Think the unthinkable and don't get too comfortable

CONTRARIAN INVESTOR

After last week's column, I am not going to regale you again with matters of index tracking, but I am going to pick up on a theme discussed at the Inside ETFs conference in Amsterdam that has been bubbling away in my mind.

One of the most impressive speakers at the event was a London-based consultant by the name of Roy Zimmerhansl. He is something of a specialist in assessing risk, particularly if your fund manager is lending out stock to other institutions. Much of his analysis is fairly specific to ETFs, but midway through his talk he reminded us regulators now have a very different way of looking at risk. The traditional model for anyone trying to control the risk of dealing with extensive links to financial third parties such as investment banks was to try and put a percentage on the likely loss if the...