Sentry [PDF]
*I'm going to be honest, I can't even keep track of the stuff we've posted. I think this is new to you but if it's not, oh well, enjoy the comedy.
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Posted by Anal_yst , Dec 23, 2008 2:08PM
Where is the forehead slapper in all of this, damnit, that's what I want to know!?
Posted by guest , Dec 23, 2008 2:18PM
PWC Rotterdam?
Posted by guest , Dec 23, 2008 2:25PM
Full presentation up on FT web site (promotion, hey) for a little while (free registration required, I think). Funny reading, although Bess picked up the best page already.
http://ftalphaville.ft.com/longroom/tables/James-Mackintosh/why-people-invested/
Posted by guest , Dec 23, 2008 2:52PM
This is really bad.
Even good FoF Managers would have invested in Sentry.
MY experience tells me that most HF do not disclose much more than what the Presentation already shows.
You could even argue that the presentation is very detailed in comparison to other stuff i have seen.
Of course you can argue that the returns are not matching the market trends. But even if you dont understand the consistency of returns Citco as an Admin and PWC as an audit blurres the picture.
Posted by European Bear , Dec 23, 2008 2:55PM
@2, yes PwC Rotterdam, presumably because the administrator is also Dutch based.
Posted by European Bear , Dec 23, 2008 3:05PM
@2, PwC Rotterdam, because the Citco office doing the admin is also in the Netherlands.
Posted by stg44 , Dec 23, 2008 3:17PM
I love it: "Examination of option greeks to make sure the hedge is working as expected". How about the examination of trades to determine whether the returns can be replicated? How about the examination of OEX option trading volumes? What a joke.
Posted by Anal_yst , Dec 23, 2008 3:23PM
@4
No offense since I kinda see what you're trying to say, but your point is nonsense in the grand scheme of things(see #7, Aksia letter, etc, etc ad nauseum).
Posted by guest , Dec 23, 2008 3:46PM
@8
It is nonsense from one point of view. But on the other hand @4's comment does illustrate the salient point: a huge amount of money goes into hedge funds with basically zero due diligence.
The observation about PWC and Citco is particularly telling.
This auditor/administrator combination should have had zero credibility since the Lancer scam came to light in 2003, at the very latest. (PWC produced totally worthless audits for Lancer, Citco completely failed to protect Lancer investors' interests.)
Posted by guest , Dec 23, 2008 3:57PM
Bet their are some current open positions at PWC Rotterdam...
Posted by guest , Dec 23, 2008 4:29PM
@8,9
What do you suggest a good dd would include besides the investment strategy, peer analysis, operational setup, infrastracture, reputation, financial statements overview, etc.?
And how would that have uncovered the fraud.
Posted by Anal_yst , Dec 23, 2008 4:32PM
@9
Just because firms/individuals threw $ into x fund doesn't mean its an acceptable or forgivable practise.
Oldest cliche in the book, a fool and his money....
Posted by guest , Dec 23, 2008 4:36PM
11 The fraud would have been uncovered if there was more focus on the ops setup and infrastructure. FGG states "independent verification of prices and account values". Totally unglam - basically seeing if the assets are truly there - an no one did it.
Posted by HeadlessHorseman , Dec 23, 2008 4:43PM
@10
You'd like to think so. Fact is that big 4 audit firms are set up like insurance companies. Both industries pool premiums (audit fees) from multiple insured entities (clients) and fully expect to pay claims (settle suits) when the shit hits the proverbial fan. Insurance companies hire actuaries in an attempt to optimize the relationship between the premiums they collect and the risk they take. Similarly, Big 4 audit firms design audit programs to catch most of the bullshit and limit their exposure (plus big 4 audit firms have more pricing power than insurance companies by virtue of statutory requirements and limited competition). Both firms higher A-list legal talent to minimize losses when their first line of defense (be it actuaries and actuarial models or auditors and audit methodologies) invariably fail.
Posted by HeadlessHorseman , Dec 23, 2008 4:56PM
@11
Putting the puzzle pieces together as was allegedly done by the folks over at Aksia. See the letter referenced above by Anal_yst
I also second 13's suggestion
Posted by guest , Dec 23, 2008 5:02PM
@14, worked wonders for Arthur Andersen. At least there is a huge wall in between the US side of the equation.
Posted by Anal_yst , Dec 23, 2008 5:12PM
@11
As 13 and 15 point out, all they had to do was...wait for it...what they claimed they did.
Since at least a handful of sources who DID THE WORK reached the exact same conclusion: Madoff's claims were impossible in the real world.
You should read all the literature on the FFG website (posted all over DB), they talk about "split-strike conversion" as if its some magically complex strategy that can deliver consistently huge profits with below-market vol.
However, in reality, the strategy is fairly simple, impossible to execute on the scale Madoff/FFG claimed, and incapable of generating the low-vol returns pitched to clients.
Any 20-year old in 1st year portfolio management could have told you it all didn't make sense, but alas people threw money into it, frankly from what I can tell, because the social aspect (bragging rights, greed, blah blah) overcame logic and reason.
Posted by guest , Dec 24, 2008 12:06AM
Farfield have removed from their website the employee list. There used to be "Our Team" under the About Us heading. It has disappeared in the past week.
It can still be seen via Google Cache, for those of us interested to know who was responsible for Risk Management:
http://74.125.77.132/search?hl=en&q=cache:fggus.com
Posted by BlackSwan06 , Dec 24, 2008 1:37PM
Depends on how diligent the due diligence is - if the wrong people are hired to do a job and they ask the wrong questions, there could be kittens in the file cabinets and phones plugged into nowhere and the money would still flow in...
I know of a few who sniffed and ran from these guys because the fundamental question of "how do you execute this strategy to generate these types returns" failed the common sense test, regardless of the fact that the accountant worked out of a phonebooth in upstate or some such nonsense...
@ Anal_yst - I agree - the social cache of being in with Madoff seemed to eclipse the question of "How does this guy make money again?" It seems that asking that question would have been the proverbial turd in the punch bowl at the country club social, and who wants to be "that guy"...
Is it time to drink yet?
Posted by guest , Dec 29, 2008 4:27AM
classic pyramid scheme
sucker born every minute
especially on the upper east side
Posted by guest , Dec 29, 2008 4:36AM
lolz after reading this it was obviously fraudulent
who has a 2+ sharpe and bolds their non-prop execution tech in the ppt
all suckers got what they deserved
Posted by guest , Dec 29, 2008 9:45AM
Does anyone have Sentry legal prospectus? I think it would help to have a broader picture of the scheme!