Despite wild swings in the financial markets last week, a number of local investment professionals said the mood among their clients has remained remarkably calm.
Ed Wedbush, president of downtown L.A.’s Wedbush Morgan Securities Inc., said unlike past market downturns, including the 2008 financial crisis and the 1987 stock market crash, investors do not seem to be gripped by panic.
“I’m not seeing the panicky selling,” he said. “We’re getting the concerned calls (from clients), there’s no question about that, but we’re not getting panicky calls.”
That sentiment was echoed across the local financial services industry. Chuck Freadhoff, a spokesman for fixed-income investing giant Capital Group Cos., said the downtown L.A.-based firm experienced virtually no major unrest among investors. Still, Vice Chairman James Rothenberg penned a letter to clients that was posted to the firm’s website.
“We knew that when there’s this much turmoil in the market, it obviously makes investors uneasy,” Freadhoff said. “We felt we needed to address that disquiet even if they were not calling their advisers.”
To be sure, the financial markets were highly volatile over the past two weeks. After Standard & Poor’s decision to downgrade U.S. credit, the Dow Jones industrial average fell more than 600 points before gyrating up and down again.
Wedbush said the market fluctuations were less panic inducing than previous downturns in part because investors have become better at diversifying their portfolios.
“There are some people who have 50 to 100 percent of their portfolio in cash. There are more bonds mixed with stocks,” he said. “There’s really more substantial diversification than there was in the past.”
The LABJ Index, which tracks 180 local publicly traded companies, fell nearly 13 percent for the week ended Aug. 10, a worse showing than each of the major national stock indexes.
Twelve local financial stocks dropped more than 10 percent, led by Cathay General Bancorp, the downtown parent of Cathay Bank. Its shares declined 26 percent to $10.21. Real estate stocks also took a pounding.
Wedbush, though, is bullish on local stocks. The current financial turmoil is global in nature and not particularly threatening to Southern California, he noted, and the local economy has shown resilience in the past.
“There’s definitely opportunity in specific companies that are home based in Southern California,” he said.
Firm Buys
The debt of many European nations – a contributor to last week’s wild stock swings – is looking iffy, but that isn’t scaring Ares Management LLC from investing in companies on the continent.
The Century City asset manager last week acquired, for undisclosed sums, a pair of firms, including Indicus Advisors, a London-based firm that specializes in European leveraged finance. Ares also bought Wrightwood Capital, a commercial real estate lender in Chicago.
Through the deals, Ares’ private debt group will gain 40 additional employees while the firm’s capital markets group will add 17 professionals.
Tony Ressler, Ares senior partner, said in a statement that the Wrightwood deal would broaden the firm’s capabilities in middle-market commercial real estate lending, which is “an area we see having attractive long-term growth opportunities.”
Indicus, meanwhile, managed more than $2 billion in assets in collateralized loan obligations and related instruments, giving Ares a substantially larger investment portfolio of European corporate credit.
Building Branches
The banking industry has been a gloomy place of late, but Chase Bank’s top executive made a pit stop in town to bask in one of the small bright spots.
JPMorgan Chase & Co. Chief Executive Jamie Dimon visited the City of Angels last week to tour an under-construction Chase branch, one of 25 the banking giant is planning to open in Los Angeles County this year as part of about 100 new locations across California. The bank expects to hire at least 15 employees at each branch.
At the downtown branch, which is set to open in October, Dimon met with local leaders, including Mayor Antonio Villaraigosa and City Councilwoman Jan Perry, where they discussed the bank’s growth plans.
C-Suite News
Moelis & Co., the Century City investment bank started by Ken Moelis, announced that Kent Savagian was hired as a managing director in Los Angeles. … Preferred Bank, a Chinese-American bank in Los Angeles, announced that Wellington Chen was appointed chief operating officer and Lucilio Couto was appointed chief credit officer.
Staff reporter Richard Clough can be reached at [email protected] or at (323) 549-5225, ext. 251.
