In 1998, my firm visited with a prominent money manager in New York City. At the time, we were trying to raise money to invest in less’than’investment’grade corporate debt. We attended the meeting and, to put it politely, we were given the brush off. That was no big deal-it happened all the time. But what that money manager said struck us as very odd. ‘Why should I give you guys money?’ he asked. ‘You can’t make me one point a month like my friend Bernie.’ We knew who Bernie was, and responded, ‘It’s not a ‘point’a’month’ world.’
Several years later, in 2005, we were sitting in front of another group that said it was interested in raising money for us. The talks proceeded to the point where we were invited to meet with the company’s founder and his top lieutenants. These gentlemen explained they were looking for another product to add to the offering of their largest existing manager (whose identity was treated like a national security secret) who was producing consistent monthly returns in the 80 to 100 basis point range. They stressed repeatedly that they could not consider a strategy that experienced losses of as much as 2% a month. We told them that it would be impossible to guarantee that there would not be monthly losses. Needless to say, the talks went nowhere.
The money manager we met in 1998 was Ezra Merkin, whose funds lost a reported $2.4 billion with Bernard Madoff. The money-management firm we met in 2005 was Fairfield Greenwich Group, whose clients reportedly lost more than $7 billion in the Madoff fraud. Madoff, of course, was the top-secret manager whose identity they refused to disclose. The firm’s now disgraced founder Walter Noel attended that meeting but let his minions do most of the talking.
This post was published at Wall Street Examiner by Michael E. Lewitt ‘ July 18, 2016.
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