Security guards and staff stand at the entrance of an Apple store during the release of iPhone 5 in Beijing's Wangfujing shopping district, December 14, 2012.

BOSTON | Thu Feb 14, 2013 7:23pm EST

BOSTON (Reuters) - Some of the biggest hedge funds that helped make Apple Inc a stock market darling lost faith and dumped their stakes in the fourth quarter, fueling the massive drop in the iPhone maker's share price.

Noted stock pickers including Leon Cooperman, Eric Mindich and Thomas Steyer unloaded billions of dollars of Apple shares between September 30 and December 31, according to disclosure documents filed on Thursday.

Shares of Apple rose to an all-time high of $705.07 on September 21 but ended 2012 down more than 24 percent from that peak as investors worried about increasing competition and declining profit margins.

The shares also may have dropped because their price rose too much, too fast.

"The stock just went up so much in early 2012 and then was coming back to earth," said Justin Walters, co-founder of Wall Street research firm Bespoke Investment Group. "Three months from now, we'll be seeing a lot of the people who sold starting to pick it up again."

The fourth-quarter sellers avoided even deeper losses. Apple's shares have lost 12 percent so far this year. The shares lost 42 cents, or 0.1 percent, to close at $466.59 on the Nasdaq on Thursday.

Cooperman's Omega Advisors fund dumped its entire stake of more than 266,000 shares during the fourth quarter, according to its required quarterly disclosure form filed with the Securities and Exchange Commission.

Mindich, named the youngest partner ever at Goldman Sachs before starting his Eton Park Capital Management fund in 2004, got out of Apple entirely in the fourth quarter after making big sales in the third quarter as well. Eton owned 600,000 shares at the beginning of 2012.

Farallon Capital, the hedge fund founded by Steyer, sold 137,000 shares. Steyer, who once worked on the Goldman Sachs risk arbitrage desk under Robert Rubin, stepped down at the end of the year from the firm, which he founded in 1986. Rubin served as U.S. Treasury secretary from 1995 to 1999.

Jana Partners, an activist fund run by Barry Rosenstein, also unloaded its entire Apple stake of more than 143,000 shares. Other notable sellers included Third Point LLC, which had owned 710,000 shares, Viking Global Investors, which dumped 1.1 million shares and Lone Pine Capital, which sold over 800,000 shares.

A much smaller line up of funds bought shares amid the stock's crash. David Tepper's Appaloosa Management nearly doubled its stake during the quarter to about 913,000 shares. George Soros more than doubled his stake to about 184,000 shares. And David Einhorn, who last week sued Apple in a bid for higher dividends, added 20 percent to his holdings to end the quarter with 1.3 million shares.

PROFITABLE TRADES

Despite the plunge in Apple's stock price, most of the managers likely exited their positions with substantial profits because they bought years earlier.

Rosenstein and Cooperman, for example, both started gathering their stakes in the middle of 2010, when Apple shares traded below $300.

At the time, the company's iPhone 4 was beset by alleged faulty reception, a problem that became known as "antennagate." Apple's then-chief executive, the late Steve Jobs, famously dismissed the issue, saying "we don't think we have a problem." But Apple offered customers a free bumper case that was supposed to minimize any issues.

Customers did not seem to care, snapping up millions of iPhones and sending Apple's share price up almost 50 percent over the next year.

Apple came under further scrutiny last week from Greenlight's Einhorn. Einhorn filed a lawsuit to block changes in Apple's policy for issuing preferred stock. Instead, Apple should issue a new class of preferred stock to share more of its $137 billion cash hoard with shareholders, Einhorn said.

Apple Chief Executive Tim Cook dismissed the moves as a "silly sideshow" on Tuesday.

SOME TRIMMED

Not all well-known hedge fund fans of Apple cut ties in the fourth quarter. Some only trimmed their holdings.

Philippe Laffont, who worked under famed hedge fund manager Julian Robertson before striking out on his own at Coatue Management, sold about 18 percent of his Apple shares. Coatue ended the year with a still sizable 643,000 shares.

Chase Coleman, another manager who worked for Robertson, reduced the Apple stake at his Tiger Global Management fund by 19 percent to just over 1 million shares.

