It took a huge scandal — Bernie Madoff's alleged Ponzi scheme — to convince a slew of hedge funds of funds that they needed to be more open about their own investments.
An unprecedented number of hedge fund-of-funds managers announced triumphantly that their due diligence process had dissuaded them from investing with Bernard L. Madoff Securities LLC, New York, or in any of the so-called “feeder funds” that offered access to Mr. Madoff's strategy.
Among fund-of-funds companies trumpeting their non-involvement in what may turn out to be the biggest-ever hedge fund fraud case include firms that cater to the world's ultra wealthy. These firms include Luxembourg's Banque Privee Edmond de Rothschild Europe; Swiss managers Partners Group Holding AG, Gottex Fund Management Holdings Ltd.; and Vienna-based Salus Alpha Group Services GmbH. Also dodging the bullet were New Zealand's Infiniti Solutions Ltd., and U.K.-based CMA Global Hedge PCC Ltd.; GAM, the hedge fund-of-funds subsidiary of Julius Baer AG; and Dexion Capital PLC.
Among U.S. fund of funds proclaiming innocence were Cadogan Management LLC, Berens Capital Management LLC, Hennessee Group LLC and Taylor Investment Advisors LP.
“I am not shocked that Madoff did blow up, but I am shocked that so many obviously unqualified naive fund of hedge fund managers — who are obviously doing no due diligence nor do they understand hedge fund strategies — do manage so much ... money and wonder why this happened to them,” said Oliver Prock, chief investment officer of Salus Alpha, in a statement.
Most major U.S. institutionally oriented hedge funds of funds didn't have anything to say — they had passed on Mr. Madoff's funds because he wouldn't provide enough transparency on the investment process. — Christine Williamson
