Get ready for investigators to uncover dozens of more possible Bernard Madoff style frauds. Politco and Morningstar Inc surveyed 1,684 hedge funds that have disclosed their quarterly results for the past 5 years. That’s twenty quarters of results. It seems that 34 of those funds have never reported a down quarter.
That kind of unwavering stability of results was a key red flag that the Madoff investment scheme was crooked. So the odds are that at least some of these funds reporting unblemished quarterly records have been cooking the books. According to Politico, seven of the firms with unblemished results are connected to Madoff. That means there are 27 firms with results suggestive of completely independent scams.
From Politico: To be sure, the time frame captured by the Morningstar data – the fourth quarter of 2003 to the third quarter of 2008 – was generally a good time to make money in the stock market – though it got much tougher in 2008. And many of the firms may be exactly what they purport to be: excellent, and perfectly legitimate, investors.
Among funds of funds, or hedge funds that invest their money in other funds, such results are much rarer. Morningstar found that of 1,227 funds of funds that have reported 20 consecutive quarters of results, only four have failed to report a single down quarter in that time frame. And none of the four seems to be publicly connected to the Madoff scandal.
Of course, most of the funds that will be uncovered as scams will be far smaller than the purported $50 billion Madoff scheme. But as these stories trickle out of the next few weeks and months, expect even more investor uncertainty. It’s tough enough to make a profit in turbulent markets. Now they have to worry that they’re being cheated by their investment advisors also.
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Prepare For Many More Madoffs
John Carney
17 January 2009
Get ready for investigators to uncover dozens of more possible Bernard Madoff style frauds. Politco and Morningstar Inc surveyed 1,684 hedge funds that have disclosed their quarterly results for the past 5 years. That’s twenty quarters of results. It seems that 34 of those funds have never reported a down quarter.
That kind of unwavering stability of results was a key red flag that the Madoff investment scheme was crooked. So the odds are that at least some of these funds reporting unblemished quarterly records have been cooking the books. According to Politico, seven of the firms with unblemished results are connected to Madoff. That means there are 27 firms with results suggestive of completely independent scams.
From Politico: To be sure, the time frame captured by the Morningstar data – the fourth quarter of 2003 to the third quarter of 2008 – was generally a good time to make money in the stock market – though it got much tougher in 2008. And many of the firms may be exactly what they purport to be: excellent, and perfectly legitimate, investors.
Among funds of funds, or hedge funds that invest their money in other funds, such results are much rarer. Morningstar found that of 1,227 funds of funds that have reported 20 consecutive quarters of results, only four have failed to report a single down quarter in that time frame. And none of the four seems to be publicly connected to the Madoff scandal.
Of course, most of the funds that will be uncovered as scams will be far smaller than the purported $50 billion Madoff scheme. But as these stories trickle out of the next few weeks and months, expect even more investor uncertainty. It’s tough enough to make a profit in turbulent markets. Now they have to worry that they’re being cheated by their investment advisors also.
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