Representatives of the bank declined repeated requests to comment on the reports or on investment in hedge funds in general by Merrill's private clients, as did Chase Manhattan Private Bank, one of the more vigorous promoters of exotic investments. Officials at several other banks said that, while it was possible that some of their private clients had invested in LTCM through other channels, none had done so through its banks. Any bank that did put its clients into LTCM, or funds like it, ran the risk of breaching its obligation to provide them with the best possible advice, financial advisers and bankers said. LTCM was just like other hedge funds, only more so. There has always been this element of secrecy.
Bankers acknowledge the difficulties in vetting hedge funds.
Rudolfo Bogni, chief executive of UBS Private Banking, said that the bank's procedure for screening investments ''is practically impossible to achieve with hedge funds, where it is normally very difficult to obtain information beyond the basic generalities of the investment policies. This ought to make every private bank that recommends hedge funds look through the process again to ensure that any recommendations they made were the right ones,'' said Luke Ellis, managing director of Financial Risk Management, a firm that assists institutions and rich individuals in selecting hedge funds. Private banks that were actually offering these more sophisticated, risky solutions will look more carefully at them. There may be a move back to more conventional investment and risk-management strategy.