CFA Magazine page 19" href="http://viewer.zmags.com/publication/4ba2e869?page=19">former concentration of liquidity in interdealer </a> former concentration of liquidity in interdealer <a title="May/June 2011 CFA Magazine page 20" href="http://viewer.zmags.com/publication/4ba2e869?page=20">BY DOROTHY KELLY, CFA, AND JULIA MCDONOUGH, ESQ.</a> BY DOROTHY KELLY, CFA, AND JULIA MCDONOUGH, ESQ.<a title="May/June 2011 CFA Magazine page 21" href="http://viewer.zmags.com/publication/4ba2e869?page=21">Not sure whether to disclose? Direct questions re</a> Not sure whether to disclose? Direct questions re<a title="May/June 2011 CFA Magazine page 22" href="http://viewer.zmags.com/publication/4ba2e869?page=22">EthicsFORUMagreements with blanket non-disclo</a> EthicsFORUMagreements with blanket non-disclo<a title="May/June 2011 CFA Magazine page 23" href="http://viewer.zmags.com/publication/4ba2e869?page=23"> V(A). In addition, Belland's insider trading an</a> V(A). In addition, Belland's insider trading an<a title="May/June 2011 CFA Magazine page 24" href="http://viewer.zmags.com/publication/4ba2e869?page=24">MarketINTEGRITYSEC Rules on Wall Street Pay —</a> MarketINTEGRITYSEC Rules on Wall Street Pay —<a title="May/June 2011 CFA Magazine page 25" href="http://viewer.zmags.com/publication/4ba2e869?page=25">Hedging Bets with Better DisclosureCFA Institut</a> Hedging Bets with Better DisclosureCFA Institut<a title="May/June 2011 CFA Magazine page 26" href="http://viewer.zmags.com/publication/4ba2e869?page=26">MarketINTEGRITYDerivatives DangerFinancial </a> MarketINTEGRITYDerivatives DangerFinancial <a title="May/June 2011 CFA Magazine page 27" href="http://viewer.zmags.com/publication/4ba2e869?page=27"> “It is a fine line that regulators have to</a> “It is a fine line that regulators have to<a title="May/June 2011 CFA Magazine page 28" href="http://viewer.zmags.com/publication/4ba2e869?page=28">MarketINTEGRITYWish and PRIPsEuropean Commi</a> MarketINTEGRITYWish and PRIPsEuropean Commi<a title="May/June 2011 CFA Magazine page 29" href="http://viewer.zmags.com/publication/4ba2e869?page=29">two-page document that conveys the pertinent char</a> two-page document that conveys the pertinent char<a title="May/June 2011 CFA Magazine page 30" href="http://viewer.zmags.com/publication/4ba2e869?page=30">PortfolioPERFORMANCEGuts, Courage, and Stra</a> PortfolioPERFORMANCEGuts, Courage, and Stra<a title="May/June 2011 CFA Magazine page 31" href="http://viewer.zmags.com/publication/4ba2e869?page=31">I posit that it is simply the application of expe</a> I posit that it is simply the application of expe<a title="May/June 2011 CFA Magazine page 32" href="http://viewer.zmags.com/publication/4ba2e869?page=32">AnalystAGENDAAn Incommodious Commodity?KE</a> AnalystAGENDAAn Incommodious Commodity?KE<a title="May/June 2011 CFA Magazine page 33" href="http://viewer.zmags.com/publication/4ba2e869?page=33">benchmark. The ratio startedlife at 1.8 when the</a> benchmark. The ratio startedlife at 1.8 when the<a title="May/June 2011 CFA Magazine page 34" href="http://viewer.zmags.com/publication/4ba2e869?page=34">Private CLIENT CORNERBridging th</a> Private CLIENT CORNERBridging th<a title="May/June 2011 CFA Magazine page 35" href="http://viewer.zmags.com/publication/4ba2e869?page=35">investing. “As