It seems that one of the worst investments offered by Wall Street in recent years was a leveraged fund that invested in hedge funds, private equity, venture capital and real-estate funds. For every dollar invested, two more dollars were lent. But when the fund declined by something close to one-third of its values, the investors were completely wiped out.
In an ironic turn, the investors feeling the sting of this investment funds wrong-turn are Wall Streeters themselves. The fund was one of the options offered by Morgan Stanley to its own employees as a way of investing their deferred compensation. The point was to allow them more diversification than the other option–holding Morgan Stanley stock.
Morgan Stanley set the fund up three years ago, when alternative investment funds were all the rage. Employees who chose to simply invest their deferred comp in MS shares would have lost 60% of the investment since then. But those who put money into the firm’s Leveraged Co-Investment Plan have lost almost everything, Forbes reports.
Yow! No wonder these Wall Street guys are so eager to get big bonuses again. Much of their past wealth has been erased.