Robertson's own Tiger Management LLC fund trimmed its Apple stake by 28 percent to about 42,000 shares.

Large hedge funds are required to disclose their U.S. stock holdings within 45 days after the end of each quarter.

But the filings may not give a complete picture of each fund's moves, since only U.S.-listed shares and options must be revealed. Bonds, foreign shares and derivatives are not included, and short positions, or bets that a stock will fall in price, are not listed.

(Reporting by Aaron Pressman; Additional reporting by Katya Wachtel, Svea Herbst, Sam Forgione and Jennifer Ablan in New York; Editing by Steve Orlofsky and David Gregorio)

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Attendees sit in front of an Apple logo during the Apple Worldwide Developers Conference 2012 in San Francisco, California June 11, 2012.

NEW YORK | Fri Dec 21, 2012 1:41pm EST

NEW YORK (Reuters) - The nearly 28 percent decline in shares of Apple Inc since mid-September isn't just painful to individual shareholders. It's also being felt by investors who chased hot mutual funds that loaded up on Apple as the stock raced to a record $705 per share.

Apple makes up 10 percent or more of assets in 117 out of the 1,119 funds that own its shares, according to data from Lipper, a Thomson Reuters company. Those big stakes have contributed positively to each fund's annual performance to date, with Apple still up about 32 percent for the year. It was trading at $527.73 soon after the opening on Friday.

But that year-to-date outcome may not accurately reflect the performance of the funds for individual investors. All told, approximately $4.5 billion has been added to funds with overweight stakes in Apple this year, according to Morningstar data. The majority of these dollars were invested after March and after Apple first exceeded $600 per share - meaning many investors have been riding down with the decline.

The $302 million Matthew 25 fund, for instance, holds 17.4 percent of its assets in Apple, according to Lipper. The fund's 31.9 percent gain through Thursday makes it one of the top performing funds for the year.

Most of its Apple shares were bought years ago at a bargain basement price of about $125 per share. But $158.9 million of the fund's assets - or 53 percent - were invested after the end of March, when Apple was trading near $615 per share, according to Morningstar data.

For those investors that bought after March, all that concentration in Apple hasn't led to a stellar gain but rather a drag on the portfolio. Someone who invested in Matthew 25 in early April has seen the value of the fund's Apple stake fall about 19 percent, while someone who invested at the beginning of September has watched that outsized Apple stake drop 27.2 percent.

In turn, the majority of the fund's investors have reaped a much more modest performance than its year-end numbers suggest. Since the end of March, the fund has gained 6.7 percent, according to Morningstar data, far less than its 31 percent year-to-date gain and about two percentage points more than the benchmark Standard & Poor's 500 index.

Since, September the fund is down nearly 3 percent through Thursday's close, compared with a 1.1 percent decline in the S&P 500 in that period.

The impact of Apple's falling stock price shows some of the drawbacks of portfolio concentration, experts say. These stakes can leave the funds overexposed to the ups and downs of one company - counter to what most mutual funds are supposed to do for investors.

"Any time you get over 10 percent of the portfolio in one company it's a red flag," said Michel Herbst, director of active fund research at Morningstar. Many fund managers do have risk management rules that prevent them from devoting more than 5 percent to 6 percent of their portfolio to any one stock, he said.

Then again, some funds purposely invest in just a few stocks. Mark Mulholland, the portfolio manager of the Matthew 25 fund, said that taking concentrated positions in companies is the only way to beat an index over longer periods of time.

'RIGHT-SIZING' PORTFOLIOS

Along with concerns about iPhone sales in China and tax-motivated selling among people who want to avoid potentially higher capital gains taxes in 2013, the wide fund ownership of Apple may be a factor in the size of the stock's recent declines, fund managers said. In addition, with so many funds already heavily invested in the high-priced stock, there may be fewer marginal buyers available to push prices up again when shares begin to dip.

"The stock didn't go from $700 to $520 because people didn't like the new iPad. It's become a favorite short of hedge funds because they know they can get in on this," said Mark Spellman, a portfolio manager of the $300 million Value Line Income and Growth fund with a small position in Apple.

