Institutional Investor's Alpha Magazine - December 2008 / January 2009 - (Page 3)

Letter from the editor Confidence Game EDITOR Michael Carroll EDITOR Michael Carroll EXECUTIVE EDITOR Michael Peltz MANAGING EDITOR David Schutt INTERNATIONAL EDITOR Tom Buerkle ART DIRECTOR Nathan Sinclair EDITOR-AT-LARGE Firth Calhoun ASSISTANT MANAGING EDITORS Tom Johnson ART DIRECTOR Irene Ledwith (Research), William Loob (Editorial Production), ASSISTANT MANAGING EDITORS Lewis Knox Sathya Rajavelu (Director, Research Operations Group), Steve Rosenbush Kutler (Global Technology and (Research), Jeffrey (Wall Street, Corporate Finance), Tracy Tjaden (International) Banking), Deborah F. McClellan (Editorial BUREAU CHIEFS Loch Adamson (London), Production), Barbara Rudolph (Money ManageAllen T. Cheng (Asia) ment) SENIOR EDITORS Steven Brull (Los Angeles), EUROPEAN EDITOR Tom Buerkle (London) Karl Cates, Jane B. Kenney (Editorial Research), Jo Wrighton (Paris) BUREAU CHIEF Kevin Hamlin (Hong Kong) SENIOR WRITERS Frances Denmark, Michael Shari SENIOR EDITORS Steven Brull (Los Angeles), STAFF WRITERS David Lanchner (Paris), Andrew Capon (London), Jane B. Kenney Imogen Rose-Smith, Julie Segal (Editorial Research) SENIOR ASSOCIATE EDITOR Tucker Ewing SENIOR WRITERS Deepak Gopinath, ASSOCIATE EDITORS Sivert Hagen, Justin Julia Leikin (Research Specialist), WeiQing Lu Schack (Research Specialist), Carolynn B. Tetro STAFF WRITERS Rich Blake, David Lanchner COPY CHIEF David Wray (Paris) SENIOR CONTRIBUTING EDITORS Fran Hawthorne, SENIOR ASSOCIATE EDITOR Tucker Ewing Harvey D. Shapiro, Stephen Taub ASSOCIATE EDITORS Emily Fleckner, Sivert CONTRIBUTING WRITERS Pam Abramowitz, Danielle Beurteaux, Phil Davis, Katie Gilbert, Hagen Udayan Gupta, Scott Martin, Neil O’Hara, COPY CHIEF David Wray Nick Rockel, Robert Rosenberg, Jaye Scholl, Henry Scott Stokes SENIOR CONTRIBUTING EDITORS Fran Hawthorne, Hal Lux, Harvey Deputy Copy Charles Smith COPY DEPARTMENT D. Shapiro, Chief: Bill Christophersen; Joan Warner (Tokyo), Stephen Taub, Copy Editors: Ingrid Accardi, Ruth Hamel CONTRIBUTING EDITORS Colin Barraclough, ASSISTANT TO THE EDITOR Elizabeth Simroe Lucy Conger (Mexico City), Jonathan Kandell, ART DEPARTMENT Deputy Art Director: Diana Panﬁl; Lois Madison Reamy, Kazuhiko Shimizu Associate Art Director: Anthony Scerri; (Beijing), Leah Nathans Spiro Senior Designer: Jennifer Klock; Photo Editor: Katie Constans; COPY DEPARTMENT Deputy Copy Chief: Jeff CranActing Associate Photo Editor: Frannie Ruch; mer Color Imaging Manager: John Miliczenko ASSISTANT TOCEO Gary Mueller CHAIRMAN & THE EDITOR Elizabeth Simroe GROUP PUBLISHERDeputy Art Director: Patrizia Bove; ART DEPARTMENT Christine Cavolina PUBLISHER Joy DeSanto Associate Art Director: Stephanie Lora; Photo Editor: PUBLISHER, INTERNATIONAL Spencer Wicks Anastasia Pleasant; Color Imaging PUBLISHER, ASIA Wendy GallagherManager: ONLINE Miliczenko John SALES DIRECTOR Chris DeAngelis EXECUTIVE DIRECTOR OF MARKETING Louis Cassetta PRESIDENT & CEO Christopher R. Brown PRODUCTION DIRECTOR Brian Gill PUBLISHEROF FULFILLMENT Robert Tonchuk DIRECTOR Christine Cavolina CHIEF OPERATING OFFICER David E. Antin PUBLISHER, INTERNATIONAL Lisa Traeger Institutional Investor’s AlphaTM and AlphaTM, 225 Park Avenue South, PRODUCTION DIRECTOR Brian Gill 224-3171. New York, NY 10003; (212) 224-3300; Fax: (212) MANAGING DIRECTOR OF RESEARCH PRODUCTS © 2008 Institutional Investor, Inc. No statement in this magazine is toDenise Murrell be construed as a recommendation to buy or sell securities. Neither this publication nor any part of it may be reproduced or transmitted in any form or by AND OPERATIONS DIRECTOR OF FINANCE any means, electronic or mechanical, including photocopying, recording or by any information David E. Antin storage and retrieval