October 14, 2008
Chicago firm Ennis Knupp to oversee bailout portfolio
By Joshua Boak
October 14, 2008
The fate of the $700 billion federal bailout could rest in part on an expert billiards player from Chicago.
Richard Ennis advises companies, retirement funds and non-profit foundations on which investment managers they should hire. His latest client is the Treasury Department.
Over the next year, Chicago-based Ennis Knupp and Associates will help administer the portfolio of mortgage-backed securities the Treasury Department is buying from banks, according to a Monday announcement.
A former Ohio government official who worked through a controversy with Ennis was heartened by the selection.
“As a citizen, any concerns I had about how this will be handled have been alleviated,” said Tom Hayes, who recruited Ennis to unravel $14.3 billion in troubled state investments in 2005.
By taking hundreds of billions of dollars of toxic mortgage assets off corporate balance sheets, the government hopes to stabilize tumultuous financial markets and reignite lending across the economy. The assets are expected to be purchased mainly through an auction process, and the portfolio could turn a profit for taxpayers, the government has said.
Ennis Knupp will be responsible for developing investment guidelines for the portfolio, picking firms to manage the distressed assets and identifying any potential conflicts of interest. Among other jobs, the firm also will look for qualified minority and female-owned businesses to work on behalf of the portfolio.
The Treasury Department chose the consultant over two other bids from unidentified firms. Ennis Knupp contracted to receive up to $2.5 million for its services.
The contract signed Saturday put Ennis Knupp to work immediately, noting that the initial assets will be acquired within the next 30 to 45 days. Separately, money from the same fund will be used to make equity purchases in bank, the government said.
A spokeswoman for Ennis Knupp declined to comment about its participation in the bailout plan.
Ennis and Jim Knupp founded the consultancy in 1981, which now has 155 clients with total assets of $835 billion.
The firm has counted Honda, the Illinois Municipal Retirement Fund and the United States Conference of Catholic Bishops among its clients.
Ennis Knupp has stressed the importance of consultants being independent from the asset managers they recommend clients hire. That makes it able to present itself as a trustworthy adviser in politically sensitive situations.
“Without any doubt, it is one of the better firms in this area,” said Josef Lakonishok, chief executive of LSV Asset Management. “Ennis has a great reputation in the business. He’s very thorough and has a lot of integrity.”
For the Ohio government, Ennis Knupp analyzed a state insurance fund that failed to hold managers accountable. The fund hid a $216 million loss in an offshore hedge fund during the 2004 presidential election, later resulting in the hedge fund manager’s conviction for breaking the terms of his contract.