Newspaper article The Evening Standard (London, England)

Shadowy Hedges May Be Down, but Are They Really out? London Link: US-Based Madoff, Whose Scam Has Brought into Question the Whole Industry's Future, Also Had Offices in Mayfair Nicola Horlick Bramdean Alternatives, 35 Park Lane Philip Richards RAB Capital, Adam Street (Strand) Corina Piedrahita Fairfield Greenwich, 10-12 Cork Street Arkie Busson EIM Group, Mayfair Place

Newspaper article The Evening Standard (London, England)

Shadowy Hedges May Be Down, but Are They Really out? London Link: US-Based Madoff, Whose Scam Has Brought into Question the Whole Industry's Future, Also Had Offices in Mayfair Nicola Horlick Bramdean Alternatives, 35 Park Lane Philip Richards RAB Capital, Adam Street (Strand) Corina Piedrahita Fairfield Greenwich, 10-12 Cork Street Arkie Busson EIM Group, Mayfair Place

Article excerpt

Byline: ROBERT LEA

AFTER the banks, talk was that hedge funds would be next. The prediction has proved correct but not in a way anyone imagined. It was always supposed that as the recession deepened, hedge funds would struggle to make their returns and clients would want their money out.

That is what happened with the Bernard Madoff scandal, but what the rush to redemption exposed was something far worse than a stuttering performance fraud on a vast scale. Madoff's extraordinary ability to hoodwink the investment community, including other hedge funds, has brought into question the industry's future.

Throughout the glorious decade just finished, the hedge funds told everybody how brilliant they were. It didn't pay to ask questions, partly because the answers were convoluted but also because their alchemy was a trade secret. Madoff was able to prey on this need for secrecy, with devastating effect.

Now investors want to know how many other Madoffs there are.

But the industry's love of scant information means nobody knows. The fear stalking the hedge-fund operators is that clients are not going to hang around to find out they are going to demand their money back. The arrogance upon which they built their mystique could prove to be their undoing.

In London, Antonio Borges, a former senior Goldman Sachs executive, is as near as there is to a frontman for a profession that doesn't do frontmen. He's emerged this week to defend the seemingly indefensible, an industry that has seen some of its highest-profile members hang their heads in shame as they confessed that client money had just disappeared in Madoff.

Though he was based in the US, about 45% of the $25 billion losses that have been so far admitted can be pinned on organisations Fairfield Greenwich and FIM Kingate Management that had offices in London's hedge fund heartland of Mayfair and St James's.

But don't believe everything you read about the demise of the industry, says Borges, who is chairman of the Hedge Fund Standards Board, which this year has for the first time laid down thresholds of transparency, governance, oversight practices, valuation procedures and management behaviour. …

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