system, without the prior written permission of Institutional Investor’s Alpha magazine. For reprints contact Institutional Investor’s Alpha TM and Alpha,TM 225 Park Avenue Dewey Palmieri (212) 224-3675; Fax: (212) 224-3563; e-mail: South, New York, NY 10003; (212) 224-3300; Fax: (212) 224dpalmieri@institutionalinvestor.com. Subscription hotline: 3171. (800) 437-9997; Overseas: (44 -20) 7779 8999 YOU’VE GOT TO LOVE YOUTUBE. Where else can you ﬁnd a video from a roundtable discussion at the Philoctetes Center for the Multidisciplinary Study of the Imagination in New York featuring Bernie Madoff speaking about market regulation some 14 months before the pioneering market maker and former Nasdaq chairman was arrested for masterminding an alleged $50 billion Ponzi scheme. “In today’s regulatory environment it’s virtually impossible to violate rules,” Madoff says in the clip. “It’s impossible for a violation to go undetected, certainly not for a considerable period of time.” Nothing, it seems, is impossible anymore. According to the FBI agent who questioned him, Madoff confessed to deceiving clients for years, using the principal he received from other investors to pay their returns, in classic Ponzi fashion. His ﬁrm, Bernard L. Madoff Investment Securities, which reported $17.1 billion in assets under management at the start of 2008, was, in fact, insolvent. Even so, the 70-year-old Madoff might have been able to keep the scam going had it not been for $7 billion in redemption requests the ﬁrst week of December. It’s easy to see how individuals, charities and small foundations could get taken in by a Wall Street legend. The affable Madoff was known as a conservative investor who delivered consistent, lowdouble-digit annual returns with little volatility using a low-risk options-trading strategy. What’s much harder to understand is how sophisticated fund-of-funds ﬁrms like Union Bancaire Privée, EIM, Man Group and Tremont Capital Management could entrust their clients’ money with Madoff, whose strategy shouldn’t work in falling markets and failed to raise red ﬂags despite steady monthly gains. Madoff wasn’t a hedge fund manager, but the fallout for the hedge fund industry from his actions is potentially enormous. Jim Vos, CEO and head of research at consulting ﬁ rm Aksia in New York, estimates that funds of hedge funds allocated at least $13 billion to Madoff — all of which could be gone. Fairﬁeld Greenwich Group tops the list of losers, with a staggering $7.5 billion of its $14.1 billion in assets invested in vehicles connected to Madoff. So much for diversiﬁcation. The scale of Madoff’s alleged Ponzi scheme will provide powerful ammunition for lawmakers and regulators already eager to put the squeeze on hedge funds. As we report in this month’s cover package, “The Credit Pandemic and the New World Order” (page 25), 2009 is going to be a very challenging year for hedge fund managers, one marked by a potentially deepening recession, continued market volatility and the almost certain prospect of greater regulation. As we’ve learned from Bernie Madoff, anything is possible. MICHAEL PELTZ EXECUTIVE EDITOR mpeltz@iimagazine.com DECEMBER 2008/JANUARY 2009 • INSTITUTIONAL INVESTOR’S ALPHA • 3

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - December 2008

Institutional Investor's Alpha Magazine - December 2008 Contents Letter from the Editor Longs & Shorts Inside the Trade Pension Corner The Good Guys Interview: Stanley Fink Cover Story: The New Regulatory Reality United States: The Usual Suspects Europe: Flirting with Unity Asia-Pacific: What Asian Contagion? In Theory In Focus Strategies Research Center Alpha Bytes Unhedged Commentary

Institutional Investor's Alpha Magazine - December 2008

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