Dr. Martha O'Hagan-Luff:

One would then be putting risk with informed investors. To take investment funds, there used to be three main asset classes - bonds, equity and cash - and there is now a fourth asset class of alternative investments, which means anything that is not plain, straight, investment-grade bonds, publicly traded equity or cash. Alternative investments could be investments in junk bonds or hedge funds, which are riskier assets outside of those main areas. The problem is one does not want to be marketing assets to investors who do not understand the risk they are taking on. We had this is in the 1980s with derivatives and the mis-selling scandals. We want risky assets to be only marketed to those investors who have the expertise and know exactly what risk they are taking on in advance. That is the argument, namely, if there is this straight connection between informed institutional investors who are investing in risky assets, and it is part of a portfolio and they are well informed of the risk they are taking on, I would see that as a better situation than retail banks being saddled with risky assets which will have a negative effect.