At one time the integration you saw in a Madoff operation (self-administration) was probably considered a benefit, despite the fraud red-flag it should have raised. No more. We keep hearing rumors that fund of funds have been pulling back from the likes of DE Shaw, Millennium Partners and Caxton. Apparently, they are all self-administered.
True? False? Incomplete list?
You tell us.
Comments (38)
Leave a comment
You can log in with your account or comment as a guest below.
As of 7/31/08, there’s $438 billion in self-administered hedge funds. Zap $50 bil for Madoff, and lop off 20% for performance but still: about $300 billion exists out there – so who are they?
http://www.pionline.com/apps/pbcs.dll/article?AID=/20080730/DAILY/907461225
Were I a reporter, I’d call up Brian Shapiro at Carbon360 and ask him who the top self-administered HFs are. Just sayin’.
i think we really need to know who is self administered and has a sham auditor.
Pretty sure Grosvenor is self-administered.
I hear Jim Simmons is self administered too. Can someone verify?
de shaw was but they are switching over.
subscribe to a database like myfundfinder.com and you can check.
Administration is just one of the issues. Focus on a real auditor, a real staff where there are a number of people at the firm, relationships with 3rd parties and actual trading in the market that other parties can see and verify.
There’s no one smoking gun. Someday just maybe people are going to learn that there are no sure things in life and that you actually have to think for yourself at some point as opposed to abdicating the right to do so to someone with major conflicts of interest.
It would seem the real problem that allowed Madoff to steal everybody blind was not the self-administration, it was the fact that he was a broker-dealer, no? Even if you self-administer, your trades are for the most part routing through external brokers or platforms where there will be an audit trail of your executions. (You would obviously need a competent known outside auditor to sign off on audited financials, of course.) But since he was the BD, and most everybody assumed he was front-running his order flow in some fashion, they never questioned it. Now it appears that there was very little, if any, trading actually going on.
So are there are major funds that are their own BD? The structure is rife for conflict, soft-dollar abuse, and can end up screwing the client. Oh wait, I just described Goldman…
…and citadel…
Self administered isn’t all that bad IF there is someone legit doing the audits…
I worked at a fund that was self administered and it was completely legit — we lost our investor’s money the old fashion way
“It would seem the real problem that allowed Madoff to steal everybody blind was not the self-administration, it was the fact that he was a broker-dealer, no? Even if you self-administer, your trades are for the most part routing through external brokers or platforms where there will be an audit trail of your executions.”
I am pretty sure a lot of Millenium Partners trades are self executed by Israel A. Englander and Co.
As I understand it, in a scenerio like a fund investing in Madoff, all GAAP requires the auditor to do is obtain a confirming letter stating that the money is there. No actual verification of the trades or assets held in the fund are required. I have personally read the KPMG report stating $1.3 billion in CASH held at Madoff at year end 07. All KPMG was required to do was exchange letters saying in essence “Is that 1.3 Billion in cash right?” Madoff’s answer, “Yep.” Gaap satisfied.
Fund of funds my firm uses have put in redemptions on DE Shaw and Millenium prior to Madoff and post the triggering of gates. Not sure about the self-administration issue but I will look into it.
9 here. Uncle Izzy’s name has popped up in this regard before. Successful long-term track record? Check. Extremely secretive? Check. Investigated by the SEC? Check. Cranky old Jewish guy? Check. Has his own DB? Check.
Hmm, where have we seen this before?
@14, I’m on the broker/dealer side and every audit letter I’ve ever received from one of the big accounting firms requests for us to send them month end statements for any account that the fund might have with us. Hence, @9′s point is legit since Madoff could create his own statements through his own brokerage firm.
I’ll be the first to state it flat out.
I cut my teeth in Chicago, on the floors of the CBOE and CME, I’ve been both a market maker and an off floor- back when you know it was actually two floors off the actual exchange floor; and I’ll say this, every single market maker/trader I’ve ever known was always, always completely spooked by Izzy- reason, the guy was known as a consummate pickoff artist, and he was ALWAYS right.
When I later heard about the “success’ of Millenium I was moooorree than suspicious.
Well Izzy was imho as “curved” as they come in this business, and now that Madoff has been outed I am simply waiting for what I know will be soon, ohh so soon, coming.
Izzy, hopefully has a Venezuela address ready.
lemondropkid
I’ll be the first to state it flat out.
