LOOKING BACK
Barron's this weekend takes on a trip down memory lane, highlighting a 2001 article the magazine did on Bernie Madoff, the now infamous money manager who took $17 billion in assets and made it more or less disappear (the larger $50 billion number has yet to be explained in detail). Here's how Barron's start of the trip*:
"Seven years ago, well before
Bernie Madoff had been accused of fleecing investors of $50 billion in
a massive Ponzi scheme, Barron's questioned his remarkable investment
performance. One of our staff writers, Erin E. Arvedlund, talked with
experts who were highly skeptical about Madoff's claimed results. One
financial adviser that she quoted had pulled his clients' funds out of
Madoff's shop for exactly that reason. Here's the story, excerpted in
almost its entirety. (Erin was recently interviewed on National Public
Radio about her story. Here is a link to the interview.)
TWO YEARS AGO, AT A HEDGE-FUND CONFERENCE in New York, attendees were asked to name some of their favorite and most-respected hedge-fund managers. Neither George Soros nor Julian Robertson merited a single mention. But one manager received lavish praise: Bernard Madoff. Folks on Wall Street know Bernie Madoff well. His brokerage firm, Madoff Securities, helped kick-start the Nasdaq Stock Market in the early 1970s and is now one of the top three market-makers in Nasdaq stocks. Madoff Securities is also the third-largest firm matching buyers and sellers of New York Stock Exchange-listed securities.
But what few on the Street know is that Bernie Madoff also manages more than $6 billion for wealthy individuals. That's enough to rank Madoff's operation among the world's five largest hedge funds. What's more, these private accounts have produced compound average annual returns of 15% for more than a decade. Remarkably, some of the larger, billion-dollar Madoff-run funds have never had a down year.
When Barron's asked Madoff how he accomplishes this, he says, "It's a proprietary strategy. I can't go into it in great detail." Nor were the firms that market Madoff's funds forthcoming. "It's a private fund. And so our inclination has been not to discuss its returns," says Jeffrey Tucker, partner and co-founder of Fairfield Greenwich, a New York City-based hedge-fund marketer. "Why Barron's would have any interest in this fund, I don't know." One of Fairfield Greenwich's most sought-after funds is Fairfield Sentry Limited. Managed by Bernie Madoff, Fairfield Sentry has assets of $3.3 billion."
The whole piece makes fascinating reading, along with the original interview. Definitely worth a weekend read.
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