Mutual fund managers who lived through the stock market crash of Oct. 19, 1987, when the market plunged 22.6%, remembered the lessons learned, including the importance of seeking an outside point of view—particularly when the market is soaring, having a contingency plan and educating investors, The Wall Street Journal reports.
Brian Posner, now chief executive officer and co-CIO at
“One of the lessons at the time, and it’s questionable whether or not it’s been learned, is that there’s no free lunch,” Posner said.
Although some institutional investors thought that they were protected through portfolio insurance, it didn’t work, Posner said. “Like with most silver bullets, there were some fatal flaws,” he said.
Now that so many funds and investors have been affected by the subprime loan crisis, Posner believes that exotic forms of collateralized debt obligations might disappear.
Kent Simons, a consultant to