I cut my teeth in Chicago, on the floors of the CBOE and CME, I’ve been both a market maker and an off floor- back when you know it was actually two floors off the actual exchange floor; and I’ll say this, every single market maker/trader I’ve ever known was always, always completely spooked by Izzy- reason, the guy was known as a consummate pickoff artist, and he was ALWAYS right.
When I later heard about the “success’ of Millenium I was moooorree than suspicious.
Well Izzy was imho as “curved” as they come in this business, and now that Madoff has been outed I am simply waiting for what I know will be soon, ohh so soon, coming.
Izzy, hopefully has a Venezuela address ready.
lemondropkid
Millenium is definitely a shady operation. SEC should pay another visit there.
Weiss is also very shady
Which Weiss?
Which Weiss?
and Stark investments in Milwaukee
Paulson & Co.
advantage plus.
Location/Domicile Delaware
Strategy Event Driven
Accounting Currency US Dollar
Management Fee 2.00%
Incentive Fee 20.00%
Prime Broker Bear Stearns
Hurdle Rate No
Custodian Bear Stearns
Auditor Rothstein, Kass & Co., P.C.
Administrator International Fund Services (N.A.) LLC
Some well-known self-administered funds:
SAC
Citadel (through Citadel Solutions)
Millennium
Three years ago, “SEC Charges Millennium Partners, L.P., Israel Englander, and Others for Engaging in Fraudulent Market Timing Scheme”:
http://www.sec.gov/news/press/2005-170.htm
Um….. pardon my ignorance…. who is uncle Izzy?
Uncle Izzy/Israel A. Englander (Millenium Partners)has been playing the game as long as Madoff.
Remember Ivan Boesky, Michael Milken, and John A. Mulheren. Mulheren was the one caught going over to kill Boeskey with a machine gun.
What was Mulheren’s firm? Jaime Securities. JAMIE — John A. Mulheren Israel Englander.
Try and find Izzy’s name in any of the many books and articles written about the insider trading schemes. He must have good lawyers.
In “Den of Thieves” Izzy is only mentioned on one page and he is not even listed in the index.
“His Manhattan home address is so fancy it just had a bestselling book written about it—740 Park: The Story of the World’s Richest Apartment Building, by Michael Gross”
http://www.badfaithinsurance.org/reference/Annuity/A0440a.htm
http://cityfile.com/profiles/israel-englander
when izzy & co. were in the shit with fund timing the coo and the head of ops both knew about it, did nothing and are still there, that place is corrupt to the core…
Millennium is legit – i know first hand .you guys posting crap on here have no idea what your talking about – madoff and izzy are not on the same playing field – madoff scum – izzy the real deal – he has over 100 guys running portfolios who have legit long term records
There are more Ponzi schemes out there. Wait and see.
Whartonchick
which weiss?
“There are more Ponzi schemes out there. Wait and see.”
Brilliant. And here I thought this would prove to be the last one ever. Silly me. Now you’ve shown me the truth.
DE Shaw…highly liquid strategy…but won’t tell you what they do…gated…odd?
You can create a free account at http://www.myfundfinder.com and look at the admins every fund
to 35:
“DE Shaw…highly liquid strategy…but won’t tell you what they do…gated…odd?”
Not so sure. Some rough estimates from totally public news/article reports would indicate (or can be interpreted as) that the possibility cannot be ignored that in the *worst-case* scenario: anywhere around 80% of their Composite fund and 50% of their Oculus fund could be highly illiquid.
Self administration, but independent auditor is quite common of the usually illiquid and large players. The self admin helps in being lax with marking down losses. The independent auditor (unlike in the case of Madoff) hardly cares about how the illiquid stuff is marked as long as something is being done about valuations etc. But also, I am nowhere implying that this is the motivation with DE Shaw, since I have no accurate information.
BTW, I know very little about them, my guesses are mostly based “mosaic theory” approach using public info. DE Shaw, as you know, are highly secretive. So please read my comments above with all kinds of disclaimers – and ignore any implied reference to DE Shaw as a frivolous inaccurate statement.
I worked for millennium a real shady place
market timing scam they all knew what was going on, gave that trader $1 billion to trade it. IT systems tracks ever trade and Izzy goes over everything out of place, I have had him question $100,000 positions he didn’t agree with so no way he didn’t know what thst guy was doing with his $1 billion book.
when the shit hit the fan in 2003 he had a plan called the “big enchilada” where we would close down Millennium in NY and launch a new firm overseas outside of US laws. never got to this as SEC ony raped his knuckles with a small fine – small for how much money they have.