Tom Bozzo has a reasonable request to make of Andrew Ang, Matthew Rhodes-Kropf, and Rui Zhao:
Marginal Utility: Big Fraud in Little Madison: Earlier in the year I reviewed the investments held by the Madison Cultural Arts District's trust fund... the MCAD trust's assets, it held $17.9 million — just under 18 percent of its $100M portfolio of the time, in the Fairfield Sentry fund. (In early '06, they had an even greater exposure.) At the time, Fairfield Sentry was among the trust's high-flying investments, relatively speaking. I said "who knows" with respect to how Fairfield found its alpha.
Well now we know! Per Bloomberg (via), Fairfield Sentry was 100% invested in Bernard Madoff's mega-swindle! I hope they actually managed to liquidate their balance. If they did get out soon enough, then at least the MCAD trust may not have been the biggest of suckers in one respect.
Otherwise, big potential losers are Andrew Ang, Matthew Rhodes-Kropf, and Rui Zhao, whose April '08 NBER working paper concluded that funds-of-funds "on average, deserve their fees-on-fees." At a minimum, they should delete the Madoff suckers and recalculate.
How about it guys? How significant is -$50 billion? You say that "the total funds under management for funds-of-funds is $156 billion." And do you calculate arithmetic or geometric rates of return?