Short interest in the stock rose to 20.6 million shares at the end of November from 15.1 million shares at the end of September, according to Nasdaq.

"Some of my competitors have 12 percent of their assets in Apple, which I think is ludicrous", said Spellman, who said the company is no longer trading on its fundamentals.

Sandy Villere, who has a 2.5 percent weighting of Apple in his $276 million Villere Balanced fund, said that some mutual fund managers are selling shares because of the over-weighting.

"Right now many people who did take huge overweight positions are right-sizing their portfolios to get it in line with their regular weightings," he said.

Still, some bullish investors see the stock's recent declines as a buying opportunity.

Mulholland, the Matthew 25 portfolio manager, continues to say that shares should be priced at over $1,000 per share based on his valuation of the company at 10 times enterprise value divided by earnings before interest, taxes, depreciation and amortization (EBITDA). Apple trades at about 7 times that figure now.

Wall Street analysts' average price target as of Thursday is $742.56, according to Thomson Reuters data. But Mulholland is happy to be more bullish than his peers.

"I'm glad that I'm able to get it at these prices," he said.

(Reporting By David Randall; Editing by Jennifer Merritt)

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NEW YORK | Sun Oct 14, 2012 4:02pm EDT

NEW YORK (Reuters) - Hedge funds and other big speculators piled into the rallying gold and natural gas markets for a second week running, taking the net long money in U.S. commodities up by nearly $1 billion, trade data showed on Friday.

The so-called "money managers" in commodities boosted their net longs in gold to the highest level in nearly 16 months, while taking bullish bets in gas to 8-week peaks, according to the data issued by the Commodity Futures Trading Commission.(CFTC)

Reuters' calculations of the CFTC's Commitment of Traders data showed the value of the net long position held by money managers in some 22 U.S. commodity markets tracked by the CFTC rose by around $900 million in the week to October 9, touching nearly $114 billion.

The figures are calculated by Reuters based on the change in net positions from the week before, multiplied by the contract's value at the end of the period. Because most investors trade commodities on margin, the change in the value of positions is not directly equivalent to total investment.

Managed money's net length in gold futures and options traded on New York's COMEX rose by 2,547 lots to 198,194 lots in the week ended October 9 -- the largest such holding since August 2011.

Gold posted four straight months of gains prior to October. Last week, it hit 11-month highs just below $1,800 an ounce.

While the precious metal saw some profit-taking this week -- closing on Friday with the sharpest weekly decline since June -- some analysts expect a rebound due to euro zone debt worries and economic uncertainties.

Prospects of a U.S. "fiscal cliff" of automatic spending cuts and tax increases scheduled for January could also shock the U.S. economy and lead to more money printing from the Federal Reserve, analysts said.

In natural gas, money managers added 13,119 contracts in NYMEX natural gas futures and options, NYMEX Henry Hub Swaps, NYMEX Henry Hub Penultimate Swaps, and ICE Henry Hub Swaps, for a net long position of 151,942. It was the largest net long position in eight weeks for speculators in gas.

The front-month contract for NYMEX natural gas hit a 2012 peak of $3.638 per million British thermal units (mmmBtu) in Friday's session. Gas prices have gained nearly 30 percent since the end of August, helped by light stockpile builds amid cooler weather forecasts in the U.S. Northeast.

(Editing by Sofina Mirza-Reid)

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NEW YORK | Fri Oct 12, 2012 5:47pm EDT

NEW YORK (Reuters) - Hedge funds and other big speculators piled into the rallying gold and natural gas markets for a second week running, taking the net long money in U.S. commodities up by nearly $1 billion, trade data showed on Friday.

The so-called "money managers" in commodities boosted their net longs in gold to the highest level in nearly 16 months, while taking bullish bets in gas to 8-week peaks, according to the data issued by the Commodity Futures Trading Commission.(CFTC)

Reuters' calculations of the CFTC's Commitment of Traders data showed the value of the net long position held by money managers in some 22 U.S. commodity markets tracked by the CFTC rose by around $900 million in the week to October 9, touching nearly $114 billion.