you educate women, their risk tole</a> investing. “As you educate women, their risk tole<a title="May/June 2011 CFA Magazine page 36" href="http://viewer.zmags.com/publication/4ba2e869?page=36">Standards IN PRACTICEThe Other CE</a> Standards IN PRACTICEThe Other CE<a title="May/June 2011 CFA Magazine page 37" href="http://viewer.zmags.com/publication/4ba2e869?page=37">top priority, with ethics becoming secondary,” ca</a> top priority, with ethics becoming secondary,” ca<a title="May/June 2011 CFA Magazine page 38" href="http://viewer.zmags.com/publication/4ba2e869?page=38">Is a toxic culture poisoning your investment firm</a> Is a toxic culture poisoning your investment firm<a title="May/June 2011 CFA Magazine page 39" href="http://viewer.zmags.com/publication/4ba2e869?page=39">If you are reallyserious as aleader aboutAre t</a> If you are reallyserious as aleader aboutAre t<a title="May/June 2011 CFA Magazine page 40" href="http://viewer.zmags.com/publication/4ba2e869?page=40">The Center forCreativeLeadershipback and fired</a> The Center forCreativeLeadershipback and fired<a title="May/June 2011 CFA Magazine page 41" href="http://viewer.zmags.com/publication/4ba2e869?page=41">That iswhat you wantas a leader —say, “Then ge</a> That iswhat you wantas a leader —say, “Then ge<a title="May/June 2011 CFA Magazine page 42" href="http://viewer.zmags.com/publication/4ba2e869?page=42">The Tower40CFA MAGAZINE / MAY–JUNE </a> The Tower40CFA MAGAZINE / MAY–JUNE <a title="May/June 2011 CFA Magazine page 43" href="http://viewer.zmags.com/publication/4ba2e869?page=43">ofWhat will happen to the investment scaffolding</a> ofWhat will happen to the investment scaffolding<a title="May/June 2011 CFA Magazine page 44" href="http://viewer.zmags.com/publication/4ba2e869?page=44"> Soft Default or Death Spiral?Assuming t</a> Soft Default or Death Spiral?Assuming t<a title="May/June 2011 CFA Magazine page 45" href="http://viewer.zmags.com/publication/4ba2e869?page=45">When Bad Things Happen to Good Balance Sheets</a> When Bad Things Happen to Good Balance Sheets<a title="May/June 2011 CFA Magazine page 46" href="http://viewer.zmags.com/publication/4ba2e869?page=46">44Japanese Government Debt/GDP200150</a> 44Japanese Government Debt/GDP200150<a title="May/June 2011 CFA Magazine page 47" href="http://viewer.zmags.com/publication/4ba2e869?page=47">Liquid A TRULY© Newmann/CorbisCFA </a> Liquid A TRULY© Newmann/CorbisCFA <a title="May/June 2011 CFA Magazine page 48" href="http://viewer.zmags.com/publication/4ba2e869?page=48">Jean-Philippe Weisskopf reported that from 1996 t</a> Jean-Philippe Weisskopf reported that from 1996 t<a title="May/June 2011 CFA Magazine page 49" href="http://viewer.zmags.com/publication/4ba2e869?page=49">The process of determining the en primeur price f</a> The process of determining the en primeur price f<a title="May/June 2011 CFA Magazine page 50" href="http://viewer.zmags.com/publication/4ba2e869?page=50">SPIESIN THE HOUSE OFMONEY48 </a> SPIESIN THE HOUSE OFMONEY48 <a title="May/June 2011 CFA Magazine page 51" href="http://viewer.zmags.com/publication/4ba2e869?page=51">(The Secret Sharer, Heart of Darkness) showed the</a> (The Secret Sharer, Heart of Darkness) showed the<a title="May/June 