While looking for information on a certain money manager I came across a Website that put together a list of all of the institutional and individual investors who had lost money with Bernard Madoff. The list is impressive in its size and scope.
I was looking at another list as well in my due diligence for Futures’ upcoming Top Traders of the year feature. You see, while 2008 was a terrible year for equities, hedge funds, housing and just about every other asset class, commodity trading advisors (CTAs) had one their best year’s ever. Those of you who are familiar with managed futures know that it tends to perform best when equity markets struggle and when there are large market dislocations causing increased volatility.
What I find most interesting is how so many institutions and individuals could send billions of dollars to feeder funds and directly to Mr. Madoff while a relatively simple exercise of due diligence would have produced huge red flags yet these same folks would turn up their nose at most CTAs; too risky you see.
The list of managers in the Barclay Hedge CTA database show dozens of managers earning more than 50% in 2008 and more than 300 managers with a compound annual return of better than 10% over the last three years—10% is the modest figure Mr. Madoff promised that brought so many billions of dollars to his firm.
However, many of the CTAs in the database who have produced consistent strong returns had only a few millions under management. It was an interesting dichotomy and one that is worth further exploration. Stay tuned.
Tags: Bernard Madoff, Managed Futures