The figures are calculated by Reuters based on the change in net positions from the week before, multiplied by the contract's value at the end of the period. Because most investors trade commodities on margin, the change in the value of positions is not directly equivalent to total investment.

Managed money's net length in gold futures and options traded on New York's COMEX rose by 2,547 lots to 198,194 lots in the week ended October 9 -- the largest such holding since August 2011.

Gold posted four straight months of gains prior to October. Last week, it hit 11-month highs just below $1,800 an ounce.

While the precious metal saw some profit-taking this week -- closing on Friday with the sharpest weekly decline since June -- some analysts expect a rebound due to euro zone debt worries and economic uncertainties.

Prospects of a U.S. "fiscal cliff" of automatic spending cuts and tax increases scheduled for January could also shock the U.S. economy and lead to more money printing from the Federal Reserve, analysts said.

In natural gas, money managers added 13,119 contracts in NYMEX natural gas futures and options, NYMEX Henry Hub Swaps, NYMEX Henry Hub Penultimate Swaps, and ICE Henry Hub Swaps, for a net long position of 151,942. It was the largest net long position in eight weeks for speculators in gas.

The front-month contract for NYMEX natural gas hit a 2012 peak of $3.638 per million British thermal units (mmmBtu) in Friday's session. Gas prices have gained nearly 30 percent since the end of August, helped by light stockpile builds amid cooler weather forecasts in the U.S. Northeast.

(Editing by Sofina Mirza-Reid)

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n">(Reuters) - The Investment Company Institute on Thursday issued the following money market mutual fund assets report:

"Total money market mutual fund assets decreased by $1.38 billion to $2.562 trillion for the week ended Wednesday, October 10, the Investment Company Institute reported today. Taxable government funds decreased by $3.89 billion, taxable non-government funds increased by $4.64 billion, and tax-exempt funds decreased by $2.13 billion.

Retail: Assets of retail money market funds decreased by $2.90 billion to $886.96 billion. Taxable government money market fund assets in the retail category decreased by $190 million to $186.11 billion, taxable non-government money market fund assets decreased by $1.84 billion to $512.00 billion, and tax-exempt fund assets decreased by $860 million to $188.84 billion.

Institutional: Assets of institutional money market funds increased by $1.52 billion to $1.675 trillion. Among institutional funds, taxable government money market fund assets decreased by $3.70 billion to $670.47 billion, taxable non-government money market fund assets increased by $6.49 billion to $924.21 billion, and tax-exempt fund assets decreased by $1.27 billion to $80.78 billion.

ICI reports money market fund assets to the Federal Reserve each week. Revisions are due to data adjustments, reclassifications, and changes in the number of funds reporting. Weekly money market assets for the last 20 weeks are available on the ICI website."

NOTE: ICI's Web site is www.ici.org

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LONDON | Tue Oct 9, 2012 8:23am EDT

LONDON (Reuters) - A global supervisory body for securities has published its final recommendations for new rules for the $4.7 trillion money market fund sector despite opposition from its U.S. member.

The recommendations were called for by leaders of the world's top economies (G20) a year ago as part of efforts to crack down on "shadow banks" that also include hedge funds, special investment vehicles and repurchase agreements.

The International Organization of Securities Commissions (IOSCO) said the recommendations - which the body's regulatory members such as Britain's Financial Services Authority will apply locally - cover valuations, liquidity management, use of ratings and disclosures to investors.

"Although money market funds, which provide a significant source of credit and liquidity, did not cause the crisis, their performance during the 2007/08 financial turmoil highlighted their potential to spread or even amplify a crisis," IOSCO said in a statement.

Some regulators worry that as traditional banks become more heavily regulated, risky credit activities will shift to shadow banks which are currently less regulated.

IOSCO's 15 recommendations supplement reforms already introduced in the United States and Europe in 2010. It will review within two years how they are being applied.

The industry says money market funds are safe and don't need more rules.

Most of the commissioners from the U.S. Securities and Exchange Commission (SEC), an IOSCO member, opposed the publication of the global watchdog's recommendations.

In August, the SEC commissioners blocked U.S. proposals to introduce more rules for the money market funds sector on top of those already implemented in the United States in 2010.

