Piper Jaffray Reportedly Takes Big Hit In Derivatives

NEW YORK - A Piper Jaffray Cos. portfolio manager's investments in financial derivatives could result in more than $700 million in losses to investors, the Wall Street Journal reported today.

The Journal said the losses occurred in funds managed by Worth Bruntjen, who it said handled $3.5 billion in assets at the end of last year for individuals, municipalities, businesses and charities.

Calls today to a spokeswoman for the firm and to Bruntjen were not immediately returned.

The reported losses underscore the enormous risks associated with derivatives, which are exotic financial contracts linked to the performance of some underlying assets such as bonds or commodities. A number of investment funds and corporations with exposure in the derivatives markets have absorbed losses this year.

The newspaper quoted a competing money manager as describing the Piper Jaffray situation as "one of the most incredible debacles in the financial-services industry."

The Journal said the losses include previously disclosed losses in Piper Jaffray's Institutional Government Income Portfolio short-term bond fund.

They also include losses from other investment funds and some privately managed accounts, the newspaper said.

The institutional fund has fallen 23.3 percent since the beginning of this year, and other fixed-income funds managed by Bruntjen have experienced losses of the same magnitude, the Journal account said.

The newspaper quoted a spokeswoman for Piper, a regional brokerage based in Minneapolis, as saying the value of the assets Bruntjen managed fell to $2.795 billion by the end of June from $3.5 billion at the end of 1993.

"We got caught in a market that we thought we understood," Addison Piper, chairman and chief executive, told the newspaper.

At midday, Piper's stock was down $2.625 at $11.

Investment advisors generally aren't responsible for losses of their investors, but the Journal said some firms have compensated investors who have lost money in derivative-laden mutual funds.