According to industry lawyers, forensic accountants and former prosecutors, the Madoff investors missed some red flags. But other investors saw the warnings and steered clear of the prominent 70-year-old Madoff, who had a loyal following among the country club set in Palm Beach and New York. Now at best, the fund of hedge fund managers who promised to spread investors' risk for a heavy fee by vetting a handful of individual funds, will have trouble wooing new clients. At worst, some may fail. A fund of hedge funds is a basket of funds selected by the manager to spread around risk. "Any person who has taken on a fiduciary responsibility and may have allocated significant amounts of money to Madoff or his direct affiliates will materially suffer reputational damage," said Ron Geffner who works with many hedge funds and investors as a partner at law firm Sadis & Goldberg.   more »

The global hedge fund industry, which has been hit by severe outflows and mark-to-market losses, is set to lose at least 25% of its assets in the last quarter, a global authority which tracks developments on these mystery players told DNA Money. The industry, which has shrunk from $1.8 trillion at the end of the second quarter to $1.63 trillion in September 2008, is set to lose at least $470 billion more by the end of December 2008. Aureliano Gentilini, global head of hedge fund research at Lipper, mailed, “Under a worst-case scenario, since the bulk of money outflows for the year will be recorded in the fourth quarter for a number of reasons, $30 billion outflows in Q4, combined with a negative performance reading of minus 10% for the broad hedge fund index in October through December, would lead to an overall reading of $1.16 trillion at the end of December 2008.”   more »