IOSCO said that apart from U.S. opposition, there were no other objections to it publishing the recommendations on Tuesday.

The watchdog's members, who also include Bafin of Germany and Japan's Financial Services Agency, regulate more than 95 percent of the world's securities markets and are required to implement agreed rules.

(Reporting by Huw Jones; Editing by Laurence Fletcher and David Holmes)

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NEW YORK | Mon Oct 8, 2012 3:41pm EDT

NEW YORK (Reuters) - U.S. hedge funds and other clients of Wall Street investment firms raised their level of borrowed money in August, a sign they may be more confident in the markets, data published Monday showed.

Leverage rose to $286.6 billion last month, according to New York Stock Exchange margin debt data, up 5.4 percent since August last year. It is the first time in nine months that margin debt has increased on a year-over-year basis, analysts at Bank of America Merrill Lynch showed in their Hedge Fund Monitor report.

Leverage levels "can be used as a sentiment indicator" so the increase could mean investors have regained some confidence in the market, the report said.

While the level of leverage recorded in August is a 3.2 percent rise on July levels, it still lags the amount of borrowed cash that investors were using to make bets in the stock market before Lehman Brothers collapsed, according to NYSE data.

Hedge funds have gained about 5 percent this year through September, according to hedge fund tracking firms, but still trail the broader stock market. The S&P 500 index rose more than 16 percent through September.

August's rise in leverage could be an indication that hedge funds and large investors, reassured by rallying stock markets, are willing to use more borrowed money try and amplify their returns, though another month of data would be needed to confirm this, Bank of America analyst Mary Ann Bartels said in an email.

Before the financial crisis, hedge funds, particularly those focused on bets in credit markets, used leverage in different forms boost returns, such as increasing exposure to inherently levered products like derivatives, or by using margin or borrowed money from Wall Street.

In 2007, NYSE margin debt rose above $317 billion and stayed there for the remainder of the year, hitting a peak of more than $381 billion that July.

Investors reduced their leverage in 2009 and 2010 to levels as low as $173 billion and then began to borrow more money again through July of 2011. Spooked by whipsawing markets last summer, which devastated the portfolios of some of the country's savviest investors, money managers took off leverage again in the second half of the year.

Through August, NYSE margin debt is down about 4 percent from its 2012 peak of $298.5 billion, recorded in April. Beginning in May risk-averse investors reduced leverage, pulling back from global financial markets riled by fears that Greece would exit the deeply troubled euro zone.

Margin debt remains down roughly 10.6 percent from its post-2008 peak of $320.7 billion, which it reached in April last year.

NYSE member organizations are required to report monthly the total amount of money borrowed by customers to purchase securities.

While hedge funds have yet to ratchet up to pre-crisis levels, or even to the highs of 2011, Bank of America analysts said the fact that investors increased leverage last month is a positive sign.

Margin debt is one way to measure how much risk hedge funds and other large investors are taking by using borrowed cash, but it fails to address or measure the exposure those firms have to 'embedded' or 'hidden' leverage, which they can obtain by investing in structured products like collateralized loan obligations or asset-backed-securities, which are more highly levered in themselves. Some hedge funds have been eyeing those riskier, more exotic assets in their hunt for yield.

Data published Friday by BarclayHedge and TrimTabs showed that hedge fund managers "are strongly inclined to maintain current levels of leverage," and "plans to lever up fell slightly in September while plans to reduce leverage climbed by a small margin."

(Reporting By Katya Wachtel)

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NEW YORK | Fri Sep 28, 2012 7:09pm EDT

NEW YORK (Reuters) - Hedge funds and other big speculators have pulled more than $5 billion from U.S. commodity markets, cutting their net long position for the first time in six weeks after sending oil, metals and crop prices to multimonth highs, trade data showed Friday.

The profit-taking in the week to September 25 was the biggest in four months by the so-called "money managers" in commodities, according to data issued by the Commodity Futures Trading Commission (CFTC) and calculated by Reuters.

It was the first major snap in managed money net longs that had built up since early July in anticipation of stimulus measures from the Federal Reserve and the European Central Bank.

