Morten Spenner, chief executive officer of $4.2 billion, London-based International Asset Management, was as stunned as any fund-of-hedge-funds manager when word broke that Bernard Madoff had conned this supposedly sophisticated crowd out of tens of billions of dollars.
"Weren’t we more institutional than this?" asks Spenner, voicing doubts that echoed across the fund-of-funds industry, whose image was badly damaged — both financially and reputationally — by the fiasco. Spenner says that although IAM met with Madoff more than once, it never seriously considered investing with him.
But plenty of other well-known firms, such as New York City’s Fairfield Greenwich Group and Rye, New York’s Tremont Group Holdings (see "What Were They Thinking?" page 32), funneled hundreds of millions of dollars over the years to Madoff without — as it seems now — doing even adequate due diligence. Tremont had $3.3 billion invested with Madoff; Fairfield Greenwich, $7.5 billion. Could there...