2011 CFA Magazine page 52" href="http://viewer.zmags.com/publication/4ba2e869?page=52">Chambers’ second book, The Twain Maxim, revolves </a> Chambers’ second book, The Twain Maxim, revolves <a title="May/June 2011 CFA Magazine page 53" href="http://viewer.zmags.com/publication/4ba2e869?page=53">asking “What if?” This places financial novelists</a> asking “What if?” This places financial novelists<a title="May/June 2011 CFA Magazine page 54" href="http://viewer.zmags.com/publication/4ba2e869?page=54"> CFA InstituteBRIEFSCFA Program Partners Ini</a> CFA InstituteBRIEFSCFA Program Partners Ini<a title="May/June 2011 CFA Magazine page 55" href="http://viewer.zmags.com/publication/4ba2e869?page=55">AmericasOUTLOOKLatin America: Why Now?BY R</a> AmericasOUTLOOKLatin America: Why Now?BY R<a title="May/June 2011 CFA Magazine page 56" href="http://viewer.zmags.com/publication/4ba2e869?page=56">Verified, but are youRed flags thatyou may have a</a> Verified, but are youRed flags thatyou may have a<a title="May/June 2011 CFA Magazine page 57" href="http://viewer.zmags.com/publication/4ba2e869?page=57">EMEAVOICEPreparing for New Education Prospect</a> EMEAVOICEPreparing for New Education Prospect<a title="May/June 2011 CFA Magazine page 58" href="http://viewer.zmags.com/publication/4ba2e869?page=58">2011 AUSTRALIA INVESTMENTCONFERENCEAsia & Emer</a> 2011 AUSTRALIA INVESTMENTCONFERENCEAsia & Emer<a title="May/June 2011 CFA Magazine page 59" href="http://viewer.zmags.com/publication/4ba2e869?page=59">Career Support for MembersBY ASHVIN VIBHAKAR, </a> Career Support for MembersBY ASHVIN VIBHAKAR, <a title="May/June 2011 CFA Magazine page 60" href="http://viewer.zmags.com/publication/4ba2e869?page=60"> </a> <a title="May/June 2011 CFA Magazine page 61" href="http://viewer.zmags.com/publication/4ba2e869?page=61">The 2010 Graham & Dodd Awardfor Best Article goe</a> The 2010 Graham & Dodd Awardfor Best Article goe<a title="May/June 2011 CFA Magazine page 62" href="http://viewer.zmags.com/publication/4ba2e869?page=62">EDUCATION CALENDARCANADA3–4 May Wealth M</a> EDUCATION CALENDARCANADA3–4 May Wealth M<a title="May/June 2011 CFA Magazine page 63" href="http://viewer.zmags.com/publication/4ba2e869?page=63">EDUCATION CALENDAREASTERN US10–14 July Inve</a> EDUCATION CALENDAREASTERN US10–14 July Inve<a title="May/June 2011 CFA Magazine page 64" href="http://viewer.zmags.com/publication/4ba2e869?page=64">SocietyBRIEFSThe Baltim</a> SocietyBRIEFSThe Baltim<a title="May/June 2011 CFA Magazine page 65" href="http://viewer.zmags.com/publication/4ba2e869?page=65">Chapter 10The Strange Recurrence of Nonrecurr</a> Chapter 10The Strange Recurrence of Nonrecurr<a title="May/June 2011 CFA Magazine page 66" href="http://viewer.zmags.com/publication/4ba2e869?page=66">Chapter 10In the past, your investment partnersh</a> Chapter 10In the past, your investment partnersh<a title="May/June 2011 CFA Magazine page 67" href="http://viewer.zmags.com/publication/4ba2e869?page=67">Jed Schneider, CIPMExecutive Director, Performan</a> Jed Schneider, CIPMExecutive Director, Performan<a title="May/June 2011 CFA Magazine page 68" href="http://viewer.zmags.com/publication/4ba2e869?page=68"> No Matter How You Say It,AFG Speaks Globa</a> No Matter How You Say It,AFG Speaks Globa