In that period, hedge funds and other speculators pumped about $30 billion into U.S. commodities, by Reuters' estimates, creating new bullish milestones in crude oil, gold, copper and soybean prices.

Reuters' calculations of the CFTC's Commitment of Traders data showed the value of the net long position held by money managers in some 22 U.S. commodity markets fell to $112.3 billion in the week to September 25, from $117.8 billion in the week ended September 18.

The figures are calculated by Reuters based on the change in net positions from a week ago, multiplied by the contract's value at the end of the period. Because most investors trade commodities on margin, the change in the value of positions is not directly equivalent to total investment.

In contract terms, the decline during the week to September 25 was 87,955 contracts, or nearly 6 percent lower from the previous week.

OIL LEADS LOSSES, GOLD SHINES

Oil accounted for much of the loss. Reuters' calculations showed a net outflow of $3.4 billion, or 36,885 contracts, in crude oil futures held by money managers on the New York Mercantile Exchange.

Speculators were also bearish on natural gas, soybeans, raw sugar, cotton and arabica coffee -- trimming net longs or adding to net shorts in these markets.

The profit-taking did not mean that money managers were done on commodities, said some analysts, who placed high hopes on an even bigger rally down the road in markets such as gold due to inflationary pressure.

Managed money's net long in U.S. gold hit near seven-month highs on bets that major central banks would keep pumping money to stimulate growth.

"Gold is being utilized as a protest by investors against governments which are failing miserably to solve their deficit and debt problems," said Jeffrey Sica, chief investment officer of SICA Wealth Management, which has over $1 billion in assets.

Gold closed lower on Friday, but the precious metal posted its biggest quarterly gain in more than two years.

The 19-commodity Thomson Reuters-Jefferies CRB index, a bellwether for the asset class, also had its best quarter since the first quarter of 2011.

Monthly data issued separately by the CFTC on Friday showed the net length across U.S. commodity markets rose by $8.8 billion in August to $209 billion.

The CFTC figures account for only a portion of the investor capital invested in commodity markets worldwide. Much of the rest are invested in over-the-counter contracts, physical exchange funds or credit notes, or via banks, which are classified differently by the CFTC.

(Editing by Jim Marshall)

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NEW YORK | Fri Sep 28, 2012 7:09pm EDT

NEW YORK (Reuters) - Hedge funds and other big speculators have pulled more than $5 billion from U.S. commodity markets, cutting their net long position for the first time in six weeks after sending oil, metals and crop prices to multimonth highs, trade data showed Friday.

The profit-taking in the week to September 25 was the biggest in four months by the so-called "money managers" in commodities, according to data issued by the Commodity Futures Trading Commission (CFTC) and calculated by Reuters.

It was the first major snap in managed money net longs that had built up since early July in anticipation of stimulus measures from the Federal Reserve and the European Central Bank.

In that period, hedge funds and other speculators pumped about $30 billion into U.S. commodities, by Reuters' estimates, creating new bullish milestones in crude oil, gold, copper and soybean prices.

Reuters' calculations of the CFTC's Commitment of Traders data showed the value of the net long position held by money managers in some 22 U.S. commodity markets fell to $112.3 billion in the week to September 25, from $117.8 billion in the week ended September 18.

The figures are calculated by Reuters based on the change in net positions from a week ago, multiplied by the contract's value at the end of the period. Because most investors trade commodities on margin, the change in the value of positions is not directly equivalent to total investment.

In contract terms, the decline during the week to September 25 was 87,955 contracts, or nearly 6 percent lower from the previous week.

OIL LEADS LOSSES, GOLD SHINES

Oil accounted for much of the loss. Reuters' calculations showed a net outflow of $3.4 billion, or 36,885 contracts, in crude oil futures held by money managers on the New York Mercantile Exchange.

Speculators were also bearish on natural gas, soybeans, raw sugar, cotton and arabica coffee -- trimming net longs or adding to net shorts in these markets.

The profit-taking did not mean that money managers were done on commodities, said some analysts, who placed high hopes on an even bigger rally down the road in markets such as gold due to inflationary pressure.

Managed money's net long in U.S. gold hit near seven-month highs on bets that major central banks would keep pumping money to stimulate growth.

"Gold is being utilized as a protest by investors against governments which are failing miserably to solve their deficit and debt problems," said Jeffrey Sica, chief investment officer of SICA Wealth Management, which has over $1 billion in assets.

Gold closed lower on Friday, but the precious metal posted its biggest quarterly gain in more than two years.

The 19-commodity Thomson Reuters-Jefferies CRB index, a bellwether for the asset class, also had its best quarter since the first quarter of 2011.

Monthly data issued separately by the CFTC on Friday showed the net length across U.S. commodity markets rose by $8.8 billion in August to $209 billion.

The CFTC figures account for only a portion of the investor capital invested in commodity markets worldwide. Much of the rest are invested in over-the-counter contracts, physical exchange funds or credit notes, or via banks, which are classified differently by the CFTC.

(Editing by Jim Marshall)

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NEW YORK | Thu Sep 27, 2012 4:01pm EDT

NEW YORK (Reuters) - With increased regulatory scrutiny of complex exchange-traded funds and exchange-traded notes, big brokerage firms are taking longer to make them available to financial advisers, according to speakers at SIFMA's Complex Products Forum.

In some cases, the firms have decided that the time it would take to conduct due diligence on complex ETFs, or even a mutual fund, is not worth the effort, said Paul Weisenfeld, managing director of funds at Morgan Stanley Wealth Management, in a panel discussion at the forum on Thursday.

This means that financial advisers - and many of their clients - may not be able to access more sophisticated products or, at the very least, will have to wait several months before they can buy them.

"It used to be that once a product got a ticker everyone could get it," said one conference attendee who declined to be named because he was not permitted by his employer to speak to the press. "Now the firm blocks the ticker until they approve it for sale."

The U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority in recent years have stepped up their focus on complex ETFs, such as leveraged and inverse exchange traded-funds, as well as exchange-traded notes.

Leveraged and inverse ETFs are designed to amplify short-term returns by using debt and derivatives while exchange-traded notes are debt securities issued by banks.

The number of ETFs and ETNs has jumped over the years, with 1,454 ETFs, 205 of which are exchange-traded notes, now on the market, according to Morningstar.

Given the increase in the number of these products being launched, brokerage firms have to spend more time than ever doing due diligence, brokerage firm executives on the panel said.

Some products might not get approved because the firm simply has not had time yet to review them properly, said Robert Forsyth, director, exchange traded products at UBS Financial Services.

"At UBS we block many products because they are too new and we haven't had a chance to review them," he said in the panel discussion. "With so many new products coming out, we just don't have the time or manpower to review all of the products."

The due diligence applies both to the firms' own products as well as those created by other providers, Forsyth said.

For example, the investment banking arm of UBS offers a number of volatility-based exchange-traded notes, none of which UBS allows its own financial advisers to sell, Forsyth said after the panel discussion.

For those products that do pass muster, the brokerages still set restrictions on who can buy them.

UBS and Wells Fargo & Co, for example, have built systems to help assure that more complex products are only available to suitable clients.

UBS' classification system takes into account a number of criteria, such as an investors' risk tolerance, income, total net worth, when deciding which investors can have access to complex products. The system has more than 20 criteria.

"You can have a very unsophisticated investor with a huge net worth, so you need to look at a variety of factors," Forsyth said.

Wells Fargo has a system created to restrict sales of certain products to only clients that have a relevant investment objective, said Dan Moorman, senior vice president, of mutual funds, ETFs and unit investment trusts at Wells Fargo Advisors, the brokerage arm of Wells Fargo, in the panel discussion.

Similarly, the firm has enhanced its systems so that when certain types of orders come in, the client receives disclosures about the potential risks of those complex products, he said.

For smaller brokerage firms, the increased due diligence on complex products can be a particular challenge, said one wirehouse executive who spoke anonymously because he is not allowed to speak to the press.

"FINRA holds every broker dealer accountable," he said.

In opening remarks at the conference, FINRA Chief Executive Richard Ketchum said the agency is looking closely at how firms sell complex products, with a particular focus on potential conflict of interest and training.

(Reporting By Jessica Toonkel; Editing by M.D. Golan)

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